The drama never ends for Argentina, land of failed expectations and the setting for a great Broadway musical. Next week, a new leading man steps into the role of president with a chance to fix the broken economy and set a positive example for South American democracy.
Mauricio Macri is an outsider, which in Argentina means he isn't a Peronist, the dominant political force for ages ("Evita" was the celebrated Eva Peron). If Macri turns out to be the least theatrical political figure ever, that would be perfect because Argentina needs sensible, stable leadership.
Getting to dull may take time, though, because the country needs a complete economic overhaul.
Under the current president, Cristina Fernandez, Argentina has become an international financial pariah. The country defaulted on debt last year in a long-running feud with hedge funds — remarkably, that was the eighth default in Argentina's history.
Fernandez refused to settle. That's left the country to squeak by in isolation, using protectionism and capital controls in a quixotic battle with globalism. The economy is stagnant, foreign currency reserves are dwindling and the inflation rate is around 30 percent. Last week, American Airlines said it stopped accepting pesos for ticket sales because it was tired of collecting revenue it couldn't convert to dollars.
At times Argentina has embraced trade and economic openness, only to slip back into bad habits thanks to populist Peronistas like Fernandez. Macri, a conservative, wants to re-establish free market principles, but there are a lot of details he didn't fully explain before his November victory because they will require some short-term pain, and he wanted to win the election.
Everything Macri is talking about makes sense. He says he will lift the capital controls that have wrecked the peso's credibility. Like other backwaters it shouldn't resemble, Argentina has a thriving black market because the government insists the peso is worth a lot more than its actual value. Freeing the currency would devalue it, a first step toward making Argentina more competitive.
The next big step would be to negotiate a settlement with the hedge funds that bought up Argentina's debt after its previous default in 2002 and demand repayment. Fernandez got political mileage from attacking the "vultures," but Macri seems to understand Argentina can't get unstuck when it's essentially shut out of international capital markets. He sounds like he wants to do a deal.
Macri's got a tremendous balancing act to pull off: He'll need to cut spending and reduce taxes without destroying the country's big social safety net, while walking the country through a devaluation. He could use a good friend, and it looks like Macri is hoping to find one in Washington. Relations have been at an ebb since the 2002 default. Argentina slowly moved out of the U.S. orbit, sidling up to China, Cuba and another outlier, Venezuela — part of an embrace of leftist politics some call the "pink tide" of South American socialism.
Argentina has incredible potential as a vibrant, resource-rich country but too often it fails to fulfill its promise. Brazil, by the way, next door and also struggling economically, has the same problem. Macri won't get much help from the Peronists, who are still powerful, but if he can kick down the biggest barriers to investment, that will re-establish trust internationally. Money will come rushing to Argentina. If that happens, expect much of South America to benefit from a new tide of prosperity. More openness should follow, giving Argentina and many of its neighbors the chance to sing a happier tune.
—Chicago Tribune