The Fall of the Latin American Left, Part III: Argentina and the Right Winning Elections

By Ignacio Portes, formerly the economy editor of the English-speaking daily Buenos Aires Herald. He has also published at Pando Daily and NSFWcorp. See Part I in this series here and Part II, here.

Unlike Brazil and Venezuela, the years of economic trouble for the Kirchner family and their Victory Front party in Argentina won’t go down in history as actual crashes. Other than in the immediate aftermath of 2008’s Wall Street collapse, no recession in the 12 years they ruled the country went past 2% of GDP or lasted more than a year, all while social security programmes cushioned the impact that any of those blows had on people.

Since the Victory Front’s defeat in the 2015 presidential elections to the upper-class, pro-business Let’s Change coalition, Argentines’ living standards haven’t exactly improved, as Mauricio Macri’s first year in government saw another 2 percent recession plus regressive income re-distribution and economic reforms that left groups of small businesses struggling to stay afloat, not to mention soaring public debt.

That gives Macri’s opposition enough ammunition to put him on the defensive and attack his policy reforms although, of course, new presidents always have a couple of standard rhetorical tools to fight back in such situation, like blaming things on the previous guy.

It’s not easy to pull that off in today’s Argentina, however. Just the fact that the Kirchnerite decade did not end in total economic collapse, like Argentine political cycles usually do, makes it harder to justify changing the country’s course or unleashing any “painful but necessary” economic reforms.

2001’s financial crash, with citizens’ savings seized, a five-year recession and unemployment above 20%, made citizens accept the pain of the massive devaluation that came with the exit of the 1990s peso-to-the-dollar peg, and left the door open for a smart politician like Néstor Kirchner to run up against that decade’s neoliberal consensus in 2003, joining the continental shift to the left.

A decade before, the 1989 crisis, with two hyperinflations, rising poverty levels and state-owned firms going under water, had left the scene ready for a pro-market turn full of budget cuts, firings and privatizations, in line with the post-Soviet and post-Reagan times. Similar things could be argued about even older economic crashes, such as those of 1975 or 1982, which helped the bloody 1976-83 dictatorship first rise and then fall.

Every Argentine that lived through those crises knows that 2015, the last year of Kirchnerism, was far from the country’s harshest years. 2% GDP growth and unemployment below 10 percent looks far from the end of the world when you contrast it with 2001-2002.

Among Macri’s supporters, however, the belief that the previous administration took the country to the edge of the economic abyss is a core one, as is the idea that today’s economic struggles are in good measure explained by damage done under the previous government.

The most common response from Kirchnerite circles to this line of thinking is that of disdain: those people must be either ideologically deluded, or lying due to personal interest. It’s a mentality not that different to that of many US Democrats towards demographics that they lost: they must be either stupid or evil. But also like in the US, it’s not hard to find Argentines who are currently angry at the outgoing party but had also backed it during previous years in office. The natural question, then, is how and why did those minds change?

It’s interesting to look at the results of the 2011 general election and compare it to those of 2015. Not only did Cristina Fernández de Kirchner win that year’s election by a landslide, taking 54% of the vote, but the second place, with a distant 17%, went to the Progressive Front, another centre-left coalition.

Four years later, the Kirchnerite coalition could not field any competitive left-of-centre option in the primaries, and three candidates that could broadly be seen as centre-right took more than 90% of the ballots when combined.

So even though the Kirchnerite left was part of one of those three coalitions, the fact that society moved to the right between both presidential votes seems incontestable. And despite the far from stellar start for Macri’s government, for many people that is where they remain.

What moved those minds rightwards, then? For a start, the economic improvements of the first Victory Front years fizzled out by the end of their run. Unemployment, poverty and inequality figures stalled, the economy didn’t grow on average since 2012 and even shrank in per capita terms. That didn’t mean there was stability, either: the ride of the last few years was actually quite bumpy, with the 2014 run against the peso arguably the most panic-inducing moment.

