Argentina’s Macri Still Standing After Poor Month of Statistics

  • Macri containing social unrest despite poor indicators
  • Poll shows majority of people still optimistic about future

Argentina’s economy shrank 3.5 percent in the second quarter, industrial production plunged 5.9 percent in August and a report showed one in three living below the poverty line. Still, most remarkable of all last month was the fact President Mauricio Macri managed to keep a lid on social discord in a country where protests and strikes often seem to be a way of life.

Macri is staving off unrest by negotiating with the country’s powerful labor unions and keeping his opponents divided, said Mark P. Jones, a professor of political science at Rice University’s Baker Institute in Houston. After meeting cabinet members Thursday, union leaders agreed to sit down with the government and businessmen to discuss their demands, calling off -- for now-- what would be the first national strike since Macri took office 10 months ago.

“Macri has been sufficiently proactive that he’s not making it easy for government opponents to work with the unions to destabilize the government,” Jones said by phone from Buenos Aires. “He’s giving the unions incentives to cooperate as well as signaling to the public that he’s being reasonable.”

The economy has been in recession since the final quarter of 2015 and, after taking power in December, the reforms that Macri has implemented to open up the economy, narrow the fiscal deficit and fight inflation have only aggravated the situation. But Macri says his tough-love approach will yield results and predicts a recovery in the final quarter.

Polls show that a majority of Argentines still give Macri the benefit of the doubt. The president’s approval rating, while down from 71 percent in January, has been 56 percent or more since June, according to polls by Poliarquia. The latest survey in the first half of September showed the largest gap between people’s assessment of the current economic situation and their belief it will improve.

That may explain why unions have been wary of pulling the trigger on a strike and making an enemy of the government, said Alejandro Catterberg, Poliarquia’s director.

Nascent Recovery

There are some signals that support the government’s optimism on the economy. Cement sales leaped 22.9 percent in August from a month earlier, breaking a seven-month decline and indicating that the construction industry may be recovering. Fertilizer use is up 50 percent this year compared with 2015, according to the Agriculture Ministry, and car sales have risen 11.5 percent.

Most significantly, the government has made real inroads into fighting inflation with monthly price increases slowing to 0.2 percent in August from 4.2 percent in May, although some of that was due to the reversal of natural-gas bill increases after a Supreme Court injunction.

Macri has until the beginning of March and the build up to midterm elections later in 2017 to produce results, said Rice University’s Jones.

Catterberg says he may have less time. Macri must first navigate December, traditionally the most politically volatile month in Argentina when temperatures soar, the overloaded energy grid fails and tempers flair, he said.

“If by December it’s not clear that these green shoots are a trend and the numbers continue to be bad, then Macri could face greater tension and the unions would have fewer reasons to negotiate,” Catterberg said.

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