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09/24/2021

Another crucial moment for Argentina

Another crucial moment for Argentina

The government front, furrowed by internal contradictions and pressure from the opposition, faces midterm elections after a hard defeat in the primaries. What happened?

Defeated in primaries

On September 12, mid-term primary elections were held for the 2019-2023 government turn. Definitive elections will be held in November when the government fears a sound defeat. The ruling party is a coalition that brings together the different expressions of Peronism, including Kirchnerism (center left, led by Cristina Fernández de Kirchner, the current vice president).

In the midterm primaries, they lost more than 5 million votes. The opposition also lost many votes. What happened?

There was a significant decrease in electoral participation, reaching 66% (22,765,590 people voted out of the total 34,330,557 qualified): this is a significant fact in a country where participation has always been high or very high. To this we must add the blank or null vote that also worked as a form of punishment. The votes lost by the ruling party were not transferred to the opposition parties.

The Macrismo (as the opposition is still called), which participated as Juntos por el Cambio alliance (Together for Change), also obtained fewer votes but was widely imposed in the four provinces with the most voters and seats: Buenos Aires, Ciudad Autónoma (CABA), Córdoba and Santa Fe.

The left appears as always in multiple tickets. Even so, they ended up as the third minority with 1.5 million votes. The “libertarian” right captured some of the few votes that abandoned the macrismo, channeling a portion of the stance of rejection of politics.

After the results were announced, an internal crisis was unleashed inside the government alliance. Cracks and weakness emerged but progress was made in short-term solutions. Why did this happen?

Tense juncture

On the one hand, the influence of the neoliberal forces was combined with the confusion and indirect speech of the government who didn’t take a clear position. On the other hand, the government, which is facing a social and economic crisis that is devastating its people, is not acting accordingly, still prioritizing agreements with the elites and the financial system. It assumes that by agreeing with the IMF, once the pandemic is over, the country will be able to count on investment credits, grow, and generate wealth and jobs. As our history and the characteristics of the players indicate, this logic is more like magical thinking.

Based on electoral promises and the Peronism image that imposes Social Justice, the Fernández government, trampled by the pandemic, failed to meet the expectations generated. The government faces a level of poverty that in some places exceeds 45% of the population. Some provinces exceed 50%. Among young people between the ages of 16 and 25, 6 out of 10 are poor.

Inflation is rampant. There has been a sustained price increase since Fernández took office in 2019. Food prices rose above the average, reaching 60-70% in some products, in the last 12 months, including basic products. There was a sinking of pensions and universal social benefits between 10% and 15% in the last year. There is an educational debacle caused by the pandemic that deepened previous problems. Unemployment exceeds 10% and 40% of the economy is unregistered. Hunger grows along with exclusion while the concentration of wealth grows. It is impossible that the population does not understand the situation, especially when it comes to a highly politicized citizenry.

The economic model

The scarcity of resources available to the government means that its options in the face of the crisis are limited. However, the possibilities of expanding that availability exist. The problem is that those options are not being considered. To consider and carry them out would imply breaking away from the prevalent agro-mining-export economic model, and the great power of the financial system.

The national state has withdrawn from different functions that have to do with the control of foreign trade. This means that today 20% of export foreign exchange is being lost only due to triangulation maneuvers carried out in the grain trade between Paraguay, Uruguay, and Argentina. There is no system of control over commerce and production; the entire transport system from the countryside to the ports, by means of railways or waterways is private and controlled by private exporters. Recently, having been able to begin to take control over the circulation through the rivers, the government decided to keep the system as it is currently working.

Trying to change this would imply advancing on a path of conflict as it would meddle with the businesses of powerful local and multinational oligarchies. The government chose to evade that dispute. From there, it is possible to obtain an income of legitimate foreign exchange, generate wealth, which is necessary at this time, could be turned over to the internal market, resolve the emergencies of poverty, and finance a sovereign development model.

