BUENOS AIRES, Argentina — A post on Twitter reads, “Starting my second semester by working on a Saturday.” That is how one user on the social media platform qualified his first impressions of “Macrinomics”, the new policy for the economy in Argentina.
Elected last December, President Mauricio Macri is the first pro-business elite to be chosen by vote rather than by military coup. But his “zero poverty” approach is drawing criticism from the middle class, which now has to endure price spikes and layoffs as part of a greater plan to improve living conditions.
The following are some of the costs and benefits of Macri’s campaign to end poverty in Argentina:
1. Whittled Social Programs
For over a decade, Argentines have enjoyed some of the cheapest utilities and most generous subsidies in the world. The economy of Argentina, under the former, populist President Cristina Fernandez de Kirchner, was known for its top-40 rankings in human development.
Under Kirchner, Argentines had a free education and paid less than $5 per month in utilities. Children in need had their own subsidy program, as did retired housewives. These are some of the positive legacies Macrinomics will need to change going forward.
2. High Consumer Costs
Macri intends to retain electricity subsidies for the lower class, but his lifting of price controls and devaluation of the peso are shocking the middle class and small business communities.
Energy bills have risen by more than 150 percent and are beginning to affect even medium-sized manufacturing firms; together these firms account for 40 percent of Argentina’s exports to Brazil.
Meat, bread, and dairy prices have also risen by 50, 30 and 20 percent respectively. Another Twitter user satirically observed, “Macrinomics, the price inflator . . . you asked for yellow balloons” — yellow balloons are part of the branding for Macri’s political party, the Propuesta Republicana (PRO).
1. Increased foreign direct investment
For the first time since 2001, Argentina is proposing a $12.5 billion bond to the U.S. and U.K. This signals its reentry into the global credit market, as Macri renegotiates Argentina’s 15-year default on loans.
The IMF has confirmed this reentry by agreeing to Argentina’s first economic evaluation since 2006. Macri says he has already secured a loan for $4 billion from foreign banks, as well as another $5 billion from the Inter-American Development Bank.
2. Improved Infrastructure
Macrinomics concentrates primarily on Argentine infrastructure. For instance, British Petroleum has pledged to invest in the Vaca Muerta region, home of the second-largest shale reserves in the world.
Chinese President Xi Jinping also met with Macri in April to discuss contracts for two nuclear and two hydroelectric power plants in Santa Cruz. The projects will cost around $15 billion, with 85 percent financing from the Chinese.
“We need the important companies of the world to finance and construct roads, ports, waterways, energy, trains,” Macri says.
The influx of foreign capital into Argentina is an exciting prospect that will create jobs for many citizens. It is also the start of a new relationship with the U.S. But, Macrinomics will take time to show results, so it will be important for the U.S. to continue monitoring the economy in Argentina as it marches toward “zero poverty.”
– Alfredo Cumerma