RIO DE JANEIRO, BRAZIL – In Argentina, government measures seem to have curbed the spread of Covid-19, at least for the time being. Newly-elected President Alberto Fernández took over the government and, as in many countries today, questions arise as to how things will proceed after the health crisis. Argentina may soon – again – be on the verge of financial collapse.
Overall, expectations after a change of government are invariably high and hardly ever all of them are or can be achieved. The first three months are typically a kind of “respite” that both the population and the media grant new governments.
This was also the case with Alberto Fernández, who has been President of Argentina since December 10th, 2019. During this period, the government’s first political guidelines began to emerge. In contrast to his predecessor Mauricio Macri (2015-2019), there should be more money for the poorest segments of the population.
As a consequence, the Argentinean middle class began to resent Fernández’s reforms and programs. In particular, those associated with the Macrista camp reject support for the poorest.
The Fernández government’s progressive approach to social policy soon became the subject of attacks. The overall conditions and the budgetary situation, in particular, both at the national and provincial levels, generally left him and his government with limited options.
The “debt of the century” that Macri bequeathed the country has exacerbated the economic situation over his last two years in office. In September 2018, under Macri’s leadership, Argentina borrowed US$57 billion from the International Monetary Fund (IMF), the largest loan in the Fund’s history. But Argentina never achieved the expected economic rebound.
Quite the opposite: under Macri’s leadership, inflation continued to soar steadily, officially reaching 50 percent in 2019.
The main fiscal burden is borne by Argentina’s middle class, contributing to the national treasury with its tax levies, since it is not employed in the informal sector, unlike 35 to 40 percent of the population. However, under Macri there was also a steady decline in consumption in the country, which was structurally increased under the Kirchner governments, also affecting the goods produced in the country.
Macri’s liberal economic policy also impacted the poorest sections of the population, which led to an increase in the poverty rate in recent years and to social protests. The memories of the late 1990s and early 2000s financial crisis, which led to massive riots in December 2001, are still very present in most people’s minds. Many experts assumed two years ago that Argentina might default again after the 2001/02 crisis, before Covid-19.
Prompt reaction to the virus
On March 3rd, 2020, health authorities reported the first case of Covid-19 infection, one of the first cases in Latin America. The Argentinean government announced a ban on all domestic travel on March 19th and a curfew on March 20th.
People were only allowed to leave their homes to do essential work (hospital staff), to go grocery shopping, to the pharmacy, and to help direct relatives over 65 years of age. This was strictly controlled by the police and violations were punished, with cars being temporarily confiscated from drivers who violated the regulations.
Originally the curfew was planned to end in mid-April, but has been extended several times. Given low or declining infection rates, some provinces also ended the curfew and restrictions on public life towards the end of May. However, residents of Buenos Aires city and province will have to live with curfew restrictions for some time longer.
In general, the Fernández government reacted quickly and pragmatically. To date, the health crisis seems to be under control, thanks to the resolute and long-lasting measures implemented. The rate of people who tested positive in mid-May in Argentina stood at around 18 per 100,000 inhabitants, compared to 240 in Chile and 21.1 in Uruguay.
However, Argentina – like other Latin American countries – is struggling with dengue fever. The Pan-American Health Organization, based in Washington, counted 560,000 infections in the region in the first weeks of March alone. Paraguay and Bolivia are particularly affected. The authorities see a sharp increase in dengue infections in Argentina compared to previous years, with over 12,000 officially confirmed cases in April, 7,000 of them in Buenos Aires.
Fernández could even “profit” from the Covid crisis. His image as a calm, pragmatic head of government and state and the strict restrictions prove him and his advisory staff right – at least so far – particularly when looking at neighboring Brazil.
As a result, Fernández was finally able to establish his independence from his Vice-President Cristina Fernández de Kirchner (CFK). A good part of his electoral victory can be attributed to CFK, who was the “driving force” in the election campaign for the electoral alliance Frente de Todos. Her popularity was decisive for the Peronists’ return to the Casa Rosada.
However, CFK has long been accused of being involved in several corruption cases during her presidential term (2007-2015). In the meantime, several of the charges against her have been dropped, and since she now enjoys political immunity as Vice-President, no further investigations will be conducted in the near future.
The Buenos Aires daily newspapers La Nación and Clarín have been running a real anti-CFK campaign for years. It came as a surprise, therefore, that in March and early April they were very reserved about the measures implemented by Alberto Fernández’s government. However, in April they changed their minds again.
Facing a new debt crisis?
As in many other countries, attention is now increasingly focused on the economic and financial consequences of the coronavirus pandemic. Due to its already tense financial position, Argentina is facing even more challenging times in terms of economic policy. In order to prevent a complete default, in mid-April Fernández proposed a debt restructuring plan to the Committee of Private Creditors of Argentine public debt.
This was rejected by the creditors, although even the IMF, the largest lender, endorsed comprehensive debt relief by private creditors. The other creditors, virtually all of whom are based on Wall Street in New York, are (still) open to further discussions.
For the time being, Fernández and his government are staying on their chosen path, namely to help the poorest sections of the population, but also to support the increasingly financially vulnerable middle class with social policy measures. Daniel Arroyo, Minister for Social Development, introduced a package of measures in early May, including a “zero-interest loan” (Crédito Tasa Cero) of up to 150,000 pesos (around US$2,123) for the self-employed with a gross annual income of over 400,000 pesos.
At the current inflation rate of 60 percent, this means that significantly less than the current amount will have to be repaid later for the loan.
The package is intended to help small businesses, but also the generally high number of “monotributistas” in Argentina – comparable to self-employed workers, taxpayers under the simplified tax regime – through the coming months. The “monotributistas” will thus be granted subsidies, and regular payments such as social security contributions can be settled at a later date.
This should prevent thousands of Argentineans from slipping into poverty, which the Minister expects to rise. The Social Observatory of the Catholic University of Argentina estimates that the poverty rate could rise to 45 percent. Grants of up to 10,000 pesos are also planned for people in the informal sector, such as hired help.
Concessions and even more social-political tact also required concessions from the authorities during the riots in a prison in the Villa Devoto district on April 24th. The images from the prison located in the west of the city – the only penitentiary within Buenos Aires – reflect a situation that is part of everyday life in many Latin American penitentiaries. Often they are overcrowded by over three times their capacity, which poses a considerable health and safety risk for the inmates, but also for the staff.
The cramped and overcrowded cells and unhygienic conditions could greatly speed up the spread of Covid-19. The prisoners of Villa Devoto also pointed this out with their uprising.
At the negotiating table, which was also attended by the Ministry of Justice officials, it was agreed that detainees with chronic illnesses (heart and lung diseases, diabetes, etc.) would be separated and thus protected. Since then, an emotional debate on the “special treatment” of prisoners has erupted, particularly on social media.
Many comments revolve around the issue of justice: while the “normal, good” citizens are forced to stay home, criminals are given “special treatment”. The government is also said to be planning to send hundreds of inmates to house arrest early, which it vehemently denies. To date, the interplay of political pragmatism and far-sighted social policies designed to prevent social unrest has served its purpose.
Source: Amerika21