There is also the problem of the macroeconomy, the financial system and the IMF. Finance Minister Martín Guzmán reported that the Central Bank of the Argentine Republic (BCRA), looking to rein in a stronger peso, intervenes in the bond market to keep the exchange gap between the dollar and the peso stable. The BCRA has been spending 1 billion dollar per month propping up the peso, looking forward to trim back sky-high interest rates and top up dollar reserves (since August 26 to date, it has spent 1,25 billion dollars). Even so, the depreciation of peso has been taking place in a sustained manner, which has a negative impact on the purchasing power of wages.

Intervening through the sale of bonds to control the price of the dollar is to fund the financial system. Those dollars are subsidized by the state and bought by a small group of companies and citizens. Many of these dollars are legitimate foreign trade currencies, originating primarily from the export of grains. That’s why even though 2020 left a positive current account balance of $12,500 million, national reserves decreased. The money that comes in the BCRA is being used to finance financial business and capital flight, and it does by arguing that is avoiding generating discontent in the markets. Meanwhile, negotiations are taking place with the IMF to refinance debt. Could it be that the IMF is acting as a shock force so that the government complies with the fiscal adjustment to be able to pay the debt, and at the same time, it is making the whole business of capital flight reproduce and continue to be financed by the state itself?

The Frente de Todos continues to prioritize the payment of the foreign debt and an orderly negotiation. During 2020, interest payments to multilateral organizations totaled almost $2 billion. The 2021 commitments with the IMF total $5.1 billion in regards to capital and interests. The government has chosen to be “sustainable” long before this election. Although the government has taken the stand that the debt acquired by the Macri government is illegal and fraudulent, and they have decided to pay it ($45 billion, the most important loan in Argentine history and the IMF itself). Macrismo violated each and every one of the country’s regulations that determine how administrative decisions of these characteristics have to be made, and the IMF was aware of it. To meet the interest on the debt, every year i, from the national budget, between $10 and $20 billion dollars is being made available. These amounts far exceed the items earmarked for education and health.

Payments are made with the positive balances of foreign trade in a country that has problems in generating wealth. The risk is that when this flow of foreign currency stops (it does so periodically, due to global situations, a drop in the price of soybeans, etc.), it puts the current government on the verge of default. The solution to this crisis has been to contract more debts, which results in more restrictive impositions on social welfare.

Recalibrating

After the electoral defeat, some measures were announced: an increase in the minimum wage (reaching 316 dollars a month), raising the tax floor to medium and high wages, delivery of emergency cash bonuses, an increase in social and welfare assistance, early retirement for sectors at social risk, debt forgiveness for small taxpayers. At the same time, the dissolution of many sanitary restrictions is being announced, seeking to remove obstacles to the domestic economy.

Likewise, a new cabinet was defined which, for various reasons, can be considered as an emergency team to go on to the November elections. It will be difficult to sustain the new cabinet after that. The changes were made after a public and visible palace dispute before which the citizens rejected. This reinforces the idea that the political leadership is locking itself in a bubble. We assume that the government knows that it will not win the November elections, and that the main objective is not to lose more votes, or in any case to recover some of what was lost.

The announced socio-economic measures imply a small distribution of immediate resources, they do not generate rapid changes, much less are specifically weighty changes. The risk is that they can be understood by the people as forced, opportunistic gestures.

At the same time, the political activism that supports the government is demobilized and runs the risk of distancing itselves further. They could pose differences that could be insurmountable. There are no channels for participation or information. The popular movement within the government alliance is disjointed. Meanwhile, a bid for sectoral interests develops within the government front. The measures taken can be successful if what is sought is a slight change of mood to stop the bleeding of votes. We must neither underestimate the voter, nor the power of Peronism. All of this will be seen in November. The question is what direction the government will take after the coming elections.

Final comments

In Argentina, the largest part of the foreign debt is an illegal, illegitimate, and fraudulent debt, not just the debt acquired by the Macri government. The illicit indebtedness of the state at the hands of dictatorships and democratically elected governments has been operating for decades as a business of the elites, ruling classes, and the financial sector. The worst moment was the so-called “lost decade” of the eighties of the last century when the external debts of several Latin American and Caribbean countries caused a regional crisis. For this reason, the economic models of industrialization by import substitution were abandoned and an export-oriented growth strategy was adopted, promoted by the IMF itself. As Fidel Castro argued in 1985, the debt is unpayable, because the indebted countries will never be able to get rid of it, and therefore it should not be paid with the sweat and hunger of the peoples.

