Macri Tries to Weather Argentina’s Economic Storm by Ending ‘Gradualismo’
Once again, Argentina has become synonymous with crisis. The Argentine peso has already lost half of its value against the dollar this year, and the economy is projected to contract by at least 2 percent while inflation reaches 40 percent. Beleaguered President Mauricio Macri is asking the International Monetary Fund for additional assistance, only three months after finalizing a loan agreement. Not surprisingly, Macri’s domestic popularity has suffered, weakening his re-election prospects next year.
But while the situation is indeed serious, comparing it with Argentina’s total economic, political and social collapse in 2001—as some Argentine and foreign commentators have—is as excessive as the unrealistic optimism that surrounded Macri’s inauguration in December 2015. Less than three years ago the new president had promised a quick economic turnaround after the end of supposedly populist policies under former President Cristina Fernandez de Kirchner. What Argentina is now facing are the consequences of the structural vulnerabilities that Macri inherited when he took office, which his government had underestimated, perhaps for too long.
As global oil prices collapsed over the last two years, regional governments have started to lose their leverage in the energy industry. To attract international investors, they must offer increasingly favorable terms, which means ceding more of their own control.
As Latin American countries reassess their energy policies in light of lower oil prices, there is an opportunity to apply lessons learned from the US experience to enact regulations that mitigate environmental risks, strengthen public support, and attract investment.
The election of President Mauricio Macri may signal the start of a new era in Argentine energy policy and cooperation with the United States, but the new government still faces challenges to increasing oil and gas production and erasing energy subsidies.