It’s not hurricane season in South America, but yet another currency crisis has slammed into Argentina. It has arrived just as President Mauricio Macri is running for re-election.
Macri, a non-Peronist president, has always expected hard-going. Since Argentina’s return to democracy in the early 1980s, the Peronist party has never permitted a non-Peronist to complete a full term in office. The last regularly-elected, non-Peronist president before Macri was Fernando de la Rúa. The Peronists seized on a sovereign debt crisis (that they helped to create) to force him from power in 2001. That crisis bore similarities to the 2019 reboot.
De la Rúa’s resignation opened the door to fifteen years of leftist-populist Peronist rule, including a dozen years (2003–2015) under Nestor and then his wife, Cristina Kirchner. Their policies of statism, protectionism, expropriations and heavy deficit spending devastated Argentina’s economy, isolated the country and weakened the rule of law.
This latest crisis follows an unfortunate, and all too predictable, pattern. As the Financial Times has reported, “Argentina has defaulted on its sovereign debt eight times since independence in 1816, spectacularly so in 2001 on $100 billion of bonds—at the time the world’s largest default—and most recently in 2014.”
President Mauricio Macri took office in late 2015 and did what he could through executive action to stabilize the economy by imposing austerity measures to reduce the burden of subsidies on the budget. Initially he was successful, making a deal with “hold-out” creditors from the 2001 default, and enticing a new generation of emerging market investors to place what was admittedly still a high-risk bet.