Argentine Political Outlook (Set-05-19)
Set-05-19, by Rosendo Fraga

1. In the face of the "political-economic" crisis in Argentina, there is a suggestive silence from the Trump Administration, which was a strong explicit support for the Argentine President up until the open primaries. From August 11 until today, there was no expression by the President or his main officials. Only on Wednesday, August 28, a spokesman for the State Department said: "The United States hopes to continue our strong partnership with the Argentine people and their elected leadership, whoever the candidate the Argentine people may elect as their next President." Macri seems to have talked to his American counterpart on Saturday, September 1, in the morning. The IMF mission departed from Argentina without having taken a resolution on the pending disbursement and in the face of the measures taken between August 28 and September 1, it opted for a wait-and-see stand. The point is that the support of the Western world to Macri had a precise goal, as Trump said publicly half a dozen times: "prevent the triumph of Kirchnerism in Argentina, because that would imply the return of populism to the region." At the Government Residence, hopes are that the visit paid this week to Buenos Aires by the daughter of the American President (Invanka) - within the framework of a regional tour - could bring some positive message. As for Brazil, the Vice President -General Mourao- who expresses the Army's point of view in the government, differentiated from Bolsonaro, saying that his country would continue to work with Argentina regardless of its government. 

2. Argentina thus faces the ‘crisis dynamics' as it already lived in 1989 and 2001: an electoral defeat hastens a serious economic crisis, which results in the lack of control of the streets and a government crisis. History may not be repeated, but political leaders - and the civil leadership in general - do not seem to understand the seriousness of the situation and the need to come up with political solutions. The anticipation of elections is not allowed by the National Constitution, which establishes a period of 60 days prior to the end of the term to carry out the presidential election. The Electoral Code - which is a law - set the first round for October's last Sunday and the runoff election for November's last Sunday. Even if this law was amended, the advancement could be by October 13, just two weeks before the current date. However, if a new President is elected, the 45 days after the end of the term -December 10- could be shortened. But the central point today is the speed of the crisis. In the three weeks after the open primaries, the country risk more than tripled, the dollar increased by a third and the dollar outflow exceeded 13 billion. Now, 55 days are still to go before the first round, exactly the same period that elapsed in 1989 between the presidential election of Menem (May 14) and the advanced handover of power (July 9). Meanwhile, through social media, the government has begun to call a march in support of Macri, to defend the Republic, "threatened" by the triumph of the Fernández-Fernández ticket, for Saturday, October 19, the weekend before the first round, in an attitude that shows some disconnection with reality. 

3. Despite attempts and efforts for Macri and Fernández to sign an agreement like that of Brazil in 2002, it does not seem easy and the chances run just behind the speed of the economic crisis. Talks between the ruling party and the opposition have begun in Congress to achieve the approval of the bill for the restricted debt restructuring, but it is not easy for them to reach a successful conclusion. There is dialogue between Vidal and Massa, but this seems to be limited to the province of Buenos Aires and does not project to the national level and there are some efforts so that in Spain, Alberto Fernández meets with Felipe González, one of the political leaders of Ibero-America, more experienced in agreements, pacts and coalitions. The strategy of the ruling party, supported from the economic field, has been to put the blame on Alberto Fernández' statements criticizing the IMF for the negative reaction of last week's markets. The problem is that the more the open primaries' winner is accused of causing fears, the more the economy deteriorates and when this happens, the more Macri's electoral chances are reduced, which are now focused on reducing the 16-point gap that led him to defeat. This is the same electoral strategy that failed in the open primaries, exacerbating fears of the return of Kirchnerism. Meanwhile, Cristina returned from Cuba and resumed her role in the campaign, presenting her book in La Plata, with a hard speech against Macri and his economic failure. 

4. Regarding the social situation, the two economists most experienced in crisis, with opposing views (Cavallo and Lavagna) have warned about the risk of hyperinflation. The Social Pastoral of the Episcopate and the evangelical preachers have warned the government about the need to assist the most vulnerable sectors of the population, due to food scarcity. Roberto Lavagna publicly proposed that the "food emergency" declared by the social movements and the CGT be declared. The parallel dollar that arises when exchange rate controls are established -which Lacunza recognized - will increase inflation, thus causing social deterioration. August and September inflation, which is expected to be high due to the devaluation, will go up even further. Last week, two important protests took place (on Wednesday the 28th the moderate sector, and on Friday the 30th the radicalized faction) claiming "food emergency". This week they will take place again. The province of Chubut shows what happens when the exercise of power weakens and social conflict steps up. Since the beginning of August, the state workers began a strike and blocked many roads and routes, including the national route No. 3, in a protest rejecting the payment of wages in installments. The federal justice, despite the request of the national and provincial government (Governor Arcioni has been reelected) does not order to vacate the national routes taken by protesters. Consequently, the federal security forces do not deploy and the provincial police is just on the sidelines of the road blockades. Last week the teachers joined the protest, blocking the access roads to the oil companies, preventing the production of the country's largest oil field operations. 

5. To conclude: 

a) In view of the political and economic crisis that hits Argentina, the Trump Administration remains in silence, contributing to the IMF cautious stance and President Macri's weakening. 

b) Argentina seems to repeat the dynamics experienced in 1989 and 2001: electoral defeat, economic crisis and lost control of the streets, which has not happened yet. 

c) The above-mentioned end is avoidable, but the two main candidates and political leaders as a whole fail to broker a political truce that manages to curtail the crisis. 

d) Two experienced economists have warned about the risk of hyperinflation, when the exchange rate controls trigger the parallel dollar and increase the risk of social crisis.