The Economist October 30th 2021 The Americas 59T
he definitionof insanity, Albert
Einstein is alleged to have said, is to
do the same thing over and over again
and expect a different result. Argentina’s
Peronist government seems to find this
simple rule as baffling as others find the
general theory of relativity. On October
19th Roberto Feletti, the new secretary for
internal trade, issued a decree fixing
until January the prices of 1,432 products,
ranging from cheese spread to shaving
cream. Its 881page appendix sets out to
the last fraction of a peso the maximum
price for each product in each of the
country’s 24 provinces. The reason?
Prices rose by an unexpectedly high 3.5%
in September, or 53% over 12 months.
And the October figure is due to be pub
lished just three days before a crucial
midterm legislative election.
In September the ruling coalition was
shocked to lose primaries that serve as a
dry run for the election. The lesson
drawn by Cristina Fernández de Kirch
ner, the powerful vicepresident who
held the top job from 2007 to 2015, was
that the government had intervened too
little in the economy. Mr Feletti’s con
trols will allow the ruling coalition to
blame price rises on grasping businesses.
“There’s no economic logic, it’s all
communicational and political,” says
Federico Sturzenegger, a former presi
dent of the central bank. It is the govern
ment itself that is the reason why Argen
tina has the highest inflation of any of
the world’s bigger economies (barring
Venezuela, whose government is even
more addicted to controls). It had already
capped utility tariffs and interest rates
after it came into office in December2019. But its failure to reach an agree
ment with the imfdenies it internation
al sources of credit. So it is financing this
year’s fiscal deficit of around 4% of gdp
mainly by printing money. “That money
chases other goods,” driving inflation up,
points out Mr Sturzenegger.
The country has been here before.
Peronism’s penchant for protectionism,
subsidies and holding down the exchange
rate means that Argentina suffers chronic
fiscal deficits and shortages of hard cur
rency. In late 2013, as the commodity
boom waned and dollars ran short again,
Ms Fernández’s government tightened its
prior controls on prices, foreign exchange
and capital movements. Recession and
higher inflation duly followed, and the
Peronists lost the presidential election in
2015 to Mauricio Macri of the centreright.
So why repeat a failed recipe? The
Kirchneristas’ reading is that they only
lost narrowly in 2015. They represent
interests that benefit from protection
(established industrialists), or are as
suaged by subsidies (the poor). Controls
assure a kind of stability, preventing
hyperinflation.
This artificial stability comes at a cost:
the economy has seen almost no growth
since 2008. Wages have risen by less thaninflation in eight of the past ten years.
Argentines were getting steadily poorer
even before the pandemic. Those who
can afford to send their money abroad; in
the recent Pandora papers leak Argentina
ranks third in terms of the number of
beneficiaries of offshore companies,
behind Russia and Britain.
Can the government keep control
until the next presidential election in
2023? As inflation has edged up, the price
of the dollar in the (tolerated) black
market has widened to double the offi
cial rate. Alberto Fernández, the proxy
president installed by Ms Fernández, has
been diminished by his mishandling of
the pandemic (he lost credibility after
breaking his own draconian lockdown to
host a birthday party for his partner).
Losing next month’s election would be a
further blow.
Luis Secco, an economist, notes that
past hyperinflationary episodes came
when the government was weak after
losing a midterm election. But there
may still be scope for muddling through,
especially if the government reaches an
agreement with the imf. Even if it
doesn’t, and it finances fully next year’s
expected deficit of 4% of gdpby printing
money, inflation need not go much
higher than this year.
The big question is whether Argen
tines have tired at last of the Kirchneris
tas’ failed policies. Mr Macri lifted con
trols, spurring shortterm growth, but he
was too slow to reform the state, prompt
ing a run on the peso and a belated slash
ing of the deficit. “The people can’t take
more austerity,” Máximo Kirchner, the
vicepresident’s politician son, said this
month. His policies offer slower but
inexorable impoverishment without any
hope of growth. Argentines may come to
realise that. Peronism’s penchant for controls is holding Argentina backBelloNogrowth economics
abroad began offering to sell cryptocurren
cy, such as bitcoin, to people on the island
with mobile phones and the technological
knowhow. The buyers would then deliver
the purchase price in pesos to the seller’s
family or friends.
Initially many of these transactions
happened informally over socialmessag
ing apps. As crypto became more common,
people turned to specialist platforms, such
as BitRemesas, founded in September 2020
by Erich García, a Cuban YouTube influ
encer who makes videos about the inter
net. BitRemesas matches crypto sellers
outside the country with buyers on the is
land through auctions.
Now the Cuban government wants to
muscle in. At the end of August, the central
bank announced that it would recognise
and regulate the use of crypto. As is so of
ten true in Cuba, details of the new rules
remain cryptic. But the government’s de
sire to clamp down on a new technology
comes at a worrying time. In July country
wide protests were met with police repres
sion and house arrests. Activists had
hoped to stage a peaceful march on No
vember 15th, but the government has refused them permission to do so. Rather
than deal with their discontent, it claims
that they are agents for the United States.
Many of those who protested in July
were calling for reforms to an unfair finan
cial system that requires Cubans who are
lucky enough to have dollars to exchange
them at a lousy rate for other currencies, or
for prepaid cards to buy food and basic
goods in staterun shops. Crypto might of
fer a lifeline to some. But it will take more
than the world’s most decentralised cur
rency to change one of theworld’s most
centrallyplanned economies.n