Author: Paul

The Argentine Election: The Last Question

The Argentine Election: The Last Question

Majority of voters favor gasoline-car phaseout. But all-electric goal faces tough opposition.

On the evening of May 17, the president of Argentina issued his final speech as prime minister of his country, urging his nation to vote for the new government during a televised presidential election on July 2. But his tone seemed unusually subdued, as if he was already preparing for another round of what he clearly saw as a losing campaign. It was the same message that Argentine voters would hear if they were offered the chance to choose between an increasingly unpopular austerity government and a new government led by Alberto Fernández.

The day before, the government released its 2014 budget, including a drastic cut in spending on education and health care, among other things. The national debt will increase by an estimated $3.4 billion, according to the same document. But those figures are dwarfed by the $50 billion in savings that Congress has approved in order to avoid an Argentine default on its obligations. More troubling, Fernández is committed at this point in his government’s life to more than $120 billion in structural cuts in his first term. That amount could increase to $200 billion if he makes good on at least some of these proposed cuts.

Although few would wish to see him, it is clear that Fernández has no intention of standing down. But the country faces two questions that have not been answered in the Argentine campaign.

First, has Argentina finally learned the lesson of previous debt crises? On average, the Argentine economy has grown by half since the 1980s, and the financial crisis of 2001 was only the second time in history that there was such a serious collapse because of external shocks. The other debt crisis was in Argentina’s neighbour, Brazil, and this episode was precipitated by the country’s own fiscal problems. In 2015, the Brazilian economy appears to have recovered from the recession that started in 2009. Why did the Argentine economy collapse in 2001?

Second, and more importantly, what does it mean for economic growth in Argentina now that the country’s debt is the highest in the world? How have political and economic events in Mexico, Ecuador, Bolivia, and Venezuela influenced the situation in Argentina?

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