The Economist - USA (2021-02-20)

The Economist February 20th 2021 The Americas 29

I

n buenos airesin 1997 Carlos Menem

hosted a regional “Davos” of interna-

tional business types. With a dull eve-

ning reception under way, Argentina’s

president swept in, cheeks shining and

eyes flashing, dispensing bear hugs,

starlets in tow. Your columnist felt a jolt

of political electricity course through the

assembled suits. So discredited was Mr

Menem by the time he died, aged 90, on

February 14th that it is hard to remember

that he was once acclaimed as a Latin

American economic visionary.

On taking office in 1989 amid hyper-

inflation, he swiftly grasped that Argen-

tines wanted price stability and econom-

ic order above all else. He tore up the

populist programme on which he had

been elected and the statist economic

doctrines of his Peronist movement, and

implemented what he called “major

surgery without anaesthetic”. Domingo

Cavallo, his economy minister, imposed

“convertibility”, a law under which the

peso was fixed at par to the dollar and the

supply of pesos was restricted to the

Central Bank’s hard-currency reserves.

Having persuaded Congress to grant him

sweeping powers, Mr Menem slashed

import tariffs, subsidies and curbs on

foreign investment, and privatised hun-

dreds of state enterprises, from the rail-

ways to the oil company.

At first it worked. Inflation dissipat-

ed, foreign capital poured in and the

economy roared. Mr Menem basked in

popularity. Having changed the constitu-

tion to allow re-election, he easily won a

second term in 1995. But unemployment

rose, too. Under convertibility, Mr Me-

nem had forsworn both monetary and

exchange-rate freedom. When foreign

capital poured out of emerging markets,

Argentina suffered a slump culminating

in financial collapse in 2001-02. In what

until the 1970s had been a middle-class

society, the poverty rate soared to 56% and

unemployment to 21%. Mr Menem handed

health care and education to provincial

governments without giving them more

resources. Argentina acquired Latin Amer-

ican social inequalities.

Not all of this was Mr Menem’s fault,

but much was. His lasting legacy was a

record so notorious as to shut off rational

discussion about economic policy in Latin

America for a generation. He and his

Argentina were indelibly branded as “neo-

liberal” slaves to the “Washington consen-

sus”. By extension, liberalism and a cap-

italist economy were damned.

This charge sheet was based on a blur-

ring of political identity. Peronism is an

alliance between trade unions and the

caudillosof the backward north, men such

as Mr Menem, who was governor of the

province of La Rioja. His keystone, con-

vertibility, divided economic liberals:

some thought it necessary in a country

with a hyperinflationary past; others saw

it as a conservative policy, akin to the gold

standard. It certainly violated a tenet of

the Washington consensus, which called

for a competitive exchange rate to stim-

ulate exports. Convertibility’s fixed peso

quickly became overvalued, so the trade

opening killed some potentially viable

manufacturing firms.

Mr Menem himself undermined

convertibility by piling up foreign debt to

spend on political clientelism in a quest

for an unconstitutional third term. He

should instead have helped the unem-

ployed with retraining and public works.

In many cases his privatisations created

monopolies, or rewarded cronies. He

abolished some economic privileges

only to create others. These mistakes did

much to discredit privatisation, dereg-

ulation and economic openness. Their

subsequent lack is one reason Latin

America has scarcely grown econom-

ically for the past seven years. The bold-

ness of his reforms would be welcome in,

for example, today’s Brazil.

Forgotten is the mess that Argentina’s

statist, protectionist economy was in

when Mr Menem took over. In minis-

tries, broken typewriters (yes), toilets

and lifts languished unrepaired; state-

owned companies lost 6% of gdpper

year; only half the locomotives of the

state railways worked; businesses em-

ployed staff whose sole job was to hold a

telephone handset for hours to get a line.

Mr Menem was a democrat—he was

briefly jailed by a dictatorship in 1976.

But he was an illiberal one. He packed the

Supreme Court and the audit tribunal. In

his inner circle influence-trafficking,

corruption and links to organised crime

flourished. During his presidency, poli-

tics merged with la farándula(the more

vulgar end of show business). When the

economy dived, the glitter became a

mockery. This was Mr Menem’s failure,

not liberalism’s.

The failures of Carlos Menem, a conservative caudillo, tarnished liberalism

BelloA case of mistaken identity

battle forward. The national anti-corrup-
tion prosecutor is overwhelmed with
cases. A proposal by anti-graft prosecutors
for constitutional guarantees of their au-
tonomy and a minimum budget “has not
found traction with López Obrador’s con-
gressional majority”, according to a recent
report by wola, a think-tank in Washing-
ton. An autonomous government agency
estimates that the number of acts of cor-
ruption rose by 19% between 2017 and 2019.
The vast majority of government contracts
are not open to tender.
Ordinary Mexicans have overlooked

amlo’s failures because he has a bond with

them that most presidents lacked. “He is

from the people, for the people and with

the people,” says Daniel Sibaja, a Morena

official in Ecatepec. His popularity flows

from who he is rather than what he does.

Power thus flows to him.

amlosets the national agenda in daily

morning press conferences that can last

three hours. He has cut the budgets and

dismissed the bosses of autonomous insti-

tutions such as Coneval, which measures

poverty. Last month he proposed to abolish

several autonomous agencies, including

the antitrust body and freedom-of-infor-

mation institute. He rails against critical

media and ratings agencies.

amlodamages the social fabric by con-

stantly “characterising the elite as wicked

and the poor as saintly and victimised”,

says Soledad Loaeza, a historian. The elite

call him a Mexican version of Hugo Chá-

vez, Venezuela’s late socialist strongman.

That is an exaggeration. But the mix of pol-

icy failure and power-grabbing is worry-

ing. Next June’s congressional and region-

al elections may be Mexicans’ last chance

to tame their rampant president.