Criticism against Macri's decision to ask for an economic rescue from the IMF and about the different policies of his government have once again been discussed in the country
Mauricio Macri ascended to the presidential power since 2015 with the promise to get out of the economic crisis that had plagued Argentina since the Kirchner era. The fight against the strong inflation that the country had was the main discursive tool that served the candidate of the Propuesta Republicana party to win the elections to the peronism.
However, this fight has not had the results that were expected. The months of April and May 2018 have been clear examples of the failures of the government to get Argentina out of the difficult situation. According to the newspaper El Clarín and to data from the Banco Central de la República de Argentina (Central Bank of the Republic of Argentina, in English), so far this year the Argentine peso has devalued by 25%, without counting that during the last 5 years the currency has depreciated in a 80%, affecting thousands of people and complicating the social and economic situation of Argentines.
To this we must add the inflation so far this year, which has affected the Argentines surprisingly. For example, many of the products of the basic basket have increased their price up to 100%. According to El País of España, public services such as water, gas and electricity have risen between almost 700% and 930% as a response to "open up" the prices of the subsidies provided by the Kirchners in their government. Public transport has gone up more than 200% (expecting hikes in June) and gasoline increased by 96%.
Macri's excuse is clear: the crisis comes from past governments. To this has been added the rise in the price of oil and interest rates in the international arena, as well as the devaluation of emerging currencies. Here it is worth clarifying that in the crisis of the country the fall in the price of the currency is not the cause, but a consequence of bad political decisions of the country's governments.
One of the main causes of this crisis is the high public spending that the Argentine government has had for several decades, time in which the State has spent more than it collects. A reality that exemplifies this is the large number of public employees that the State has. According to data from the Central Bank, 35% of people throughout the country are employed by the public sector and, in the case of some provinces, this percentage reaches 60%.
This has resulted in Argentina having had four major economic crises during the last half century. An example of this is the large external debt that this country has, which amounts to more than 250 billion dollars, currently unpayable for the country and now one of the main reasons for going to the International Monetary Fund (IMF).
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The depreciation of the peso has scared away a large number of foreign investors, involving a large amount of capital flight in the country and greatly reducing its foreign financing, which is a vital part of the country's economy. This is because, according to the Institute of International Finance, 64% of its economy comes from foreign capital. Another cause of this is the high tax rates for private companies, which transforms its economy into an unattractive and competitive environment for foreign investors.
In the face of adversity, Macri has managed to regain the confidence of foreign investment that the economic default of the early 2000s managed to keep away from Argentina, according to El Clarín. What it has not managed to do is reduce inflation and the public deficit that so afflicts the country's economy.
For this, the president's government has implemented a reform plan called gradualism, which has been gradually implemented and has not generated the fast and effective responses that are expected. In view of this, in Argentina there is an urgent need for more drastic policies that lead to quick solutions that reduce the deterioration of the quality of life of Argentines and stabilize the difficult economic, social and political situation in this country.
Latin American Post | Juan Sebastián Salguero Bernal
Translated from "¿Se agudizará la crisis económica de Argentina o es una oportunidad para salir adelante?"