The overwhelming defeat of President Macri in the primary elections of August 11 and the failure to achieve any of the benchmarks agreed to in the Stand-By Agreement with the IMF a year ago, have produced economic anxiety with unpredictable social and political consequences. As stated in a previous column here (“Argentina’s Dead-End Relationship with the IMF”), there was never a chance the Argentine government would fulfill the program.[i]

To date, the only cabinet member to resign has been the Minister of Finance, Nicolás Dujovne, but many doubt that Macri can conclude his mandate, which runs out December 10. Such doubts are not surprising. Since 1928, no non-Peronist government has been able to complete its mandate. In the nine weeks remaining until the presidential elections of October 27, the pressure of social unrest could generate a crisis like previous ones in Argentina, which include the forced exit of the president. The electoral strategy that Macri put together, with support from the financial sectors, has collapsed after the electoral debacle (47% vs. 32%) and his government has lost legitimacy.

The weight of the external debt and the lack of access to external credits have brought Argentina to the verge of default and the consequent renegotiation of its debt. According to the presidential candidate of the Front for Change, Alberto Fernández, who beat Macri by a margin of 15 points in the primary elections (PASO) [ii], “There is only one incontrovertible reality and that is that Argentina in these conditions can’t pay the obligations assumed … We have to understand that we are virtually in default, and that’s why Argentine bonds are worth what they’re worth, because the world realizes that it cannot be paid.” [iii]

Even JP Morgan, which measures country risk, has warned that “there is an increase in the possibilities of default and some type of debt restructuring.” Likewise, the rating agencies Fitch and S&P have lowered the B grade to CCC, a category for countries with substantial risks.

Another risk facing the country is that the exchange rate causes a bank run due to the sharp fall in time deposits and the decrease in dollar deposits in banks.

The fact that these elections were just a primary has turned them into a straitjacket that prevents an institutional solution from being reached through broad consensus. Although few doubt that Alberto Fernández will be the next president of Argentina, no transition process can take place until he’s elected president Oct. 27, as long as he gets 45% of the votes or beats his nearest opponent by at least 10 percentage points. If not, the election goes to a second round scheduled for November 24. This is what Macri is betting on.

Widespread popular support for the Front for Change will mark a shift in the country’s economic policy and a turning point in the alliance of right-wing governments that has been consolidating in the region. But during the interim, the citizens will suffer the consequences of the misgovernment of a president who has lost legitimacy and that the local and international media, and his allies of the financial world, begin to consider him as inept to govern.

The Macri Government: Failed Deregulation and Liberalization

In November 2015, amid dancing under a sky covered with yellow balloons, Mauricio Macri was declared the winner of the presidential elections. Twelve years of Kirchner governments ended. The middle and upper sectors of Argentine society were fed up with what they considered the “bad manners” of the economic policy implemented since 2011– limits on the purchase of foreign currency to prevent capital flight, mandatory in-country liquidation of foreign income from exports, import restriction, among others. These measures allowed the government to have foreign exchange without having to resort to international organizations or external indebtedness.

The new president received a country with strong distortion of relative prices, but with a low level of indebtedness, and lower levels of inflation, unemployment and poverty than those registered at the end of his government. Proof of this is that in the August 2015 primary elections, citizens gave the victory to Daniel Scioli, candidate of the party of President Cristina Kirchner, with 38% of the votes against Macri’s 30%. However, during the November general elections, due in part to the obvious lack of support from President Kirchner for her party’s candidate, Macri prevailed. He beat his opponent in the second electoral round by barely two percentage points: 51.4% to 48.6% for Scioli of the ruling Front for Victory.

As soon as he took office, Macri established a scheme for deregulation and liberalization of the exchange rate, finances and trade. To attract financial capital, he raised interest rates, punishing the productive sectors, and accelerated an irresponsible process of indebtedness by flooding bonds in the market, in the hopes that these measures would attract a rain of foreign investments.

But, except for financial speculators attracted by the high interest rates paid by the government to keep the exchange rate low and contain inflation, productive investments did not arrive. At the same time, there was a rising outflow of foreign exchange. With the stable dollar, Argentines increased their spending on tourism and foreign companies, sending profits and dividends.

Macri Goes to the IMF

In 2018, the current account deficit was close to 6% of GDP, a very worrying sign in an inflationary scenario. With rising interest rates in the United States, financial investors began to take capital out of the country. The pressure was so great that at the end of April, the Central Bank–contravening its new principles–had to intervene and sell more than 8 billion dollars of its reserves in two weeks, and raise interest rates from 27 to 40% to sustain, without success, the peso’s value.

