The look of the Spanish newspaper El País on the Argentine crisis

Argentina: the crisis does not stop

Raúl Alendre went home last night with a black eye. Nothing serious, an accident in the gym. Alendre began boxing at the age of 13, but over the last decade he stopped his career because he did not need to fight. I had a good job. In December, however, it closed the Paquetá factory in Chivilcoy, a city of 60,000 inhabitants located in the pampas of Buenos Aires. Alendre and 700 other people, including his wife, lost their jobs. Now, with 37 years and 63.5 pounds of weight, he must return to the ring. The next day, 7 will fight in Chivilcoy against a boy from the capital and win 4,000 pesos, or about 80 euros, for badault: the goal is to stay up until the end. If all goes well, with two or three more fights, they could perhaps offer you a fight abroad, in Brazil or in Uruguay, where they pay in hard currency and earn perhaps a few thousand dollars. .

The Paquetá factory was inaugurated in 2006 and has since produced slippers for the Diadora brands and, above all, for Adidas. It was an industrial project spoiled by the president of the time

Néstor Kirchner

He had 1,200 employees and paid good wages: between Raúl Alendre and his wife, Daniela Olmos, they received 50,000 pesos a month. About one thousand euros. They could go to the movies with their seven-year-old daughter or go to the restaurant from time to time and, most importantly, they could build a house on a street without a street or stream. "I have only primary education, I am a pawn and I have never dreamed of a job as good as the one I had in Paquetá," he explains. . "The bank has given me a credit card, can you imagine, how can I not sympathize with Kirchner's if they manage to bring this factory?"

Politics gave him, politics took him away. Since 2016, the liberalization policy of

Mauricio Macri

He began to open the borders. Exchange controls were lifted and tariffs reduced. The shoes produced in Chivilcoy have ceased to be competitive compared to those imported from Brazil or countries of Southeast Asia. Paquetá has gradually reduced its workforce and last December, the last 700 workers were dismissed. The Chivilcoy, Paquetá and Raúl Alendre summarize the economic history of Argentina. The peronist model of tariff protection and relative isolation from the liberal model, committed to finally integrate the country into world trade. Two opposing systems and traumatic alternation. The Mauricio Macri presidency has opened many wounds and its economic management offers a bad balance, but the problem is not now, but always. Moments of well-being and hope end inexorably in crisis and bitterness.

The World Bank published a devastating report a few weeks ago titled Towards the end of the crisis in Argentina. It states that Argentines have suffered 15 recessions since 1950. Of these 69 years, 23 recorded negative growth. The only country with the worst record is the Republic of Congo, a bankrupt state that has experienced an intermittent civil war for decades. The World Bank is not lost in the formulas in kind: "One of the main explanations for the poor macroeconomic performance of

Argentina

it is their tendency to lead a standard of living beyond their reach that drives their cycles of boom and crisis endogenously. "More:" This trend to spend beyond all possibilities is even greater during expansions, with procyclical policies that consumption and investment (public and private) grow faster than incomes. "

Volatile currency

The result? High chronic inflation, punctuated by episodes of hyperinflation and deflation, and an extremely weak currency. The peso is the most devalued currency against the dollar in 2018. It has lost half of its value. With a historical perspective, this seems almost normal. Since its inception in 1881, the peso has lost 13 zeros against the dollar. Its current value, in constant terms, is about a billionth of what it was 140 years ago.

The second mandate of

Cristina Kirchner

He had to adapt to a terrible international situation, marked by the great crisis that began in 2008. His reaction was typically Peronist: he protected the domestic industry through customs duties and, at the end of his presidency, had to endure the weight with what is called the "cepo", one that severely restricted the purchase of dollars. In their book The Cycle of Illusion and Disenchantment, which reviews the tilting economic policies between 1881 and 2015, professors Pablo Gerchunoff and Lucas Llach conclude that "kirchnerism has come to an end without critical explosion as the two previous disappointments: the hyperinflation of 1989 and the crisis of 2001. But he left to his successors an economy that required urgent corrections to avoid this crisis and let stagnation that took already four long years " .

