- Created: Thursday, 06 June 2019 11:10
- Written by Alvaro Michaels
Argentinian capitalism is in a profound crisis, with a large balance of payments deficit, 55% inflation, 62% borrowing rates and an unpayable state debt. The employment rate, the number of people who have a job as a percentage of the working age population, is 42.50%, lower than South Africa (43.1%) or Brazil (54.7%). About a third of Argentina’s 43 million people live below the poverty line, downtrodden, cheated and robbed. Nearly 8% of the population, 3.4 million Argentinians, limit themselves to one meal a day, while farm products make up a huge 64% of Argentina’s exported goods. Alvaro Michaels reports.
Immediately after his 2015 elec-tion, President Macri agreed to pay state debts to regain access to international capital markets, and in April 2016 raised more than double any previous loan requested by any ‘developing’ nation, $16.5bn. Imperialist banks rushed to buy state bonds. He then handed back $9.3bn of this, with $2.5bn interest, to US vulture capitalists who had bought old Argentinian debt claims on the cheap (see FRFI 241 Oct/Nov 2014). In June 2017 Macri raised another $2.75bn and many of the country’s provinces also made international bond issues.
Argentina’s public debt reached $321bn in 2017, roughly 57% of gross domestic product, up 33.3% from when Macri took office. Nearly 70% of this is in foreign currency, and 40% is held by private investors.
To pay interest on all this debt, the state has to squeeze its budget. A large current international trading account deficit means foreign currency is scarce. In fear of explosive protests, Macri did not directly cut social programmes, and therefore slowed reductions in the budget deficit. However, he ordered layoffs of state workers, eliminated tariffs protecting local industry and removed fuel subsidies, which provoked widespread unrest anyway. From January 2016 to March 2019, electricity prices rose more than 3,600%, gas prices 2,400%, water 1,118% and transport 500%. Higher gas prices encourage shale production. In 2018 gas output rose 215% and shale oil rose 87%.
Yet for two years, with some econo-mic growth, Macri and his free-market coalition ‘Cambiemos’ (Let’s Change) retained electoral support in the August 2017 primaries and October 2017 mid-term elections. On the other hand, his predecessor Cristina Fernandez-Kirchner’s new Citizen’s Unity Party (established June 2017 from her previous Party for Victory) won additional seats in those mid-terms.
Macri’s tariff reduction caused a flood of imports and a growing balance of payments deficit. In the last week of April 2018, money flooded out of Argentina. On 26 April, after the central bank spent $4.3bn in five days to prop up the peso, a series of interest rate rises followed. Nevertheless, the peso fell 18% in the year. This cheapened exports but forced up import prices, the burden of which will fall on the working class.
The overwhelming grip of finance capital
On 8 May 2018 Macri made public a secret appeal for money, made a month earlier, to the IMF. He received promises of an emergency credit package of $50bn until 2019. However, in 2018, the worst drought for 50 years cut agricultural output by half. GDP fell 2%. From the end of 2017 to the end of 2018 the peso lost half its value against the US dollar. Inflation rose to 46% and real wages fell 11% in the last four months of 2018.
On 3 September 2018 emergency measures were taken to slash the budget deficit. Taxes on exports, which Macri had cut, were re-imposed. Ten government ministries were closed. Interest rates hit 60% and the peso collapsed to a historical low of 40 to the US dollar. It is now worse at 45. The ‘deficit zero’ plan aims to slash state spending by $11.7bn by 2020. On 26 September the IMF agreed an extra $7.1bn on top of the $50bn loan approved in June, to be spread over three years. This final $57.1bn loan is the biggest in the IMF’s history.
In December 2018 Buenos Aires and surrounds were locked down by 22,000 police for the two-day G20 meeting. The week before, four bomb scares forced the evacuation of the senate, the US embassy and other public buildings. A large anti-government demonstration in the city centre, uniting 70 different groups, protested about issues from workers’ rights to climate change. There have been weekly demonstrations since then. On 13 February activist groups held massive demonstrations in 50 cities to demand that the government declare a food emergency and cut back on tariffs.
Despite the huge IMF loan, investors dumped Argentine bonds at the end of April 2019 as the US dollar rose again, making debt interest and capital repayments more expensive.
Elections and political shifts
On 18 May, 10 days before her trial for embezzlement of public funds started, Cristina Fernandez-Kirchner announced her candidacy as Vice President in the forthcoming party primaries for the 27 October presidential elections. She was expected to stand for president. Together with the presidential candidate, Alberto Angel Fernandez (no relation), they aim to represent the ‘Peronist’ voters. Another ‘Peronist’, Daniel Scioli of the ‘Justicialist’ Party will stand against her in the party primaries. The fractious ruling class, with its IMF backers, now have a major social-liberal alternative to their free-market Macri coalition.
The other key Peronist grouping is the ‘United for a New Alternative’, of Sergio Massa. This contains the Renewal Front, the Christian Democratic Party and the Integration and Development Movement. Massa seems prepared to do a deal with the ‘Fernandez and Fernandez’ team.
Should he win the presidency on 27 October, Alberto Fernandez faces the threat from international financiers of a block on capital flows to Argentina. For socialists a mass movement is necessary to end the country’s subordination to international capital, to go beyond social liberalism and reject imperialism, so that Argentinian workers can proceed with the difficult business of building their own society.
Fight Racism! Fight Imperialism! 270 June/July 2019