Uncertainty in the Status Quo

Currently, the continued economic uncertainty in Argentina is caused by a wide range of contributing factors. The country has once again been experiencing average annual inflation rates greater than 25% and the Central Bank of Argentina recently decided (May 2018) to raise the interest rate on pesos from 27.25% to 40%–notably the highest interest rate of any centralized currency in the world.

In an effort to make the nation’s economy more competitive (striving to outperform Brazil, Mexico, and China), Argentina recently decided to accept a $50 billion loan from the IMF. This loan may help the country to stabilize many of its debts in the short-term, though the nation’s incredible rate of currency deflation still remains a universal concern.

President Mauricio Macri was undeniably voted in during a time of great economic uncertainty and complications. As the first President of Argentina since 1916 who doesn’t identify as a Peronist or a radical, Macri’s approach to economics offered many of his voters the possibility of change. However, in the context of the current global economic climate, it seems that many of Macri’s policies may be creating a new set of issues, rather than effectively solving the problems he inherited.

While Macri’s “gradualist” approach to the economic policy may suggest the possibility of economic stability and predictability, it may also prolong the process of bringing the country’s high levels of inflation back down to acceptable levels. On the other hand, the fact that the administration decided to remove all forms of exchange controls before the economy had a chance to stabilize may deter foreign investors from considering Argentina to be a legitimate investing option.

Looking Towards the Future

As the history of Argentina’s economy and the turbulence in the status quo strongly suggest, the future of what was once the pride of the New World is something that will certainly be quite messy. There is no clear nor easy solution that will be able to effectively resolve the country’s economic woes overnight. Every decision the Macri administration could possibly make—even if they choose to exercise a greater degree of discipline—will involve a significant number of opportunity costs.

However, there may be a few reasons that Argentinians can be generally optimistic. Despite a century of economic mismanagement and volatility, the material conditions for a globally dominant economy have not gone away. Argentina is still one of the largest nations in the world and has more available natural resources per capita than many others of its size. Argentina is still in a very temperate climate zone, has one of the world’s most important cities (Buenos Aires), and has a generally diversified economy. Lastly, Argentina has done relatively well at avoiding international conflicts (save for the Falkland Islands and a few others), which may help encourage an eventual increase in foreign direct investment. With the right and responsible economic leadership, Argentina has all it takes to become a stable economic nation. Otherwise, Argentina is on a mid rollercoaster ride.

The economic difficulties of Argentina are certainly far from being over with. However, Macri’s position as a non-radical, non-Peronist alternative suggests that future change in a positive might still be possible. The primary problems in the status quo are high levels of inflation and high degrees of economic uncertainty. If these problems can be resolved in a clear, well-orchestrated manner, then the economic potential that this beautiful nation still possesses may someday come to full fruition.