Taking office on 10 December 2019, President Alberto Fernandez faced a simple fact – his defeated opponent Macri had placed Argentina in an impossible international debt position, a situation of virtual default. Western debt mongers, in their pathological anxiety to plunder the country, were unconcerned with the consequences: 40% of the population live in poverty. However, Fernandez’s electoral victory stands against the recent reactionary shift to the right across much of Latin America. ALVARO MICHAELS reports.
Fernandez has to manage a political constituency made up of Cristina Kirchner Fernandez’s impoverished working class supporters, and a lower middle class and a vacillating middle strata, both crippled by Macri’s economic programme, together with left-wing political leaders close to the La Cámpora youth movement, plus centrist Peronist governors, and the Frente Renovador (Renewal Front) leader Sergio Massa. COVID-19 has allowed Fernandez to position himself as the leader of all Argentines.
The debt burden
Former president Macri, ‘darling of markets’, aimed to bring in foreign investment, but little changed from Cristina Fernández’s previous administration; only speculative finance rushed in and out, profiting from exchange rate changes. His expansion of international debt in 2018 was calculated by the IMF to support its neo-liberal allies in Argentina and throughout Latin America. An unusual new 100-year government bond was supported by foreign investors, anticipating the long-term plunder of Argentina. These bonds are currently worth 37% of face value to their owners. Argentina’s public debt, nearly 90% of GDP at the end of 2019, is unsustainable. It includes $44bn outstanding from Macri’s $57bn 2018 IMF ‘bailout’. The new government, with only $10bn in reserves, was faced with the country’s ninth sovereign debt default, unable to pay about $100bn of the $148bn of private credits in its $332bn foreign debt. Argentina verged on collapse.
Poverty in Argentina
The large protest marches demanding food, which marked the October election campaign, showed deep poverty in Argentina. The official poverty rate rose from 32% at the end of 2018, to 35.4% by mid-2019, then around 15.8 million Argentineans. Realistically it is now 40%. Meat consumption is at its lowest level in 100 years. Real wages are 10% less than 2016. There is 13% official unemployment. ‘A plan to fight against hunger’ was Fernandez’s first action.
A no growth economy
The economy shrank 2.1% last year, with barely any growth over the past decade. Industrial production has fallen overall since 2004. For six out of the last 20 years, GDP growth has been negative. The expansion of public spending to offset this trend was halted from 2016 as the private sector fought back against taxes. Inflation is 50%. On 5 March interest rates were reduced for the eighth time since 10 December to 38% to encourage borrowing.
Fernández is currently renegotiating $169bn of the state debt. The government delayed a February repayment of local debt to 30 September, declaring it would not be ‘held hostage’ by creditors. Major investment funds, Templeton and Pimco, have been forced to accept an estimated 30 to 40% cut in their claims. The ongoing saga of roll-overs is a struggle between international capital and the national bourgeoisie for control over the economy. When the Province of Buenos Aires tried to postpone a $250m January payment of its debts until May, it failed to ‘convince’ Fidelity, which owns a quarter of the province’s 2021 bonds. The province backed down and agreed to pay the money it owed, promising to restructure its remaining foreign debt. On 23 March, taking shelter in the COVID-19 crisis, Fernandez told the IMF that Argentina would not make any repayments for five years. This provides room to renegotiate foreign debt with private creditors.
Budgetary efforts
An emergency package in December included tax rises on the wealthier and tax relief for the poorest. It imposed a 30% tax on foreign currency transactions abroad and retained the US dollar bank withdrawal cap of $200 per person per month, imposed by the panicking Macri administration. The government intends that 70% of new revenues are used in social programmes, including subsidising free food vouchers for two million of the poorest Argentinians, and the rest for infrastructure and housing.
Taxes on agricultural exports are one reliable source of government income. The agribusiness sector in Argentina, the world’s largest soya bean oil and meal exporter, represents about 10% of its economy, providing 65% of the $60bn export revenues. Here we see the current priorities of the farming industry and the government which sees soy as a commodity, not a food. Why does Argentina export 400m tonnes of soy but won’t provide food for five million poor people?
The government has raised the country’s soy export tax from 25% to 30% then 33%. Those on corn and wheat have risen from 7% to 12%. These taxes provoked protests from the farming lobby but must now be used to alleviate poverty and not interest for the state’s bond holders. What is needed is state control of the agricultural sector, but with full workers management, not simply state supervision of market processes. Until that is the case, any government trying to drive progress will meet the active opposition of property owners.
Domestically, the president is in dispute with the Catholic church over his plans to legalise abortion. He has sent a bill to legalise abortion to Congress – of great importance for all Latin America’s women. He is fighting with judges over his attempts to reform the judiciary – ‘without an independent judiciary there can be no democracy’. Fernandez has no choice but to resist the crushing impact of Argentina’s debts to maintain his constituency. He will struggle to extend liberal bourgeois rights in a country extricating itself from years of fascist and military political dominance. Reformism is not going to work. Only radical measures including repudiation of all foreign debts, and strong interventions in the economy would enable Fernandez to begin to meet the poor’s needs. The government must confront the overarching interference of US imperialism, the IMF, private creditors’ claims, the recession, austerity, and its own propertied classes, all at the same time.
