The Economist 14Dec2019

The EconomistDecember 14th 2019 The Americas 35

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expecting an implicit haircut—a discount

on the bonds’ face value—of nearly 50%.

“Every dollar we don’t use for debt will go to

consumer-led recovery at home,” Mr Guz-

mán has told his new colleagues.

The idea of paying foreign creditors less

than they are owed is bound to be popular.

So, too, will be Mr Fernández’s plans to

boost wages for public-sector and low-paid

workers and raise pensions.

Ideas for reining in inflation are unor-

thodox. The new government may keep a

cap on utility prices that was due to expire

at the end of 2019. It is expected to keep cap-

ital controls introduced by Mr Macri as an

emergency measure to curb the deprecia-

tion of the peso, and to reach a pact with

employers and trade unions to hold down

prices and wages. (This may mean that sal-

aries will rise by less than Mr Fernández

has implied.)

The big question is whether such a

package can exclude the growth-clobber-

ing stuff that the Peronists campaigned

against. That is unlikely. The new govern-

ment does not want to draw down the re-

maining $11bn of its imfloan, but will still

have to deal with the fund. The imfis likely

to welcome a cut in the private-sector debt

burden (making it easier for Argentina to

repay the fund). Both sorts of creditor are

likely to insist on a primary fiscal surplus,

ie, before interest payments, which means

more austerity than Mr Fernández has in

mind. There is worried speculation that

the central bank will pay for promises such

as higher pensions by printing money,

even though its new president, Miguel

Pesce, is thought to be a safe choice. If ei-

ther fiscal or monetary policy is too loose,

that will push up inflation in spite of the

bodges being planned to contain it.

Although Mr Fernández is bringing

back into use some of the techniques used

by his Peronist predecessor, he is keen to

signal that he will not repeat her excesses.

“This is Alberto’s economic team, and he

will be in charge on this front,” says an ad-

viser. Yet the new president has not laid to

rest fears that Ms Fernández will have un-

due influence. Mr Guzmán got the econ-

omy ministry after she vetoed two other

candidates, says the presidential adviser.

She had a hand in the choice of the min-

isters of interior, defence and security. Her

supporters will be in charge of the agencies

that handle taxation, pensions and care of

old people, which have big budgets and

jobs to offer political allies. Her clout in

these areas suggests that reforming the

state will not be a priority. As vice-presi-

dent, Ms Fernández is the senate’s leader

and commands the Peronist bloc in the

chamber, where it has a majority. Her son,

Máximo, leads the Peronists in the lower

house of congress.

Ms Fernández also helped arrange the

appointment of Carlos Zannini, one of her

closest associates, as attorney-general. Mr

Zannini was held in preventive detention

for his alleged role in covering up a deal

that Ms Fernández had made with Iran to

absolve it of blame for the bombing of a

Jewish centre in Buenos Aires in 1994 in

which 86 people, including the bomber,

died. His trial has been delayed indefinite-

ly. Alberto Nisman, a prosecutor who was

murdered in 2015, had indicted Mr Zan-

nini. As attorney-general Mr Zannini, who

was released from jail in 2018 and denies all

charges, will lead the government’s anti-

corruption unit and its team of lawyers.  

Mr Fernández has already made clear

that he is not concerned about the alleged

misdeeds of his senior officials. He con-

tends that Ms Fernández and jailed mem-

bers of her government are victims of “po-

litical persecution”. He has pronounced Mr

Zannini innocent. “We vindicate you,” he

told the new attorney-general. 

Mr Fernández will revive aspects of his

Peronist predecessor’s foreign policy. The

incoming foreign minister, Felipe Solá, has

signalled “re-engagement” with Nicolás

Maduro, Venezuela’s leftist dictator, who

will now be less of a regional pariah. Argen-

tina’s new government will not accept in its

current form a trade deal negotiated by

Mercosur, a four-country trade bloc, with

the European Union. This will dampen Ar-

gentina’s growth prospects in the long run

and increase tension with Brazil, the bloc’s

biggest member. Mr Fernández and Jair

Bolsonaro, Brazil’s populist president,

speak of having “pragmatic relations”. But

there is no hiding the frostiness. Mr Bolso-

naro did not attend Mr Fernández’s inaugu-

ration, sending his vice-president instead.

The Macri government is proud of hav-

ing ended the economic isolation that Ms

Fernández imposed on Argentina. “We’ve

spent four years taking Argentina out of the

deep freeze,” says Jorge Faurie, the outgo-

ing foreign minister. “The fear is we’re go-

ing back.” Optimists think that the leftward

shift in diplomacy will make it easier for

Mr Fernández to adopt a moderate eco-

nomic policy. Argentines must hope so. 7

Pounding the peso

Argentine peso per $, inverted scale

Source: Datastream from Refinitiv

Mauricio Macri lifts

capital controls

Alberto

Fernández

sworn in

Peronists win primary vote

Capital controls reinstated

60

40

20

0

2015 19181716

IMF approves

loan

O

lder residentsof Asbestos, Quebec

remember when the substance for

which their town is named was thought to

be a miracle material. The furry silicate

mineral was woven into textiles and incor-

porated into building materials so that

they would not burn. Kaiser Wilhelm shel-

tered in a portable asbestos hut during the

first world war. During the next one the

American armed forces used the stuff to in-

sulate ships, tanks and aircraft and to make

fireproof uniforms. Asbestos found its way

into cement, pipes, tiles and shingles. The

Canadian navy launched a corvette in 1943

called the hcmsAsbestos. “It [would be] a

fantastic material if it didn’t kill people,”

says Jessica van Horssen, author of “A Town

Called Asbestos”, a book about the town

and its place in the global industry.

Now it is known to cause a deadly form

of lung cancer. The 2km (1.2-mile) open-pit

Jeffrey Mine, once the largest asbestos

mine in the world, shut down in 2012. It re-

mains the most visible feature of the land-

scape near Asbestos. The town’s 5,000 in-

habitants are now considering whether to

change its name. That might make it easier

to attract investment.

Hugues Grimard, the mayor, says pros-

pective investors treat councillors as if

they had a contagious disease. Some even

refuse to take their business cards. He be-

lieves that a new name is a matter of life

and death for the town, which has lost half

OTTAWA

When your name is poison, do you

change it?

Canada

Welcome to Toxic

Town