The successor, Mauricio Macri, sinned arrogantly. He said that ending inflation would be an easy task. With Macri, the Argentine oligarchy came to power, determined to make the country "a normal country". His electoral guru, the Ecuadorian consultant

Jaime Durán Barba,

The man who predicted the victory of Donald Trump before everyone else insisted over and over again that Macri should not surround himself with traditional politicians. Macri chose to surround himself with private sector executives and former colleagues from his school, the distinguished Newman of Buenos Aires. One of them, Alfonso Prat-Gay, descendant of a family of landowners of Tucumán, was responsible for the delicate Ministry of Finance and Public Finance. Prat-Gay, somehow a "traditional politician" because he was a radical MP and governor of the central bank with Kirchnerism, opted for a gradual adjustment. Duran Barba and his best student, Chief of Staff (Prime Minister) Marcos Peña, supporters of a rapid political and economic revolution, hated him from the start.

Prat-Gay dismantled the "stock" of exchange without much inconvenience (the automatic devaluation was 10 to 14 pesos per dollar) and developed a first budget with relatively moderate reductions. The budget deficit rose to 3.9% of GDP in 2017, compared with a target of 4.2%, which was hailed almost as a feat: public spending was reduced for the first time since 2004, at the beginning of Kirchnerism. But Prat-Gay only lasted one year. It has been replaced by

Nicolás Dujovne,

an economist more willing to "work in a team", that is to say to obey Marcos Peña, implacable executor of Mauricio Macri testamentary.

As the inherited inflation of Cristina Kirchner was about 25% (there were no reliable statistics) and that filling the gap by printing paper money would have boosted the inflationary trend, Macri has decided to borrow. In the Macri book, intimate and secretive account of the Argentine elite that took power, journalist Laura di Marco quotes a sentence from the president, pronounced in 2017: "For evaluation, I still think that having avoided the terminal crisis, especially when I look at how much money we borrowed, we took 47,000, nearly $ 48,000 million to pay for all the deadlines and disasters that They had left, with a broken country, what success, if you go to the bank in default, without handful of reserves, bankrupt, and the bank, even if you have not paid, you lend another 47 billion moreover, it's a huge success. "

Which moments those, those of "the huge success". In 2017, the second year of Macri's mandate, Argentina already presented an alarming macroeconomic picture: its budget, trade and current account deficits were among the highest in the world and the peso, in float, was constantly being devalued. the external debt increased. The disaster occurred in April 2018, even though, according to this newspaper, a senior official of Casa Rosada admitted that since January, the government was aware of the fall of the economy. A "currency exchange" in April and another in August pulverized the peso and triggered inflation. It was again necessary to resort to the International Monetary Fund (IMF), which granted in September to Argentina the largest loan in its history: 57 000 million dollars.

Debt issue

The figures are crude: between December 2015, when Macri came to power, and 2018, when the IMF intervened in favor of the economy, Argentina was the first issuer of debt in the world in absolute terms and had accumulated credits amounting to nearly $ 143 billion, of which more than half escaped overseas.

Under the conditions imposed by the IMF, we had to forget the gradualism and impose brutal cuts to the umpteenth recession. Against all economic logic, the decline in activity did not stop inflation. The opposite has happened. Today, less than five months before the general election, the cumulative inflation during Mauricio Macri 's term exceeds 260% and the peso has been devalued by 360% against the dollar. Construction, trade and industry, which account for nearly half of all employment in Argentina, dropped by almost 40% in the eleven months of recession. The purchasing power of wages has fallen by almost 20%. Durán-Barba, the Ecuadorian guru of Macri, recognized this week in the Brazilian daily O Globo the difficulties faced by the president to be re-elected: "If the economy was good, we would win in the first round with 60% of the votes He did a lot, he made roads, gigantic jobs, but he failed in the economy.Many thought it and now feel disappointed.

