Strolling the picturesque streets of Buenos Aires, you’d likely think you were on a walk-about in an European country. Nevermind its South American location, Argentina’s aesthetics are clearly old world. From the mind blowing architecture, to the Mediterranean inspired cuisine, to the Italian-infused Spanish, Argentina is a cultural phenomenon that’s a must-see. This corner of the world is truly unique, but behind a thin veneer of beauty and charm is a tragic economic backstory.
Argentina’s economic history stands out, as it is the only country in modern history to go backwards. Less than a century ago, Argentina was a rich nation that received millions of immigrants from Europe in search of a better life. Today, Argentina is far from rich, and has endured several economic free-falls that have shaken this society to its very core. While there are entire books written about Argentina’s fall from economic grace, many argue the road to destruction began with the rise of the Perón political dynasty. The politics that were promoted by the globally recognized icon Evita continue to haunt this country’s future.
Just like the lyrics in the song “Don’t cry for me Argentina,” Evita and her populist politics have never left this country. For generations, the political elite has branded themselves as “Peronists” and have consistently mismanaged the economy. The country hit rock bottom in 2001, when Argentina defaulted on its debt. Ordinary citizens lost most of their life savings when their bank deposits were raided. That massive default laid the groundwork for a new political dynasty that held onto the presidency until a few weeks ago.
Néstor Kirchner, and his wife Cristina Fernández de Kirchner were elected in succession to the Argentine presidency and lived in the Pink House (their White House) from 2003 to 2015. Their tenure has been decidedly anti-business and big government. Their popularity piggy-backed off society-wide distrust in free market economics from previous administrations’ failed policies. Cristina bought loyalty by doubling the amount of citizens that receive a pension or a salary from the government, which is now above 40 percent. When money ran out for their massive socialist scheme, they simply printed more.
Buying votes came at a large cost to their national currency. The spendthrift policies of the Kirchners created one of the highest inflation rates in the world. The Argentine peso’s slide downward over the past decade has been breathtaking. Today, a cell phone costs about the same as a car did 15 years ago. To hide the horrific inflation, the Kirchners sacked the entire staff at the Official Statistics Agency and started doctoring core economic statistics. They also weakened congress, influenced the judiciary, and censored the press, all in a concerted effort to suppress the truth about their disastrous economic policies. Currency controls prohibited everyday people from obtaining US dollars, and created a vibrant black market for foreign currency.
It appears this era of economic backwardness is ending, as the Argentine Republic has just elected a new president named Mauricio Macri. As the mayor of Buenos Aires and the former head of the world-famous Boca Juniors soccer club, he’s developed a reputation for being a turnaround specialist. He’s now brought that spirit to the Pink House, as he’s make headlines around the world for moving to “quickly reboot the economy.” He’s attempting to undo all the damage done by the Kirchners, a very politically risky venture. One of his first acts was to remove currency controls, which caused the Peso to free-fall, stoking already insane inflation.
Fortunately, there’s also been a lot of good economic news since the transition of power. The cost of borrowing for the government has plummeted and the stock market index has risen nearly 40 percent. Investors from around the world are pleased as punch that Macri is looking to have better relations with Western powers, and promote foreign investment in Argentina.
For Cristina Fernández de Kirchner and her supporters, the change of power and reversal of her socialist policies have been especially acrimonious. The former president refused to be at the new president’s inauguration and also won’t hand over the presidential Twitter account. Because the former president will once again be constitutionally eligible to run in four years, the fate of this economically downtrodden republic rests in the newly elected president’s hands and his ambitious reforms.
Any stumbles along the way in making Argentina business-friendly once again could deliver power right back to the Kirchners, the very family that brought the country to its knees. Sustained efforts for economic reform are going to require buy-in from large swaths of the population–something that’s not easy for a society that’s grown accustomed to vote-buying subsidies and anti-establishment populist rhetoric. If things go well, and meaningful free-market reforms take hold, Argentina could be a lot better off. Free-market reforms could induce widespread prosperity. Argentina’s neighbor, Chile, a country that just a generation ago was a poor economic backwater, is now a developed country.
Photo credit: Mauricio Macri by Sandra Hernandez for Ciudad Autónoma de Buenos Aires, Argentina
David is the Editor of Bold. He's especially passionate about millennial economic empowerment. A former local news reporter, David is originally from the Little Havana area in Miami, and later became a pioneer resident of the Disney-inspired town of Celebration, Florida. David holds a Master’s in Public Policy from the Harvard Kennedy School.