Back in the Game

By | Updated Sep 13, 2016 3:26 PM UTC

President Mauricio Macri is making the same sales pitch to bankers, tech titans and world leaders: Argentina has moved past the populist trap that doomed it for decades. Foreign investors say they like what they’ve seen and heard since Macri took office in December. But actual investment is scarce and the economic reforms meant to heal the economy have driven up the unemployment and inflation rates. How long will Argentines swallow Macri’s medicine?

The Situation

Macri has lifted currency controls that had shaken faith in the peso and that had allowed a black market to thrive. He’s hired an economist who’s correcting years of government data on things like inflation and gross domestic product that had been made up or polished. And he’s settled a 15-year dispute with creditors. This paved the way for Argentina to sell debt abroad again in April — $16.5 billion in bonds that set a single-day sales record for a developing country. But Macri has had some defeats at the hands of the nation’s supreme court, which rolled back his planned increases in the prices for natural gas and electricity. These threaten his efforts to reduce the budget deficits that ballooned as his predecessors subsidized everything from cooking oil to bus fares. And after the new economic data was published at midyear, showing an economy in ruins, Macri’s approval rating fell below 50 percent for the first time.

The Background

In the hundred years after independence in 1816, Argentina went from an impoverished backwater of the Spanish empire to one of the wealthiest nations on earth, as its vast plains supplied the world with beef and grains. Exports and investment collapsed after the great depression of 1929 and a series of military coups began. Juan Peron, first elected president in 1946, allied with workers by awarding higher wages, raising import tariffs and nationalizing businesses. Eva, his wife, expanded payments to the poor, calling them “social rights.” The country spiraled into hyperinflation during his third term in the early 1970s. A military dictatorship then borrowed heavily to finance infrastructure and state industries. In the seven years after the 1976 coup, foreign debt ballooned to $46 billion from $8 billion. (Argentina has argued it shouldn’t have to pay this “odious debt,” since it was incurred by unelected governments.) Military rule crumbled after the disappearance of as many as 30,000 people considered dissidents and a stinging defeat by the British in the Falkland Islands War. Carlos Menem, president from 1989 to 1999, privatized state companies and pegged the peso to the U.S. dollar to halt inflation. Yet he didn’t rein in spending, so borrowing soared again. When a recession hit in 2001, Argentina declared the largest debt default in history. Nestor Kirchner, elected president in 2003, dug the nation out by riding a commodity boom and restructuring most of the debt. He was succeeded by his wife, Cristina Fernandez de Kirchner, in 2007. She continued generous public spending and was re-elected in a landslide, after which the boom began to peter out. In 2012, she stunned foreign investors by seizing Argentina’s main energy company, YPF. Argentina’s 2014 debt default — its eighth — came after the country refused to comply with a U.S. court order to pay the full value of bonds bought by U.S. hedge funds, dubbed vulture investors. Macri, a two-time mayor of Buenos Aires, won the presidency in November 2015 on a pledge to end a dozen years of protectionist policies and uncontrolled spending.

The Argument

While Macri has lined up more than $30 billion of investment plans for the next few years, a third of this is from Argentine companies. Some foreign investors point to rules that make it hard for them to buy stocks and bonds and others are taking a wait-and-see attitude. Yet Argentina offers tempting opportunities. It has the world’s second-largest shale gas reserves and the fourth-largest deposits of shale oil. The clock is ticking on Macri’s reforms: He needs to show that jobs are being created, inflation has been tamed and the economy is rebounding before midterm elections in 2017. If there are not clear signs of a turnaround or he cuts too deeply into the safety net, he could face a formidable challenger. Fernandez de Kirchner was banned from running for a third consecutive term, but she can stand again for president in 2019.

The Reference Shelf

  • Mauricio Macri told his own story on his campaign website.
  • Bloomberg Businessweek article: “Argentina President Macri Throws Open the Books.”
  • In an interview in September with Bloomberg TV, Macri said that his goal is a “one-digit” inflation rate in two years. 
  • Bloomberg tackled Argentina’s economic facts and fictions in five charts.
  • Bloomberg QuickTake on Vulture Investing.

Daniel Cancel contributed to the original version of this article. 

First published Oct. 16, 2015

To contact the writer of this QuickTake:
Andres R Martinez in Buenos Aires at

To contact the editor responsible for this QuickTake:
Anne Cronin at