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Argentine Political Outlook (Jan-09-17) PDF Imprimir E-Mail
Jan-09-17 - by Rosendo Fraga

1. Macri ends his vacation, leaving the government reorganized to face the second year. He has followed a rule of Argentine politics since 1983: change the Minister of Economy (in this case finance minister), on completing a year in office. All presidents without exception did so. His decision has been to reinforce the Chief of Cabinet team as his main instrument of government, as he explained in December. Specifically, although there still is an economic team composed of 8 out of the 21 ministers plus the Central Bank Chairman, chaired by the Chief of Staff (Peña) and his secretaries (Quintana and Lopetegui), a smaller and more operational team was created, including the above mentioned three plus the two new Ministers of Finance (Dujovne) and Economy (Caputo), plus the Minister of the Interior (Frigerio), who is the political figure in a reorganization, accentuating the business traits that were already characterizing the Macri Administration. As the President and the Chief of Staff both stated, these changes do not imply that others will not occur as circumstances unfold. But the adopted decision means, above all, to ratify the personality of Macri, for whom ministers are managers rather than politicians who make a government coalition.

2. In the first days of the new team, it has become clear that the policy will not change, that is, subjecting economic results to the electoral strategy to win the midterm election. The idea that Dujovne will be a Minister who will put in place the tightening postponed by Prat Gay, is rapidly diluting. The "non-tightening" of the former minister was the consequence of Macri's political decisions, which led in 2016 to adopt measures such as moderating the fare increase, passing the social emergency law and giving in to the income tax reform negotiation, trying not to resort to the veto power. The first signs of the new Minister of Finance, in the sense of spending less, were quickly neutralized by the Administration. Executing the full public work plan - which formally depends on Frigerio, - and putting in place a "work transparency plan" that reduces informal and black work, are the type of initiatives that are launched at the beginning of the year and which show the economic course for the current year. This poses two political questions regarding the course of the economy: whether government will manage to get the growth perception reach people before the October election, and whether it will be persuasive enough to implement the new-to-be postponed tightening measures in 2018, although by then the great political challenge will be the presidential election of 2019.

3. The central political discussion of the ruling party is whether or not to extend its coalition to sectors of Peronism. Macri seems willing not to do it nationally, but leave the possibility open in the districts. The idea of the President of the Lower House (Monzó) to extend the coalition to sectors of Peronism within the cabinet, -supported conceptually and publicly by Frigerio and executed in fact by Vidal- has been rejected by Macri. But at the same time, the governor of Buenos Aires began the year incorporating a new Peronist mayor to her coalition without sparking any questioning from the Administration. Something similar may happen in other provinces. Now, the two views of the ruling party agree on the need that Peronism runs divided for the elections in the province of Buenos Aires, where the national result is decided. Macri has begun the year giving this district a boost of 25 billion pesos outside the budget, at the risk of creating tensions and claims from some governors. The governor of Mendoza province, who is from Cambiemos, asked for a similar boost to his province and the governors of Patagonia (Tierra del Fuego, Santa Cruz, Chubut and Río Negro) criticized the decision that benefits Buenos Aires. The financial boost promoted by Vidal confirms that the cut on spending will not be the priority of the new economic model, which will be the main political tool either to divide Peronists or to join them in.

4. The social conflict, whether the one caused by unions or social movements and the demand for greater public security, emerges from the first days of the year as a central issue. The peronist unionism will try not to resort to a general strike, which is its most effective negotiating weapon against a government that wants to differentiate itself from previous non-Peronist efforts. The government starts the year by saying that it will not accept increases above 20%, seeking to promote "productivity agreements", which will reduce wage costs on the one hand - the first proposals of the new Minister of Finance to lower taxes on labor are being rapidly diluted- and to allow for greater increases when they are economically justified. But in the last days of the year, unionism, with its transport strike, whose effect is national, and in the early days of this year, with the strike of the subway C line, showed that it will keep the pressure. The social movements (pickets) are divided into the "moderate" group, who agreed to the social emergency with the government, - with some support from the Pope, - and the "hard people", who were left outside the agreement, will be in the street since January. The debate about lowering the age of criminal responsibility from 16 to 14 years is a consequence of society's growing demand for deterioration, or saturation, of public insecurity. During 2016, the government opted to give in to the issues of "street control" - trade unions, pickets, policy towards the police forces, etc. - the point is that in the election year to continue with this policy can have its costs.

To conclude:

a) Macri begins the year reorganizing government, ratifying his "business-oriented" administration through the Cabinet Office but reinforcing the role of the Minister of the Interior.

b) It has also been made clear that the economic policy will be subject to the strategy to win the midterm election, postponing or diluting the idea of implementing tightening measures.

c) The central political strategy of the ruling coalition this year entails the electoral division of Peronism whether it will be joined in to the coalition or not, and the spending policy will be an instrument for that.

d) The "control of the streets" (unions, pickets, public security, etc.) will be critical, where the policy of yielding to avoid conflict but pay costs due to inaction, will be the quandary to solve.

 
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