Return to Chivilcoy, this small town located 160 km from Buenos Aires, to illustrate the abstract figures. Foreign competition and the recession led to the closure of Paquetá, which paid a monthly salary of 13 million pesos. This $ 13 million was spent almost entirely in Chivilcoy. "I sell less," says Juan Pissini, owner of a small food store. "What I'm selling now are basic products, bread, flour, noodles, a bottle of oil," he says. In the home appliance or automotive sector, the decline in sales exceeds 30%. And yet the real crisis has not arrived yet. Paquetá paid reasonable compensation for the dismissals. The pawnbroker Raul Alendre received 500,000 pesos, which he has 150,000 (as he owes the bank for a mortgage loan) after investing the rest in work at home, to house a clothing business. that he hopes to open within a few months. This means that money continues to move in Chivilcoy.

Layoffs

Another licensee, Lorenzo Lezama, has devoted compensation to the installation in his house of a small aluminum window workshop. "Right now, I'm selling," he says. Because the compensations allowed a moment of ephemeral wealth. But inflation, nearly 50% per year, eats the benefits. "Between the time I order the equipment at the factory and when I install it, the prices go up and I can not pbad on the increase to the customer: I have to pay for it from my pocket", explains he. The Lezama workshop is an example of what is happening in thousands of small Argentine businesses.

The government believes however that it is on the right track. In December 2015, it had received a public debt representing between 41% and 45% of the GDP (the statistics were not reliable) and increased it to 97%, if the loan of the IMF is taken into account . These data can not be disguised and weigh on growth prospects. But at the Ministry of Finance prefer to highlight other data. They inherited a public expenditure representing 41.5% of GDP and reduced it to 37%. The tax burden has risen from 34% of GDP to 30%, the peso has been relatively stable for weeks and favorable economic positions predict a beginning of inflation control. After the strong March rally, when prices rose 4.7%, the rise was reduced to 3.4% in April, and in March, they should hardly exceed 3%. The goal is to arrive at elections with a monthly rate of 2%. This would imply an annual inflation forecast of about 24%. Excessive, in objective terms. Acceptable, if you consider that for the moment, it is doubled.

Néstor Kirchner became president on May 25, 2003, after the bankruptcy of Argentina after the bankruptcy of 2001-2002. And yet, he quickly benefited from a virtuous circle: the devaluation had made Argentine products more competitive, unemployment had reduced real wages, the international situation had improved, harvests were good and the margin growth had become important. Wages have increased, the internal market has been strengthened and it has been possible to set up factories like Paquetá.

With the exception of the international situation, which does not look splendid, the situation could be similar in the years to come. But there is a serious drawback: the repayment of the IMF loan. According to the conditions signed in Washington, $ 3.821 million must be returned; in 2022, 18,500; in 2023, 23,000 million and in 2024, 10,100 million. Payments of 2022 and 2023 can crush any growth in an economy whose annual GDP hardly exceeds $ 600 billion.

So much

Alberto Fernández

and Cristina Kirchner, the presidential and vice-presidential candidacy of Kirchnerism, along with moderate Peronism (Sergio Mbada or Juan Schiaretti) believe that a renegotiation of the conditions with the Fund is inevitable. The government seems to be looking at another, not very different, solution: to negotiate additional credit to deal with these two critical years and, therefore, prolong the dependency / guardianship relationship with the international organization. The most important thing in the equation is to see: who will preside Argentina at this time. If it is still Macri, it will have the support of Washington, be it Donald Trump or another president: the liberal Argentina of macrismo is perceived as a strategic ally, hence the generosity shown by the IMF.

For the moment, the immediate future contains only sacrifices. The box of the supermarket will remain the altar where will be celebrated the slow ritual of the domestic austerity: the coupons will be displayed, the conditions will be negotiated, a product will be deleted if the total account is too high. The winter will be cold because the increase in gas and electricity tariffs (between 300% and 600% during the term of Macri, based on very low rates and subsidized kirchnerism) makes heating prohibitively expensive in many homes. And Raúl Alendre will have to stay in the ring, at 37, with the dream of calling someone from abroad and offering him a fight paid in dollars.