The fate of the Macri government was already cast. The financing needs to keep the financial bicycle going and reduced access to international loans forced Macri to negotiate a Stand-by Agreement for three years with the IMF for 57 billion dollars in June of last year.

This failed to restore the trust of the markets and only two months later, the president declared that the country was in an emergency situation so had to renegotiate. In exchange for an advance of the funds committed for 2019 and 2020, the government agreed to a fiscal adjustment greater than the 1.3% initially agreed for 2019 to reach a zero-fiscal deficit. [iv]

A year after the signing of the Agreement with the IMF, the goals for fiscal policy, inflation and economic growth have become an impossibility. The IMF loan only patched the financial disaster in which the Argentine economy had once again fallen. Ninety percent of the loan provided for in the Stand-by Agreement has already been disbursed and now the next government will have to figure out how to pay it back in 2022.

Not a single economic or social indicator improved during Macri’s administration. He received an inflation rate of 27% and will leave it, if he’s lucky, at 50%. He entered with a benchmark interest rate of 38 points and took it to the world record of over 70%. Unemployment increased from 7 to 10%. The minimum wage of $580 per month– the highest in South America—dropped to $279, moving Argentina to seventh place in the region’s ranking. The value of the currency went from 15 to 55 pesos per dollar, poverty rose from 27% to 35% of the population, and indigence from 4.5% to 8%. Some 23,000 companies closed during his government.

Argentina became the most indebted country in the region. Its external debt is now equivalent to 80% of GDP– 27 percentage points more than what Macri received. Consequently, the country risk has increased from 487 points at the beginning of his government, to 1900, the second highest in the world after Venezuela.

Despite the dramatic situation, these figures got little attention. It took the citizen thrashing of the government in the primary elections for the media, once defenders of Macri and bitter critics of Kirchnerism, to recognize that they had been seriously out of step with the reality of what was happening in the country.

The Day After the Primary Election

The electoral defeat had its correlation in the hysteria of the markets. The peso devalued by more than 30%, and the Buenos Aires stock market collapsed 37%–the biggest loss since 2001. The country risk reached around 2000 points, reacting to the government’s lack of response to the events.

Macri failed to respond to the deeper economic disaster because he had developed an electoral strategy that supported his message to the nation that because they voted for Kirchnerism, economic indicators were crashing. He alarmed the population by telling them that the dollar’s gains and the stock market crash were just a sample of what could happen if Kirchnerism won.

“What can happen is huge,” Macri said, adding that “the problem we have is that the alternative has no credibility. Kirchnerism should carry out a self-criticism.” After the results were in, he told voters that “the triumph of an economic program other than this one would be seen by the world as the end of Argentina. We Argentines must decide if we are going back to the past, which is where what happened today will lead us.” Finally, he urged voters to “reflect before coming back to vote the same in October.”[v]

The former president of the Central Bank, Martín Redrado, stated, “President Macri said on Monday that the dollar goes where it has to go so that the Argentines learn who they voted for.” [vi] The press broadly criticized the president’s reaction to the election, obliging Macri to apologize for having judged the Argentines’ vote and acknowledging that many of those who voted for him “got fed up with the endless adjustment.”

This was accompanied by a set of measures aimed at alleviating the economic crisis. With their emphasis on subsidies and price controls through December when his term ends, they give the final stab to the heart of the IMF agreement. However, many analysts, including opposition candidate Alberto Fernández, consider the measures too late and predict that they will not compensate for the losses caused by the devaluation that was allowed to continue for so long. The wage hikes in progress will not even be enough to recover the loss of purchasing power.

Bolsonaro Gets Hysterical and Everyone Starts Talking About Venezuela

 Hysteria didn’t only hit the markets. In an act of verbal incontinence, Jair Bolsonaro warned that if A. Fernández became president, there could be a mass exodus of citizens to Brazil.

“If that left returns to Argentina, Rio Grande do Sul will become the new Roraima (northern Brazilin state bordering Venezuela) and we don’t want our Argentine brothers and sisters fleeing here.”

He added that the relationship with Alberto Fernández would be “conflictive”, which could impact Mercosur and the trade agreement to form a commercial bloc with the European Union.[vii]

Actively supporting Macri before the election, the next day Bolsonaro stated that, “Argentina is sinking into chaos and beginning to follow the course of Venezuela, because in the primary left-wing bandits initiated their return to power.”

Before Bolsonaro’s attacks, Fernández had called the Brazilian president “racist, misogynist and violent”, but he ruled out any long-term problems between the two countries.

