Argentina’s been kind of a mess since, well, since there’s been an Argentina. It took the country all of three years to default on its first-ever sovereign issue, and the country has stopped paying its bills eight times since, including five in the last 36 years. The country has swung wildly between military dictators and popularly-elected demagogues, suffered through a whole series of civil wars, endured periods nicknamed the “Infamous Decade” and the “Dirty War,” and seen Madonna portray the beloved mother of their country on screen, during much of which time it was at least theoretically one of the wealthiest countries in the world. Most recently, the country lived through 14 years of left-wing populist presidents who made refusing to meet the country’s financial commitments the centerpiece of their domestic policy.
So two-and-a-half years ago, when Argentines elected one of their own president, Wall Street breathed a sigh of relief. At last, Argentina was going to be a normal country, one that paid its bills and participated in the international debt markets and all of the other things that the global financial establishment prizes. It even rewarded Argentina with an oversubscribed 100-year debt issue, a remarkable vote of confidence for a country that has quite literally never gone more than 63 years without defaulting on its debt.
Given the century-long rope that investors had just given the country, you might have thought the Mauricio Macri would be given a little bit of time and flexibility to clean up a mess that all agreed was pretty spectacular. Plus, there was all the reason in the world to want him to succeed, because waiting in the wings to succeed a failed Macri is his predecessor, the possibly unhinged but very definitely not-Wall Street/IMF-friendly Cristina Kirchner, and after all look how well holding Greece and Italy’s feet to the fire worked out electorally.
Investors soon became impatient. They questioned the central bank’s credibility as it cut interest rates in January to support growth despite inflation at 25%, well above target. They worried about the government’s ability to reduce expenses to plug the fiscal gap and enact regulatory changes intended to improve business competitiveness and cut red tape….
Mr. Macri said recently he was initially overly optimistic and committed to quickening the belt-tightening. “The world decided that the speed that we were committed to reducing the fiscal deficit wasn’t enough,” he said. “We have to move faster….” That has many Argentines worried. The IMF is already deeply unpopular here, as many people blame it, rightly or wrongly, for the 2001 financial crisis. Thousands protested Mr. Macri’s IMF approach in a public demonstration on Saturday.