Skip to main content

More on the Argentine adjustment

I'll post a longer discussion later, but I wanted to provide a short update on the situation in Argentina. Everything indicates, as I had noted before, that the government of Macri wanted to accelerate inflation, with depreciation and an increase in the electricity bill.Macri rehired the technician (Graciela Bevacqua) that had been fired by Cristina Kirchner, and that led to the (mostly true) critique that inflation was higher than the official measure indicated.  More importantly, for a government that constantly bashed the previous administration for lying about inflation, they fired the same technician as soon as it became obvious that inflation was accelerating (you can check the numbers in Cavallo's website; this is the son, not the infamous finance minister; as it can be seen inflation accelerates again in November 2015, right after the election, with the huge depreciation of the peso).

Also, it is clear that the economy is slowing down, with the index of production provided by Ferreres suggesting a fall in January of about 1.1%. Not clear what the new unemployment rate is, but the increase in the layoffs in the public sector, and lower growth will lead to higher unemployment. It is true that given the current account problems the economy had already slowed down in the last 3 years or so, but the adjustment and the depreciation will likely throw the economy in a recession (we will see if the hopes of the Argentine new developmentalists pan out, and export-led growth compensates the collapse of the domestic market; I, obviously, doubt it).

Finally, Argentina is also finalizing an agreement with the Vulture Funds, which basically accepts all their demands. Regularizing the situation and having access to international financial markets is not a bad idea, but certainly there was no reason to cave to the Vultures' demands. So more inflation, to reduce real wages, and lower growth, also to weaken the labor force's bargaining power and roll back the social progress of the last decade or so. And that's why Macri was elected anyway.

PS: There are many other problematic issues in this very short administration so far, including the packing of the court, and the treatment of human rights organizations, to name a few. But it seems that in general I more or less got it right in my talk on what to expect in November, and the article that followed.


Popular posts from this blog

A few brief comments on Brexit and the postmortem of the European Union

Another end of the world is possible
There will be a lot of postmortems for the European Union (EU) after Brexit. Many will suggest that this was a victory against the neoliberal policies of the European Union. See, for example, the first three paragraphs of Paul Mason's column here. And it is true, large contingents of working class people, that have suffered with 'free-market' economics, voted for leaving the union. The union, rightly or wrongly, has been seen as undemocratic and responsible for the economics woes of Europe.

The problem is that while it is true that the EU leaders have been part of the problem and have pursued the neoliberal policies within the framework of the union, sometimes with treaties like the Fiscal Compact, it is far from clear that Brexit and the possible demise of the union, if the fever spreads to France, Germany and other countries with their populations demanding their own referenda, will lead to the abandonment of neoliberal policies. Aust…

A brief note on Venezuela and the turn to the right in Latin America

So besides the coup in Brazil (which was all but confirmed by the last revelations, if you had any doubts), and the electoral victory of Macri in Argentina, the crisis in Venezuela is reaching a critical level, and it would not be surprising if the Maduro administration is recalled, even though right now the referendum is not scheduled yet.

The economy in Venezuela has collapsed (GDP has fallen by about 14% or so in the last two years), inflation has accelerated (to three digit levels; 450% or so according to the IMF), there are shortages of essential goods, recurrent energy blackouts, and all of these aggravated by persistent violence. Contrary to what the press suggests, these events are not new or specific to left of center governments. Similar events occurred in the late 1980s, in the infamous Caracazo, when the fall in oil prices caused an external crisis, inflation, and food shortages, which eventually, after the announcement of a neoliberal economic package that included the i…

What is the 'Classical Dichotomy'?