“Bolsonaro is a moment in Brazil’s life just as Macri is a moment in the life of Argentina,” he said. Fernández announced that he would not respond to provocations any more. “Unity with Brazil is much more important and I think this can hurt the bond we have. Let him say what he wants. I don’t like bullies,” he declared. [viii]

Bolsonaro, meanwhile, said he is “praying to God that Argentina does not back down.” His most ominous remark in terms of interference in the internal affairs of the neighboring nation, came when he referred to the primary elections in Argentina, and followed up with “freedom is priceless and we are willing to give our lives for it”–in a speech given at the Agulhas Negras Military Academy. [ix]

The Front for Change, Beyond Kirchnerism

Although Kirchnerism is a very important force in the Front for Change, the is more comprehensive than Cristina Fernández’s political group. Without the participation of the other political movements in the Front, it would have been impossible to achieve the election results of August 11.

Alberto Fernández is not a politician with a strong history in the left. A lawyer and professor of criminal law at the University of Buenos Aires, he began his political career as a Buenos Aires legislator in 2000, mentored by Domingo Cavallo, former minister of economy under Carlos Menem. Although Fernandez served as chief of staff for both Néstor and Cristina Kirchner from 2003 to early 2008, when he distanced himself from the former presidents and founded his own Party, critical of the government. In 2013 he joined the Renovation Front led by Sergio Massa, and based on this relationship was able to create the alliance with the Front for Change. Fernández’s political style is more tolerant and open to dialogue, with a preference for forming consensus.

This does not mean that he doesn’t have a clear ideological stance. He has been blunt in stating that his vision for the country is absolutely incompatible with Macri’s. Fernandez’s proposals for solving inflation, for example, are diametrically opposed to Macri’s. He believes Macri’s purely monetary approach reflects a bad interpretation of how to fight inflation and that restricting the availability of currency to decrease consumption under the theory because if there is no money to buy, demand—and prices– will fall only works in the manuals.

Reality, according to Fernandez, doesn’t work that way. The Front for Change candidate proposes that the solution to runaway inflation is similar to the solution to the problem of consumption. In a society that consumes 70% of what it produces, if you affect consumption, you also affect production and employment. And when employment is affected, people are pushed into poverty. According to this analysis, that’s why the major impact of Macri policies over the last four years was to increase the number of poor people by nearly five million. Fernández’s logic is to increase consumption.[x]

In foreign policy, Alberto Fernandez has stated that Maduro leads “an authoritarian regime” that “has committed excesses…” Faced with comparisons, he has stated, “I am not Venezuela, I never was.”[xi] The statements caused an immediate response from the president of the Venezuelan National Constituent Assembly, Diosdado Cabello, who he told him “Don’t think you were chosen because you’re you… It’s the people who say no to neoliberalism and hopefully you won’t let them down.”[xii]

Alberto Fernández, has announced that if he wins the elections he will align with the negotiating position of Mexico and Uruguay on Venezuela and that “he highly values ​​the proposal made (by the presidents) López Obrador and Tabaré Vázquez that promote the path of dialogue and non-intervention to solve the Venezuelan crisis.”

He added pointedly, “I do not agree with all the proposals that allied part of Latin America behind Trump.”[xiii]

Fernandez has also stated that he will not promote the agreement reached between the European Union and Mercosur, saying it “does not exist and never existed. What we have to see is what this agreement consists of, because the central guidelines seem to reflect disadvantages for Argentina.”

The triumph of Alberto Fernández in Argentina will have a geopolitical impact in the region. It will probably strengthen the presence of the Workers Party (PT) in Brazil’s political arena, taken along with the predicted wins for the left in the October presidential elections in Bolivia and Uruguay. His government will not be a copy of Kirchnerism. But Argentina will once again focus on production-centered development and national sovereignty in the international sphere.


Ariela Ruiz Caro (Masters in Economics, Humboldt University Berlin) is a Peruvian  consultant on trade, integration and natural resources for the Economic Commission for Latin America and the Caribbean, the Latin American  Economic System, the Institute for Latin American and Caribbean Integration and others. She worked with the Andean Community 1985-1994, as an advisor to MERCOSUR 2006-2008, and as Economic Attaché in the Peruvian Embassy in Argentina 2010-2015. She is a regular columnist for the CIP Americas Program.


[i]Ruiz Caro, Ariela, “Argentina’s Dead-End Relationship with the IMF”, Sept. 17, 2018. Americas Program

[ii] Elecciones primarias, abiertas, simultáneas y obligatorias (PASO) Open, Simultaneous and Obligatorio Primary Elections.


[iv] Deficit fiscal primario, sin contar el pago de intereses de la deuda.