Global Independent Analytics
Pedro Marin
Pedro Marin

Location: Brazil

Specialization: Latin America, Ukraine, North Korea

Argentina to become a “free market paradise”

Right into Uncle Sam’s hands

A week after taking office, Argentina’s President Mauricio Macri seems to be aiming at the total destruction of all previous President Cristina Kirchner’s policies. In just a week, the newly-elected President has already eliminated farm export taxes and, like a madman, signed 29 Presidential decrees: The most controversial are the ones that aim to change the media law, which aim to open up the country’s media landscape by limiting media dominance, a decree that threatens the education law – which established that at least 6% of the country’s GDP must be spent on education – and finally a decree that appointed two Supreme Court Justices without the Senate’s agreement.

But Argentina’s government last insane move came in last Wednesday, when Economy Minister Alfonso Prat-Gay announced the end of currency controls. That means that anybody who wants to buy or sell dollars or import and export won’t have to ask the government for permission to do it, neither will he have limitations to do so. As a result, the Argentine Peso’s value decreased by about 30%.

It means that if a US company wants to buy Argentine meat, it just became 30% cheaper. A very disturbing measure, considering that Argentina’s balance trade – that is, the balance between how much the country imports and exports – doesn’t help the country that much, as it usually imports (buys) almost as much as it exports (sells).

Ultimately, this decision helps the foreign companies and the Argentineans who have fat dollars funds, at the expense of the poor and, in the long term, of the national industry. All those items that are imported, such as oil, medical equipment and pharmaceuticals, will become more expensive.

Political backlash

Macri won the elections by only 3 percentage points. Kirchner’s party candidate and Buenos Aires’ former governor Daniel Scioli could have beaten Macri, if it were not for the Buenos Aires’ flood in August or Argentina’s Socialist Party preaching of abstentionism.

As a result, Argentina is obviously very divided. Thousands staged a protest last Tuesday against the changes of the media law. Macri can’t afford a completely destroyed economy, and thus will surely ask the Monetary Fund for aid. In the short run, it will indeed help the economy. But IMF’s abusive fees will cause the country’s economy to collapse in the long run. Latin America seems to be once again going towards US and EU dominance.

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