The EconomistJanuary 20th 2018 The Americas 371(^2) their members. (This month police arrest-
ed Marcelo Balcedo, head of a union for
workers in education and child services,
on suspicion of money-laundering and tax
evasion; at his mansion in Uruguay they
found a half-million dollars in cash and a
small zoo. He denies the allegations.) Mr
Brener wants the president to say more
about how he will deal with these issues.
But Mr Macri has put off some of the
hardest decisions for his second term,
which he hopes to secure in elections to be
held in 2019. His advisers say that the re-
forms so far are just a “first draft” of the
changes he will eventually bring about.
The labour reform that he plans to enact
this year, which will make it easier to sack
workers and hire part-timers, is a timid ver-
sion of the overhaul Argentina needs. Im-
provements to education, more ambitious
tax and pension reforms and a shake-up of
the judiciary will also have to wait.
To give himself a chance to write the
second draft, Mr Macri is pursuing policies
that seek to balance economic stability
with the need to placate groups that could
disrupt his presidency and thwart his re-
election. Argentina pays an economic
price for this caution in the form of high in-
terest rates, weak exports and a rising debt
burden. If Mr Macri misjudges, and lets the
price rise too high, he could undermine the
economic revival that he has promised to
bring about.
His main macroeconomic decision has
been to reduce the budget deficit gradually
rather than abruptly. The word “adjust-
ment” is taboo, says an official in the trea-
sury department. The pension reform,
which provoked shoving on the floor of
congress as well as clashes with police out-
side it, is expected to save the government
the equivalent of 0.5% ofGDPthis year.
That is a good start, but the government
has to go further, for example by making
sure that contributionscover a bigger pro-
portion of benefits, argues the IMF. Mr Ma-
cri did not offset the corporate tax cut with
revenues from other sources.
His reluctance to slam on the fiscal
brakes has shifted responsibility for con-
trolling inflation, still a painful 25%, onto
the central bank. Its high interest rates have
slowed economic growth and encouraged
foreign investors to buy Argentine bonds,
drawing in capital that has pushed up the
value of the peso. That in turn has made ex-
ports less competitive and widened the
current-account deficit. A relatively strong
currency has discouraged foreign investors
from risking money in job-creating enter-
prises or the infrastructure that Argentina
desperately needs. The IMFhas urged the
government to set a more ambitious fiscal
goal of eliminating the deficit before inter-
est payments by 2019.
Rather than do that, the government
has decided to accept a higher inflation rate
than it had planned. On December 28th
the treasury announced that the central
bank’s inflation target in 2018 would be 15%
rather than 8-12%, which means that inter-
est rates can be lower than they would
have been. The peso quickly dropped by
4% (though it has since recovered a bit).
The central bank’s original target was
too ambitious, so it makes sense to revise it
(even the new one may be hard to
achieve). But there is a cost. Inflation hurts
the poor most. Some economists worry
that the government is teaching people to
expect higher inflation, which often causes
it to happen. The central bank shares that
worry. On January 9th it lowered rates by
0.75 percentage points, a bit less than mar-
kets had anticipated, to 28%.
Although orthodox economistsgrum-
ble about Mr Macri’s gradualism, Argen-
tine investors seem to endorse it. Private in-
vestment is recovering after a decline in
2016, though it is still lower than it should
be. It rose 16% last year and is expected to
grow by 14% in 2018. Foreign investors of-
ten follow the lead of local ones, points out
Dante Sica of Abeceb, an economic consul-
tancy. Before Cambiemos’s election vic-
tory in October, the rate of return demand-
ed by foreign investors in Argentine
infrastructure and energy was double
what projects in other Latin American
countries paid, Mr Sica says. It has since
dropped to the same level.
Investors are betting that Mr Macri and
his party can win again in national elec-
tions in 2019. There isa good chance of that,
in part because more voters still blame the
Kirchners for Argentina’s economic plight
than blame Mr Macri. He will then have a
chance to use the final term he is allowed
in office to modernise Argentina’s econ-
omy. Mr Manzuoli, sitting beside menus
that display Guapaletas’s 41 flavours,
sounds more optimistic than fearful. Mr
Macri “showed that it was possible to have
a normal country”. 7
*Source of series
changes to INDEC
Macri’s mid-term marks
Sources: INDEC; IMF; State Street
PriceStats Inflation Index
Argentina
Consumer prices
% increase on a year earlier
GDP
% change on a year earlier
Budget deficit
% of GDP
10
5
0
5
10
5
0
5
+2015FORECAST
16 17 18 192015 16 17010203040Mauricio Macri
assumes office*A
S MIDNIGHT neared, five nights a week
Mexicans with a taste forthe macabre
would switch on their radios to hear the
latest spooky story, called in by their fel-
low listeners. There was the tale of the
bloodied boots, which kept reappearing in
a family’s basement, driving the wife to
seek psychiatric treatment. Once, the sta-
tion that carried the show, XEDF-FM, mys-
teriously went off the air during a devil-
worshipper’s phone-in. Most famous of all
was the story told byJosué Velázquez, who
said he had suffocated his grandmother to
keep his end of a bargain with the devil
(doctors said she had died of natural
causes). Juan Ramón Sáenz, the best-
known host of “La Mano Peluda” (“The
Hairy Hand”), listened with apparent cre-
dulity to about half the yarns broadcast
over its 22-year history; some were chill-
ingly believable.
The show had a cult following, espe-
cially amonglate-shift workers and noc-
turnal taxi drivers. But Grupo Formula,
XEDF’s owner, decided to bury it; the last
episode aired on January 12th. After de-
cades of success, the show “no longer had
the same impact”, says a person familiar
with the thinking that led to the decision.
People liked the stories, some of which
could not possibly be real, because they
came from the mouths of ordinary folk
who undeniably were, reckons Ricardo Fa-
rías, a film director. Listeners believed the
tales, or pretended to. When Sáenz died
suddenly in 2011, days after a reunion with
Mr Velázquez for “Extranormal”, a televi-
sion programme involving visits to haunt-MexicoBurying the Hairy
Hand
MEXICO CITY
The macabre is as Mexican as
guacamoleWhat to wear when listening to the radio