Problems regarding representation emerge in the conjuncture, which is manifested in the estrangement between the discourses and political offers on one hand and the people on the other. It is a latent and developing danger. It must be reversed. The only way is to respond to the interests of the impoverished masses quickly and lead to popular political participation.

The oligarchic capitalist (neo) liberal trend and the populist side are in dispute, constituting a historical dichotomy, replicated in much of the continent, and that has not yet been resolved. If there is no positioning in the field of the people, in the context of the current social crisis, which does not show growth horizons with inclusion, this contradiction can blow up and lead us to a true political crisis, be it due to the conflict that can grow in a spiral, or because of the fracture of the system of political representation, or because of the return of the pro-imperial neoliberals in power.

Declaring the nullity of the foreign debt and rejecting its payment, or even much less, carrying out an audit, would position the government in a one field of this contradiction, and at the same time it would generate a breakage with the elites and ruling classes, in a cycle of conflict that would only grow. The same would happen if the agro-mining-export model were debated. Apparently, the position taken by the government is to stay in the middle and not alter the balance of interests. But that is an untenable situation, and more than anything, dangerous. Maintaining the current political and economic model won’t solve the social and economic crisis, it will maintain inequality and alienate the people.

At the scale of international politics, the government has already shown some post-electoral features that speak of the possible future. A few hours after the elections, President Alberto Fernández was supposed to be participating in the VI Summit of Heads of State and Government of the Community of Latin American and Caribbean States (Celac) in Mexico City. He had to travel to keep his word with AMLO, to relaunch the organization as a counterweight to question the OAS (that is, the United States). Fernández was supposed to assume the presidency of CELAC but he missed the appointment, aborting that maneuver. Not only that, but in the middle of it all, he fired his now former foreign minister while he was in Mexico on his behalf. A photo of CELAC with the rest of the presidents was not produced. The photo that was produced was one of Fernández with Biden, at a virtual conference on climate change.

The government has been abiding by the rules of the game imposed on it by Western multilateral organizations, reproducing the economic model of dependency and concentration that it inherited, avoiding taking structural decisions, which would generate a breakdown of relations and confrontation. Meanwhile, the population is seeing their living conditions deteriorate rapidly.

Given the electoral results, the government has been taking and announcing measures that seem to be designed to stop the loss of votes, and in any case to recover some of them. They run the risk of failing, which would further sink the Frente de Todos, facing the two years of government that remain to fulfill the mandate.

The capability of Peronism, which has won many presidential elections in recent decades but has lost most of its midterm elections, is being tested, although it has been able to reorganize, set new priorities, and consolidate to win again on many occasions. Peronism continues to be a determining political force that challenges a large part of our people. Will Peronism, as it has done so many times before, be able to relaunch itself and once again become an overwhelming force like it did in 2019?

What results will the internal dispute have in the governing coalition, among the conservative, neoliberal, centrist, and center-left tendencies?

In the background awaits the struggle around the 2022 budget, which already is generating internal dispute in the government bloc because it established that there will be increases in rates for gas, electricity, water, transportation, in addition to continuing with the fiscal adjustment, which will profoundly affect the daily life of our people. Will changes be made? Will the fiscal adjustment ease?

Fabulous popular forces still nest in the government political front. This implies a latent power capable of emerging, precisely what the pro-imperialist right tries to contain. Kirchnerism is still the strongest leg within the government alliance that represents that trend, and once again becomes the center of the attacks, while it continues to be the only hope to advance on the path of Social Justice. In any case, there is always the people, who have given ample evidence that they can put a stop to the political processes that generate hunger, and who have already given birth to revolutionary experiences.

Facundo Escobar
Facundo Escobar is an argentinian anthropologist, journalist, researcher and  International Relations and Political History Professor at National University of La Plata (UNLP), Buenos Aires, Argentina. He is editor in chief at www.noticiaspia.com

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