Home' Trinidad and Tobago Guardian : December 3rd 2015 Contents BG18 REGIONAL
BUSINESS GUARDIAN www.guardian.co.tt DECEMBER 3 • 2015
Car horns blared. Firecrackers
lit up the sky. Yells of
"Vamos!" rang out among
Buenos Aires Parisian-style
apartment buildings. The rev-
elers were acting like soccer
fans, but the win they were cheering on
November 22 was political. It was the upset
victory of Mayor Mauricio Macri of Buenos
Aires in a run-off election to become Argenti-
na s next president.
Even more than most presidential transitions,
Macri s triumph will begin a new era for the
country, and perhaps for South America as a
He will take over from President Cristina
Fernández de Kirchner, who together with her
late husband, President Néstor Kirchner, gov-
erned for 12 years with a defiant populism
that distorted the economy, made enemies at
home and abroad and undermined institutions.
Fernández leaves her successor with an econ-
omy that has barely grown for four years,
dwindling foreign-exchange reserves, inflation
of around 25 per cent and a budget deficit of
more than 6.0 per cent of GDP.
Macri s defeated rival, Daniel Scioli, shared
Fernández s Peronist pedigree and ran as her
heir. Even he would have reversed many of
her policies, though, because the disastrous
state of the economy would have left him with
With Macri, the first elected president in
nearly a century who is neither a Peronist nor
affiliated with the movement s weaker rival,
the Radical Civic Union, reform is likely to be
faster and more profound. He campaigned
under the banner of Cambiemos ("Let s
Change"), a coalition of mainly centrist non-
Peronist parties. After a dozen years of Kirch-
nerismo, he promised a return to economic
sanity, diplomatic prudence and a more
The son of an Italian-born businessman
who grew rich on government connections,
Macri is an unlikely president, aloof and some-
times almost inarticulate. However, he has
shown himself to be a good manager and a
dogged campaigner. Politically he is a self-
made man. He first came to public notice as
a successful president of Boca Juniors, the
country s most popular soccer club. In a decade
he has built a party---Republican Proposal---
Change will be evident as soon as Macri
takes office on Dec. 10, starting with a new
way of governing. He is a more collegial exec-
utive than Fernández, although he lacks her
charisma. At his post-election press conference,
itself a sign of greater openness, he suggested
that he would move quickly to restore pro-
fessionalism to institutions that the Kirchners
had tried to bring to heel. He will shake up
the statistics agency, which has been churning
out misleading reports on inflation and none
on poverty. He plans to replace the governor
of the Central Bank, who has been obediently
printing money to finance the budget deficit.
Macri has said that he will disperse power
away from Fernandez s superministries of
economy and production. He is choosing well-
regarded technocrats to fill the top economic
jobs. Alfonso Prat-Gay, a former Central Bank
governor, is to be the head of a still-weighty
Finance Ministry. Federico Sturzenegger, a
congressman and economist, will take charge
of the Central Bank. Macri s choice for edu-
cation, Esteban Bullrich, commands respect
for having reduced the number of teachers
strikes in Buenos Aires. All the city s teachers
have his mobile-telephone number.
To reorient Argentina s diplomacy, Macri
has named Susana Malcorra, a little-known
United Nations official, as foreign minister.
The new president wants to repair relations
with the United States and European countries,
which Fernández snubbed in favor of friendship
with authoritarian regimes such as those of
China, Iran and Russia. Mercosur, a six-nation
trade grouping including Brazil, is likely to be
more open to agreements with other trade
partners than it has been under the Kirchn-
ers.Macri will be a bolder advocate of democracy
in South America than his fellow leaders are:
He already has said that Venezuela should be
suspended from Mercosur if it fails to conduct
fair parliamentary elections on December 6
and to release opposition leaders from jail.
His most urgent task is to fix the economy.
Fernández kept it limping along by means of
"patches," quick fixes such as a currency swap
with China to replenish foreign-exchange
reserves. These have been depleted by debt
payments and by spending to support an over-
valued exchange rate, which gives Argentines
an illusion of prosperity but throttles exports.
Liquid reserves are probably much lower than
the $26 billion the government reports. Last
week an oil tanker was left tossing off Bahia
Blanca for days because the government could
not pay for the cargo.
"It s extraordinary that the economy is on
the verge of crisis and people don t feel it,"
economist Miguel Kiguel said.
Macri faces three big and interlinked tasks:
removing economic distortions, balancing
fiscal accounts and restoring normal financial
relations with the outside world. The imme-
diate priorities are to boost the Central Bank s
reserves, unify the exchange rate and lift
An adviser to the new president said that
lifting exchange controls and removing export
taxes will encourage farmers to sell crops they
have hoarded. This could bring in as much as
US$9 billion to the Central Bank, said Luis
Miguel Etchevehere of the Rural Society, a
Rather than turn to the International Mon-
etary Fund for support, a political nonstarter,
the new team will look for other emergency
sources of foreign funds. They are expected
to try to end Argentina s isolation from inter-
national credit markets by seeking an agree-
ment with bondholders who pushed the coun-
try into default last year.
"The challenge is getting the sequencing
right," the adviser admitted.
Devaluing and freeing the peso without
reserves risks an inflationary plunge in its
value, but the key to raising reserves is a more
realistic exchange rate. In victory Macri was
more cautious than he had been as a candidate.
Exchange controls will be lifted, he said, "once
the situation is normalised."
Raising funds abroad also would give the
new government more time to close the fiscal
deficit. It will be encumbered with a swollen
bureaucracy and indexed spending on benefits
which will take time to reform. It can move
more quickly to cut energy and transport sub-
sidies, which go to rich and poor alike: On
average Argentines pay only US$9 a month
Nonetheless, Argentina never has managed
to cut its fiscal deficit by more than one per-
centage point of GDP per year, noted Luis
Secco of Perspectives, a consultancy.
All this will inflict pain in the short term.
Barclays, a bank, expects an economic con-
traction of 1.1% next year before a rebound in
"The big danger is social unrest," Kiguel
Macri s narrow victory means that he will
have to build a mandate for radical change.
"The first package will have to be more cen-
ter-left than centre-right," the adviser said,
acknowledging the poitical constraints.
The Peronists control the Senate, and they
must be persuaded to repeal laws that prevent
a deal with the holdout bondholders.
The new president has some high cards to
play, however. The Peronist governors, who
have influence in the Senate, are a pragmatic
bunch. Many of them need support from the
central government to restructure their debts.
Argentina s isolation from the capital markets
means that it is barely indebted. If Macri
restores confidence by governing in a trans-
parent and predictable manner, money could
emerge from mattresses and flow back home
from foreign bank accounts.
He knows that it will not be easy. The per-
oration to his post-election speech at a con-
vention center on the River Plate was a plea,
not a victory cry.
"I m here because you got me here," he told
his cheering supporters. "So I ask you: Please
don t abandon me." AP
the end of
Inflation expectations for 2016 in
Brazil stabilised last week after the
central bank signalled it could raise in-
terest rates, a weekly central bank
poll showed on Monday.
The median expectation of about
100 economists in the survey pro-
jected an inflation rate of 6.64 per
cent at the end of next year, above
the government's target of 4.5 per
Brazil's central bank kept interest
rates on hold at 14.25 per cent for a
third straight meeting last week, but
a surprisingly split vote signaled poli-
cymakers are uneasy with inflation
despite a worsening recession.
Survey: Brazil's 2016
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