Argentina's Economic Outlook Post-Fernández Victory: A Path to Recovery or Another Crisis?

With the recent victory of Alberto Fernández in the Argentine presidential elections, attention is now focused on the direction of the Argentine economy. Will it find its way back to a strong economic footing, or is it destined to fall deeper into an economic crisis?

Building on Previous Successes

When Néstor Kirchner took office in 2003, much like the current scenario with Fernandez, the country was facing significant economic challenges. The external debt, which had already defaulted in 2001 under the Rodriguez Saa and Duhalde administrations, still loomed as a heavy burden. Kirchner, along with Vice President Cristina Fernández, who later succeeded him, focused on restructuring and paying off debt using internal resources instead of taking on any new loans.

Their strategy paid off significantly, leading to a resounding success. By 2014, the country had transformed into a recognizably different landscape compared to 2001. Unemployment was low, public health was fully restored and free as always, and public education, including college, was still solid and free. However, this progress was later undone by the “pro-business” presidency of Mauricio Macri, who opened the country to speculative short-term capital, leading to a significant increase in foreign debt. Promised foreign investments never materialized, ultimately unraveling the gains made during the Kirchner era.

Current Economic Context and Challenges

Following Fernández's victory, the economy is expected to continue grappling with high inflation, further weakened economy, and potential debt defaults. These factors could potentially create an environment hostile to foreign investment. It's a difficult and slow process that will require careful navigation to avoid a repeat of the IMF's involvement in the 2001 crisis.

The agricultural sector plays a crucial role in Argentina's economy, with soybean exports being a major contributor. Between 2003 and 2008, soybean prices increased significantly, reaching an all-time high of 15.60 per bushel in 2008. Cristina Fernández, part of the previous Kirchner administration, made a significant push to pay off debt during this time. By 2012, Argentina had nearly paid off its debt. However, since then, soybean prices have dropped to 9.20 per bushel, a substantial decrease from the peak.

Export taxes, applied by Kirchner and Cristina Fernández to agricultural producers, were a key tool in managing the economic recovery. These taxes were designed to balance the economic burden of paying off the debt while mitigating the impact on producers. However, the current political climate and the changing global market conditions will necessitate a careful reconsideration of these policies.

Potential Economic Strategies

A renewed focus on internal reconstruction without adding to foreign loans or investments is expected. This could involve renegotiating existing debt and slowly paying it off. While this strategy might face resistance from Western experts, the historical success of such measures in Argentina is a compelling argument in favor of this approach.

The upcoming administration must also pay attention to the agricultural sector, particularly soybean production. The fluctuating prices highlight the need for a balanced approach that considers both economic recovery and the needs of producers. This could include policies such as exchange rate stability, support for agricultural research, and measures to enhance market access.

Conclusion

While the economic path ahead for Argentina is challenging, there are clear precedents and strategies that can be employed to achieve a stable and sustainable recovery. The key will be a phased approach that addresses both immediate needs and long-term goals. Whether Argentina can steer clear of another economic crisis or continue on its path to recovery will depend on the wisdom and effectiveness of the new administration's economic policies.