The Economist: Annual inflation of 114% is pushing Argentina to the right
Patricia Bullrich and Javier Milei are rising in the polls for this year’s presidential election
image: getty images
Saturday june 24th will be a momentous day in Argentina: Lionel Messi, a superstar footballer, will turn 36. It is also the day the election season officially begins in the country. As politicians limber up to compete as presidential hopefuls for the poll later this year, they face a daunting backdrop. The annual inflation rate, of 114%, is the world’s third-highest. The share of people who cannot afford basic foodstuffs and services has risen from 30% in 2018 to 43% today. Unsurprisingly, the main concern of voters is the economy. And it is pushing them to favour politicians who offer radical fixes to their country’s economic malaise.
So far, some 20 candidates have thrown their hat in the ring. They will battle it out to win the backing of their parties in primaries on August 13th. The winners of those will move to the first round of the presidential election on October 22nd. But the depth of Argentina’s economic problems means that the election this year is particularly unpredictable.
Since 1946, when General Juan Domingo Perón came to power, Argentina has mostly been ruled by the populist movement that took his name. But Peronism appears to be at its lowest ebb: just over a quarter of the electorate say they will cast their ballot for a Peronist. Under President Alberto Fernández annual inflation has more than doubled. Capital controls have tightened, fuelling a gigantic black market for dollars, the currency in which Argentines save. The central bank has printed so much money that the amount of cash in circulation has almost quadrupled to 3.8trn pesos.
Both Mr Fernández and his vice-president, Cristina Fernández de Kirchner (no relation), have said they will not run for office. The potential Peronist hopefuls include Eduardo de Pedro, a protégé of Ms Fernández, and Sergio Massa, the economy minister, although he has not formally announced he will run. Neither is hugely popular. Instead, the polls are dominated by the centre-right opposition, Juntos por el Cambio (“Together for Change” or jxc), and La Libertad Avanza (“Freedom Advances”), the party of Javier Milei, a libertarian congressman (see chart 1).
For months the strongest candidate from JxC seemed to be Horacio Rodríguez Larreta, the technocratic mayor of Buenos Aires. Yet his emphasis on gradual change has resulted in him losing appeal as the economy worsens. This has opened up the floor for Patricia Bullrich, a former security minister. Whereas Mr Larreta is trying to bring moderate Peronists into JxC Ms Bullrich opposes any alliance with the movement. She favours a sharp devaluation and a rapid reduction in public spending. Both want to enshrine central-bank independence, reduce the total fiscal deficit (expected to be 3.8% of GDP this year), slash currency controls and unify Argentina’s mind-boggling array of exchange rates.
Some Argentines find this playbook unappealing. The previous administration was led by Mauricio Macri, the founder of the main party involved in JxC. He removed subsidies, lifted currency controls and agreed loans totalling $56bn with the IMF. The formula ended in crisis in 2018. Instead, many want more extreme solutions. That has fuelled the rise of Mr Milei, who calls his programme a “chainsaw plan”, as it is so sweeping. He wants to scrap the central bank and swap pesos for dollars. He promises to cut taxes, privatise state firms, scrap subsidies and export restrictions, and re-establish private pension funds. He also wants to introduce a voucher system in schools and privatise health care. The number of government ministries would be reduced from 18 to 8.
Mr Milei attracts voters fed up with a bloated state. But his eccentric style—he lives with five mastiffs, four of which are named after famous economists, and also wants to create a legal market for organs—is particularly attractive to young men. When polled, a little over a fifth of voters say they will choose him.
