Don´t cry for me Argentinia: IMF „cure“ or bankruptcy?
In Argentina, the left-wing progressive government alliance is losing its majority. New alliances are now supposed to cope with the economic crisi| Argentina’s progressive left-wing government alliance, the Frente de Todos (Common Front), suffered a heavy defeat in the partial Congress elections. Nationwide, it was only able to win 33 percent of the votes. Not only in the capital, Buenos Aires, she had to give up a lot, in her stronghold, the Province of Buenos Aires, she landed, albeit just on second place. In the Senate, she lost the majority for the first time since 1983. The clear winner is the right-wing liberal coalition Juntos por el Cambio (Together for Change) of former President Mauricio Macri, which was able to unite 42 percent of the votes nationwide. She achieved her best result with almost 47 percent in the capital. With a few exceptions, the result of the September primaries was thus confirmed. Half of the 257 delegates in the House of Representatives and a third of the 72-member Senate were elected. Since voting is compulsory, all around 34 million eligible voters were asked to come to the polls. Still, only 72 percent of those required to vote cast their votes – just a little more than in the September primaries. The loss of the Senate majority is a heavy blow for Vice President Cristina Kirchner, who is also Senate President. The dispute over the direction that flared up in the government alliance after the primaries had turned into a truce through a cabinet reshuffle and a series of social policy measures. But even in the government hardly anyone believed that this would turn the tide. How long the peace agreement will last is questionable.
The economic and social situation is decisive for the defeat. The economic recession that has persisted for years was dramatically exacerbated by the pandemic lockdown. At the same time, inflation is galloping. In October alone, the price increase was 3.5 percent compared to the previous month, reported the statistics agency Index. Since October of the previous year it is over 52 percent. The new poor come mainly from that part of the population whose income no longer lasts until the end of the month despite having a permanent job, as inflation is crumbling their purchasing power. 42 percent of the around 45 million Argentinians live below the poverty line.
In a televised message on the evening of the election, President Alberto Fernández declared his willingness to enter into dialogue for a “national agreement” and announced a proposal to reorganize the country’s debt, which he would submit to the new Congress. Specifically, it is the liabilities in the amount of 18 billion dollars that are due in the coming year at the International Monetary Fund and whose repayment cannot be realized. But it’s about much more than just extended repayment periods. The IMF expected a coherent concept of measures with which the surpluses necessary for debt servicing can be achieved.
In the case of Argentina, these would be: savings in the state budget, reduction in subsidies for energy, water and transport tariffs, relaxation of financial restrictions, i.e. devaluation of the peso. Measures that would fuel inflation and further increase the number of poor, and which Cristina Kirchner in particular has prevented so far. However, any agreement with the IMF must also be approved by Congress. It is possible that the “national agreement” proposed by the President will give rise to new political alliances. If a new arrangement with the IMF should apply for ten years, for example, then not only the current government in its remaining two-year term, but also the two subsequent presidencies would be subject to the agreements with the IMF. A new majority must be organized for this.
The defeat of the Argentine government in the congressional election could lead to a reorganization of the party landscape. The readiness for dialogue announced by President Alberto Fernández on the evening of the election, including the opposition, not only harbors explosives for his own left alliance. The liberal-conservative camp could also face its dissolution. The loss of the Senate majority is a bitter defeat for Cristina Kirchner, the previously undisputed center of power of the ruling alliance Frente de Todos. With polarization you can win elections, but you cannot rule, said capital city mayor Horacio Rodríguez Larreta, who is named as one of the most important candidates for the presidential election in two years. The moderate-conservative Rodríguez Larreta has no fear of contact with the moderate-left representatives of the government alliance. In this way, a new alliance could be formed from both camps beyond their poles.
Should it come to that, the respective poles ex-President Mauricio Macri and Vice-President Cristina Kirchner will clearly lose their gravitational forces towards the center. It is possible that Macri is getting closer to the anarcho-neoliberal economist Javier Milei, whose party La Libertad Avanza (Freedom Advances) was the third strongest force in the capital with 17 percent of the vote, but has no base in any province. On the other hand, it seems unlikely that the Kirchner camp will enter into a relationship with the Trotskyist party alliance Frente de Izquierda (Left Front), which with 6 percent of the nationwide votes became the third strongest force. It is much more likely that Kirchner will turn out to be the big loser of the election. Argentina’s budget and economic policy in the coming years will be determined by the International Monetary Fund. The country’s decline would continue. In order to deal with the gloomy prospects at least somewhat orderly, a new alliance is needed.