Argentina’s disastrous return to ‘neo-liberalism’

Surrendering to imperialism is no way out of economic crisis.

Just over a year ago the Argentine electorate was conned into voting, by a narrow majority of 51 percent to 49, for a change of government, on the basis of promises that a government led by Mauricio Macri would correct all the economic problems that had allegedly been created by its predecessor’s claimed economic ‘mismanagement’.

It was acknowledged that the Peronist governments that had been in power for 12 years, under first Nestor Kirchner and then his wife Cristina Fernández, had introduced popular and effective measures to reduce poverty and provide much needed social security and employment, but Macri claimed he would be able to retain all the social gains made under the Peronists while at the same time curing the economic problems caused by their ‘overspending’. Of course, after a year in office it is clear he has failed, as was bound to be the case, but the degree to which he has managed to fail in so short a time is truly astounding.

It must be understood that ‘neo-liberalism’ for a non-imperialist country simply means subservience to imperialism and permission for imperialism to exploit freely the country’s resources at the expense of the interests of the local population. Under the Peronists, a check was placed on US imperialism’s traditional looting of Argentina as the government was able to do much more favourable deals for its exports and for inward investment with China. This provided the basis for the government to offer a modicum of support to those who needed it in the Argentine population.

Argentina also benefited from trading with other Latin American countries, especially Brazil, under the aegis of Mercosur and other regional arrangements. However, as an example: “Argentinian exports to Brazil fell more than 50 percent [in 2015] and the forecast for 2016 is similar.” (Argentina’s unions stage mass protest against government cuts, The Guardian, 2 September 2016)

As the contagion of the worst-ever crisis of overproduction has now spread to China and Brazil, these two important economies are no longer steaming ahead at the pace they had been enjoying until recently. This means they are offering less demand for Argentina’s exports, which is the main reason why Argentina’s economic situation suffered the difficulties that Macri promised to overcome. His strategy for attempting this, however, has been worse than disastrous.

Since the main symptom of the economic difficulties was rising inflation, Macri claimed he would put an end to inflation by borrowing to cover the shortfall between the government’s income and expenditure, while at the same time raising government income by such means as cutting subsidies on fuel, etc. He also expected to be able to induce rich Argentinians who had squirreled away their wealth abroad to return it to invest at home.

Suffice it to say that the then chief representative of US imperialism, Obama, was delighted with Macri’s presidential victory. He visited Argentina in March last year, on the 40th anniversary of the US-backed coup d’état that established Argentina’s notorious military junta, and declared his admiration for Macri “because he has moved rapidly on so many of the reforms he promised, to create more sustainable and inclusive economic growth [ie, to sustain and include US imperialism!], to reconnect Argentina with the global economy and the world community [ie, to submit to imperialist rapine].” (Quoted in Obama in Argentina, sings Macri’s praises by Benedict Mander, Financial Times, 23 March 2016)

This man so admired by Obama was at the time of his election facing indictment on 214 separate charges, ranging from fraud and illicit association to abuse of public office, and in addition was implicated in the Panama papers. It is hard to see why the Argentinians voted for him in such large numbers!

The ‘reforms’ so admired by Obama were, in the words of Daniel Ozarow of Britain’s Argentina Solidarity Campaign, taken “straight out of the Washington consensus recipe book”. “First, currency controls were removed, provoking a sharp devaluation of the Argentine peso and provoking a punishing 54 percent increase in the cost of living.

“Secondly, export taxes (retenciones) on grain, beef, soya, mining and fish, which had been used to fund both the Kirchners’ public spending and debt repayments and also ensure food sovereignty for the population, were either slashed or ended.

“Thirdly, mass public sector redundancies commenced, numbering tens of thousands.

“Fourthly, the US vulture funds, which had been holding Argentina’s economy to ransom – after successfully suing in US courts for extortionate profits on bond holdings – were paid back on grossly unfavourable terms. While the stated aim was to bring the country’s ‘technical debt default’ to an end and attract foreign investors, the move also added US$15bn to the public debt.

“Fifth and perhaps most controversially of all, the energy minister, Juan José Aranguren, announced that he would halve the US$16bn subsidy bill. Gas tariffs quadrupled for most consumers, while those for electricity increased six-fold in what soon became known as the Tarifazo [price hike].”(See Groundhog day looms in Argentina as the IMF returns by Daniel Ozarow, Jubilee Debt campaign blog, 12 Septemer 2016)

Furthermore, the whole point of caving in to the vulture funds was to get back Argentina’s status for borrowing from the IMF, whom the Peronists had paid off and removed from interference in Argentina’s economic affairs. Macri has invited them back in, prepared to adopt any ‘structural adjustment programme’ they might demand – and in fact implementing one of his own without even being asked.

And just as Macri moved rapidly on these reforms, immediately on their tail came the disastrous economic consequences: although he had promised no job losses, there were over 200,000 redundancies within his first year in office. In the first four months of Macri’s presidency 1.4 million more people fell below the poverty line. According to official figures, 32.3 percent of Argentinians now live below the poverty line, while 6.3 percent are ‘indigent’. Energy prices have risen, with the reduction of subsidies, by 300 percent for residential properties and by 500 percent for commercial ones.

Inflation, far from being reduced, has in fact doubled from 20 percent a year to 40 percent, which has triggered a recession, with economic indicators turning negative as early as last March. According to the Wall Street Journal: “The economy shrank 4.3 percent in the 12-month period through June; unemployment hit 9.3 percent in the second quarter; and in July industrial production tanked 7.9 percent from a year earlier.” (Argentines say Mauricio Macri’s policies aren’t the solutions they promised to be by Taos Turner, 24 September 2016)


Unsurprisingly, resistance is growing. The ruling party’s approval ratings have plummeted, and the unions have been galvanised into organising large protests, largely oriented towards support for the Peronist movement. Of course, there were also massive protests in 2012 against the Kirchner government as a result of the pressure on living standards brought about by the effects of the world economic crisis – the government in such circumstances invariably being blamed for what in reality are the unavoidable problems inherent in the capitalist system.

Although these protests were organised by the right wing, they were able to mobilise in large numbers precisely because of the lack of understanding about where the problems of the masses originate. Unfortunately, even relatively progressive bourgeois governments prefer to be blamed for the adverse economic consequences of operating a capitalist system than to allow the obvious conclusion to be drawn: ie, that capitalism has outlived its usefulness and urgently needs replacing with a socialist planned economy.

Nevertheless, it is important for countries like Argentina at least to resist imperialist looting, which can only make their problems worse. It would therefore have been much better for Argentina to continue with a Peronist government that would put up some modest resistance to imperialism. It is very much to be hoped that the Macri government won’t last long!