NEW YORK (Reuters Breakingviews) - The ghosts of Argentina’s past will come for President Mauricio Macri in next October’s elections. The pro-business president has had to seek IMF help as he tries to steer Latin America’s No. 3 economy to health. That’s a gift to his discredited Peronist opponents. Recovery from drought and currency collapse is likely in 2019, but may come too late to prevent the return of the spendthrifts of yore.
Macri has spent his three years in power reining in the extravagant spending and statist economic controls of Peronist predecessors Cristina Fernandez and her late husband Nestor Kirchner. He also restored the reliability of government statistics as well as his country’s standing in global credit markets. He hoped a return to fiscal common sense would reignite growth and compensate for the pain of lower subsidies and job losses.
It was working until a triple whammy of drought, sourer investor sentiment toward emerging markets and Macri’s own managerial fumbles tanked the peso. That prompted the president to turn in June to the International Monetary Fund for a $50 billion standby financing deal, expanded by another $6.3 billion in October in return for faster, deeper fiscal reform. That was politically risky considering many Argentines blame IMF policies for a 2001 financial crisis that ended with a humiliating default on the country’s foreign debt.
The peso, which has lost half its value against the dollar this year, has stabilized under the IMF plan and a less reserves-destructive approach from the central bank’s new chief Guido Sandleris, though interest rates remain punishingly high at around 60 percent.
The IMF expects a recovery from today’s sharp recession will begin in the second quarter of 2019. In the vital farm sector, soybean production in 2018-2019 should rebound by 47 percent and corn by 33 percent from a year earlier, according to the U.S. Department of Agriculture.
If Macri is lucky, returning growth and a fall in inflation from above 40 percent will dampen voter ire just in time for him to win a second term in the Oct. 27 presidential election. If he is very lucky, the Peronists will put up the fiery populist Fernandez against him rather than a more moderate candidate promising, perhaps, a kinder, gentler implementation of the IMF plan. Still, the odds on a Macri victory are even at best.
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