34 The EconomistDecember 14th 2019
1A
lberto fernándezdrove himself and
his girlfriend, Fabiola Yáñez, to con-
gress for his inauguration as Argentina’s
president in their Toyota. That gesture, as
much as anything he said in his hour-long
speech, signalled that he intends to swiftly
help ordinary Argentines who are suffering
from recession, high inflation and rising
poverty. But some wondered, as the Pero-
nist accepted the presidential sash and ba-
ton from Mauricio Macri, his centre-right
predecessor, whether he would drive the
country forwards or backwards.
The question was provoked in part by
the presence of Cristina Fernández de
Kirchner, the new vice-president, who pre-
ceded Mr Macri as president. Ms Fernán-
dez, a populist who governed from 2007 to
2015, created the economic mess whose
clean-up Mr Macri botched. She has been
indicted in nine separate court cases for
acts of corruption and other misdeeds. In
the new administration she has already
amassed unprecedented influence for a
vice-president. The new president (no rela-tion to Ms Fernández) wants to be a crowd-
pleaser as she was, at least for poor Argen-
tines, but without repeating her mistakes.
That will be tricky.
The “social catastrophe” that Mr Fer-
nández promises to end is real. Two-fifths
of Argentina’s citizens cannot afford a
monthly basket of staple goods. The year-
on-year inflation rate exceeds 50%. Argen-
tina’s $57bn bail-out from the imfis the
largest in the fund’s history. Mr Fernández
promises to put the economy “back on its
feet”. But an adviser to the new president
admits: “There are no easy answers on the
economy, and no good options.”
Mr Macri’s bet was that he could restore
the confidence that Ms Fernández had bat-
tered, which would lead to growth. On tak-
ing office in 2015 he lifted exchange con-trols brought in by Ms Fernández, reached
an agreement with foreign creditors (with
whom she had fought) and lowered her
punishing taxes on exporters. That ap-
proach failed, largely because Mr Macri did
not cut the budget deficit fast enough to
keep investors calm when global interest
rates rose. The peso slumped and inflation
soared (see chart on next page). The imf
agreement in 2018 was a second stab at re-
viving confidence. But the austerity it de-
manded hit just as Argentina’s political
season was getting under way, weakening
the economy and driving voters to Mr Fer-
nández. That knocked the peso again.
The new president’s big idea is to re-
verse Mr Macri’s sequence: growth will lead
to a revival of confidence rather than the
other way round, he argues. To boost
growth, he intends to bring back tools em-
ployed by Ms Fernández’s administra-
tion—but to wield them more deftly.
The centrepiece of the economic pro-
gramme is likely to be a restructuring of Ar-
gentina’s $105bn debt to foreign bondhold-
ers (which does not include debt to the
imf). This is to be carried out by the new
economy minister, Martín Guzmán, an
academic with little political experience
who specialises in debt negotiation. He has
proposed that Argentina defer payment of
both interest and principal for the next two
years. Analysts assume he will end up de-
manding bigger concessions from credi-
tors. Bond prices suggest the markets areArgentinaThe Peronist predicament
BUENOS AIRES
The new president wants to boost growth while pushing down inflation.
That will be hardThe Americas
35 A town called Asbestos
38 Bello: A decade with no heroesAlso in this section