Those last years in office were defined by the government’s struggle to hold a grip on the country’s currency markets. The story might sound familiar, especially if you read Part II of this series. It began in 2010, when the Argentine Central Bank started selling foreign cash below its local going rate, causing the peso to strengthen in the official currency market, and thus raising its purchasing power — for a while. This helped win the 2011 election, as everything from salaries to corporate earnings rose massively in real terms that first year, at the expense of the Central Bank’s coffers.

But soon, problems started to mount. Corporate and retail investors used every extra Argentine peso they had to buy the US dollars that the government was selling on the cheap, but no one wanted to sell any dollars back to the Central Bank. The strong peso made local production struggle, first due to cheap imports and, when the Central Bank’s dollars and thus the capacity to buy abroad started to run out, due to lack of inputs and spare parts that weren’t manufactured at home. The government tried increasingly tightened currency controls, limiting citizens’ expenditure on holidays abroad and purchases of hard cash for saving purposes, but that only led to a surge in black markets.

Just like in Venezuela, speculation against the local currency ended up becoming one of the most obviously profitable enterprises available, much more than producing anything. The government responded by saying it was all the result of a media and finance campaign to topple it, but could never reverse the trend. Buying at official rates and selling at black market’s; buying when a devaluation was just about to become inevitable, hoarding and selling when prices skyrocketed: there was no easier money in the country for those with the means to pull those moves off, but it was hard times for the uncertain rest.

Of course, things never got as grim as in Venezuela. For starters, Argentina is a massive food producer, and with much more diversified exports too, so hunger-level scarcity due to lack of imports wasn’t coming even far on the horizon. The Central Bank never fully ran out of resources either: it came close, and it even accepted some of the worst deals possible with Buenos Aires’ financial district’s brokers (paradoxically, one of Macri’s bases of support) to buy time in 2015, ensuring the economy would run as smooth as possible during the election year even if it cost the State billions in the long run. But empty supermarket aisles were never a sight in the country.

Yet the scare had very real effects. Fear of experiencing what they saw on TV from Caracas led many to the right in Buenos Aires. After winning the election, it also gave the Macri administration an easy stick to beat its critics with: “it was either us or that.”

Scaring voters with Venezuela horror-stories is now becoming a strategy for the right across the continent. In Colombia, the paramilitary-linked former president Álvaro Uribe used it to successfully torpedo a referendum for a peace deal between the state and the FARC guerrillas. In Ecuador, the centre-left presidential candidate Lenín Moreno barely held to his predecessor Rafael Correa’s position earlier this month after Maduro’s authoritarian escalation dominated both the regional news cycle and the opposition’s closing campaign rallies.

Often, the comparisons don’t make much sense. Correa’s main problem in Ecuador has never been pursuing a wrongheaded monetary policy, but being unable to have one, due to the straitjacket of dollarization in which the country was put two decades ago. With the price of its main exports tumbling, a monetary sovereign country would typically let its currency depreciate to avoid trouble, but Ecuador is undergoing the opposite process, as the US dollar over which they don’t exert control is actually going up. So they’ve been depending on Correa’s budget management abilities alone to stay afloat within very limited margins.

In other countries where the left still stands, like Bolivia, there is actual monetary sovereignty and things work just fine. Inflation there has hovered between one and two figures without any of the currency problems seen in Venezuela or Argentina (contrary to the mantra that elected authorities can’t be trusted to handle economic policy, a popular trope among Latin American analysts), while also avoiding the kind of private debt crises seen in Brazil, all amid the most egalitarian and stable government in the country’s history, with strong economic development to boot too.

But at this point, those governments are in the minority. In most of the region, the right-wing turn is underway, and could have energy to last a while. Eventually, the tide will turn again: the ingredients are there, it being the most unequal continent on earth, with a ruling class that has historically shown massive neglect for its poor and not even much acumen to keep the economy from blowing up. But it will take some sifting through debris and patient rebuilding to recover the political capital lost by the left through all those unforced errors and make the best of the next chance.