Crisis in Argentina: Alberto Fernández Sinks

The inflationary phenomenon around the world does not let up and the risks of a global crisis are more and more latent. However, there are countries that have experienced this crisis in a much deeper way. This is the case of Argentina. The South American country has suffered an inflation of 64% in the last 12 months, this has put Argentine finances on red alert and doubts are growing as to whether the Government of Alberto Fernández has done everything possible to counteract this crisis.

Fernández's support indicators have fallen to lower levels in his presidency. At May levels, the president's popularity reached just 35%, 3 points less than in April, according to the Analogías consultancy. It could be said that the president is going through his worst moments, but each month and each crisis seems to create a new fund.

The rear view mirror

Despite almost 4 years since the beginning of the Fernández Government, the rearview mirror of Mauricio Macri's economic measures is still used. The current Argentine president does not miss an opportunity to launch himself with the other political force in the country: "what the macrismo did in Argentina is an immeasurable damage (…) it has left the worst economic scenario that we could have", referring to the situation economic life of the nation. This he said after a visit to Germany in which he participated in a meeting during the G7 summit.

Despite the fact that during the Macri government, there were no great successes in economic matters either, Fernández has made it very clear: "Blaming (his former Minister of Finance) for inflation is almost cruel, because the problem has been 15 years old".

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A drowning in foreign debt

One of the main problems with the inflation that Argentina is experiencing now is that while it is experiencing a critical inflationary phenomenon, it is one of the countries with the highest foreign debt, and has even been increasing it during 2022 under the government of Fernandez. According to EFE data, Argentina stood at the end of the first quarter at 274,355 million dollars, 6,488 million dollars more than in the fourth quarter of 2021.

Now, when the Argentine peso plummets and the debt is in foreign currency, mainly dollars, this makes the payment of these commitments increasingly difficult.

If a year ago with 96.19 pesos one dollar of debt could be paid, today the change leaves it at 128. This shows that inflation not only eats up Argentine savings, it also makes the debt grow day by day in pesos. Since the government can only collect taxes in Argentine pesos, the change makes it difficult to pay fiscal responsibilities. This makes the risk of default or non-payment of debt ever greater and would further plunge the Argentine economy into a new crisis, but with a complicated world outlook.

A divided government

But the discomfort towards the current Government is not only limited to the failed financial policies or the systematic weakness of the Argentine economy, it has also been accompanied by various scandals and fires within the Government.

First, the constant crisis within Peronism. The current government does not represent a single political force. For the president to come to power, the support of the powerful Cristina Fernández, leader of Kirchnerism, was decisive. But since both came to power, friction and internal fights have proliferated.

Since the end of 2020, the relationship between the president and vice president has fragmented when the former president publicly criticized the government of which she is a part. The fragmentation has been so great that even the meetings between the two political leaders have been few and tense. An alarming symptom for a country that is going through one of the worst economic crises in the region.

For now, it seems that Kirchnerism has defeated the president. One of the pieces of evidence was the recent appointment of Silvina Batakis as Minister of Economy, replacing Martín Guzmán, a man the president trusted. Batakis was a request from Cristina Fernández that demonstrates her victory in the political pulse within the Government.

This leaves Fernández and Peronism weakened. To the point that in 2021, the political force represented by the Government obtained the worst results in the legislative elections and gives a halo of hope to the political forces, represented by the macrismo and the libertarians (who seem to have more notoriety every day) represented in politicians like the controversial Javier Milei.

Additionally, within the government coalition, it will be necessary to choose whether to go for a re-election of Alberto Fernández, propose a more Kirchnerist candidate again, or perhaps seek a peaceful solution between both sectors and go for a new name.