Argentina—twinned with Greece

On 25th October, Argentina will vote for its next President. Loyalty, favouritism, betrayal, a powerful widow, one candidate with a supermodel wife, another front-runner a football magnate, unexplained murders, unexplained wealth—this is a campaign scripted for Netflix. Argentina’s future is at stake. Will the voters of this G20 nation of 40m people stay with patronage, populism and nationalist ideology, or choose a return to the laws of economic reality? It is a choice that the Greek electorate would find familiar.

It is now 14 years since Argentina staged what was then the biggest default in history. The current election debate shows that the Greek dilemma—populism vs pragmatism—can last for years after a nation’s bankruptcy.

“This campaign is about whether we stay the course, and finish the job of making Argentina a model for others to follow,” according to Daniel Scioli, Governor of Buenos Aires and annointed successor to the outgoing President, Cristina Fernandez de Kirchner. Now that Cuba has restored relations with the United States, the Kirchner government, in a further echo of Athens, stands in opposition to orthodox economics, big business and the World Bank.

Successive Argentinian governments have struggled to adapt to the political and economic consequences of default and global recession. It can seem at times as if the government exists in a parallel universe, where it denies that inflation is rampant, where exchange rates are frozen to prevent devaluation of the currency, where the state airline loses $2m a day, yet is touted as a success story. Its foreign policy shifts ever more towards China and Russia, with which it cuts semi-secret deals, while lambasting the US and shouting at London over the Falklands.

Can a pragmatic alternative succeed? Mauricio Macri, Mayor of Buenos Aires and the former President of Boca Juniors football club, offers a pro-business, pro-market, pro-growth agenda, a “return to the real world,” as he puts it. Macri has to watch his words on the “Malvinas,” having wondered aloud whether Argentina would not be better off leaving the Brits to pay for maintaining the Kelpers. That’s pragmatic, but unpopular. The two Kirchner presidents—Cristina,  and previously her late husband Néstor—have changed Argentina over the past 12 years. They dug Argentina out of the 2001 collapse, and default. Luckily, the commodity boom brought growth, until the global downturn.

This means that, although the economy is stagnant, there is enough revenue from taxing commodity exports to redistribute money to their power base, following the example of the President’s heroine, Evita Perón. In consequence, Argentina boasts the fastest-growing middle class in Latin America. Almost half the country receives government subsidies, be it family welfare, generous unemployment benefits, hikes in state pensions, or support for the young.

The price of this largesse is inflation at over 30 per cent. This leads to high consumerism, since only a fool saves money which will be worth a quarter less in 12 months’ time. The government can now borrow only at 9 per cent, a staggering number in this global market. The future is mortgaged. Most polls suggest that President Cristina’s Victory Front, the new title for Peronism, has a solid lock on the third of the electorate who depend on the government for handouts. The politics of default has become the politics of dependency, and debt. In October’s first round of voting her candidate, Scioli, will win outright if he garners 40 per cent or more, and beats his lead rival by 10 points. That’s his best chance. A run-off could be close if the opposition can unite. Polls show 60 per cent of Argentines are opposed to the government.

“Victory of work, health, education! We can do more, and we can do it better!” declare the billboards of the Victory Front.

The rallying cry of the main centre-right opposition is “Together we can!” The party headed by Macri evokes unashamedly the line used so successfully by the President Barack Obama’s campaign in the US in 2008.

The battle is far from over. Victory could prove a poisoned chalice, as whoever wins will face crises—brutal choices over devaluation, welfare cuts, and austerity.

The Greeks, a decade behind Argentina, will watch with interest—and despair. For the Argentine “model,” if that’s the word, suggests that the politics of default triggers not a decisive change of direction, but an addiction to deficits and debt.