During the past weeks, the news cycle has been overtaken by one topic and one topic only: the economic turbulence in which the country is immersed, its causes, potential consequences, whether it was a good idea to resort to an agreement with the International Monetary Fund (IMF) and, above all, who is to blame for everything.
That is why the weekend’s prime time was predictably dominated by public statements from former and current members of the government, as well as representatives of the opposition and economic pundits, who gave their diagnosis about the gravity of the situation.
Economy Minister during Cristina Kirchner’s first presidency, Ambassador to the US during the first year of Mauricio Macri’s administration, and current national deputy Martín Lousteau, former Finance and Treasury Minister Alfonso Prat-Gay, and former Banco Nación head Carlos Melconian were the former officials that spoke up; Cabinet Chief Marcos Peña and National Deputy Elisa “Lilita” Carrió took their time before a mic to defend the administration’s actions. This is what they said.
Out of the three mentioned economists, Lousteau was the least vocally critical, saying that Argentina’s situation is not Macri’s fault, but a result of structural problems. “I have discrepancies with the diagnosis, but it is puerile to thing that we were doing well and now we are not. Argentina was hit harder [by the worsening of international conditions for emerging economies] because it has a weak structure. I might disagree [with the way the government handled the situation], but we’ve had these problems for 40 years,” said Lousteau in an interview on TV show La Cornisa.
“We are not facing new problems. It is society, not the government who is in trouble, because we know what happens in these circumstances. Each crisis increases the levels of inequality in the country, so it is a good moment to start diagnosing like we have to,” he added.
Moreover, he called the government to welcome dissenting voices: “In the same way they thought everything was great, that the country had taken a 180 degree turn compared to the Kirchner administrations, they also argued that anyone who gave an opinion that was different to what they thought was on the other side [of the proverbial aisle]. It is time to change that,” he said.
When consulted whether the government rushed by resorting to the IMF when it did, Lousteau said he believes another path could have been taken: “It depends on the diagnosis. We have had a model whereby the government spends 20 percent more than what it has, that is the fiscal deficit. It has been like this for a while. But the Argentine people also consume more than what it has. And this is more serious. When this happens, you have to go abroad and buy overseas. For that, people need dollars, and we don’t have them. If you think it is only a fiscal problem, and that you are in an urgent situation but can’t implement austerity measures, you go to the IMF. If not, you sit down and think about what is happening,” Lousteau analyzed.
The former minister expressed himself along the same lines as Lousteau with respect to the decision to resort to the IMF, assuring it was “premature.” “There is no objective factor to conclude Argentina was on the brink of collapse,” he said in an interview with CNN. Prat-Gay went on to say that the exchange rate in December 2015 was AR $16 per dollar, and argued that “if we [factor in] the inflation Argentina had, and subtract the inflation the US had since, it results in an exchange rate of AR $28 per dollar.”
Based on this thesis, the former minister criticized the Central Bank’s (BCRA) actions, saying the exchange rate at which it started to intervene in the market [selling reserves in an attempt to prevent it from going up] was extremely far from one that could have led to generalized panic. “If they had had a proper diagnosis, they would have understood that the exchange rate was part of the problem and that is defending it was pointless.”
Even though Prat-gay pinned the blame on the political leadership – “when a country reaches an agreement with the IMF, it is a failure of politics and the political leadership, as they have to request aide overseas” – he praised Macri’s actions in particular, highlighting that “what is important is not to freeze.” “That’s what a leader does,” he said.
The former President of the Banco Nación was undoubtedly the most vocal of the three at the time of criticizing the government’s actions. Speaking at a conference this weekend, he said that since the government did not implement the necessary austerity measures to correct the fiscal deficit left by the Kirchner administrations; the IMF will do it instead. “You fooled around for two years, talking about ‘good vibes,’ and now you will have to deal with high inflation rates and low levels of economic output right before an election,” he said.
Moreover, he assured that the government’s inflation targets were not realistic – “Let’s pray it clocks in at 25 percent this year,” he said about it – and, with a raw rhetoric he explained why: “You have to understand that if you want to wear skinny jeans, which is like having a single-digit inflation rate, you have to stop eating four plates of ravioli every day. That is the fiscal deficit.”
“The crisis didn’t begin in the past ten days, but in the past 720. The catalyst is anecdotal, what is relevant is the structural problem,” he said. Regarding the agreement with the IMF, he said that the organization does not consider Argentina to be a trustworthy country. “Lagarde’s praises are mere formalities. What the Fund thinks of the country is in a paper released in December, and says the government needs to re-calibrate its macroeconomic program and implement structural reforms.”
The Cabinet Chief was in charge of defending the Executive’s stance regarding the issue. Also speaking on La Cornisa, he conceded that Argentina’s levels of credibility have lowered but, nonetheless: “The government is optimistic and believes that all of the country’s problems can be solved.” “We need to stay calm, the government has made the diagnosis and has the tools [to solve the problem], we are certain we will come out of this one,” he added.
Furthermore, in what was likely a reference to Melconian’s statements, Peña assured the government was not “fooling around” during the past two years. And while he conceded “this is a difficult situation,” he indicated that it is not the hardest they have had to go through. “We were in a worse situation in December 2015, when we took office,” he said.
In yet another display of her characteristic firebrand style, the deputy defended the actions taken by the Macri administration and accused certain sectors of the political and economic landscape of attempting to orchestrate a “market coup” against the President, assuring they want to go back to a corruption-ridden system. “There are sons of bitches who live in shantytowns and sons of bitches in the Argentine Industrial Union,” she said. Even though she then clarified that “there are decent people who live in shantytowns and decent upper-class people,” her statement was likely a not-so-veiled way of taking a jab at the members of the chamber grouping the largest industries of the country.
The abundance of public statements is not set to dwindle, as the country starts a key week in the economic landscape. On Tuesday, the BCRA is scheduled to auction notes known as Lebacs, in order to roll over about AR $674 billion of securities, an event that will signal the level of trust the private sector has in the government’s policies.