Argentina’s Endless Crisis: Is there still Hope?

By Cara Brady

In an unexpected start to the World Cup, Argentina lost their first game in 36 matches against Saudi Arabia. However, they pressed on securing win after win. Making it to the finals, they were up against the previous winners, France. A strong performance in the first half and a goal in extra time from the Argentines was not enough to keep them from a penalty shootout but with France missing both their second and third penalties Argentina rose to victory; a long-awaited win for the footballer Lionel Messi.

Argentina saw scandal hit the political office, persistently high Covid cases, and inflation growth in 2022. The year was nothing less than unstable but Argentina could rely on one thing to brighten everyone’s mood – and that was Messi’s left foot. Elated fans took to the streets in celebration of the national football team’s triumph, placing their troubles aside, if only for a few hours. It was planned that fans would be joined by the team at the Obelisk in Buenos Aires after they rejected an invitation to attend the government office, Casa Rosada. 

Given massive mistrust between citizens and the government due to decades of unsuccessful attempts to resurrect the economy and political corruption, it is no surprise that the team separated the win from politics. President Alberto Fernández has faced ongoing criticism with low approval ratings throughout his presidency. In the midterms, his party lost the majority of the senate, a majority that they had held for years, a devastating loss for the president who for now has plans to run in the upcoming elections. Depending on his performance in the following months the appointment of current Minister of the Economy Sergio Massa could bode well for President Fernandez. He has not made things worse since stepping into the role in August with a win for the Argentine economy and the Fernandez office given recent dysfunction. He has one of the highest approval ratings among Argentina’s politicians, making him a potential successful presidential candidate. He holds the golden ticket but currently, it is not something he wishes to pursue. 

It was a clash with the vice president that saw the Minister of the Economy Martin Guzman walk, prompting a conditional entrance from Sergio Massa. Clashes inside and outside political parties are frequent. Whether that be the president and his vice or a classic left vs right power struggle, dysfunction within Argentine politics is certainly rooted deep. With upcoming elections the left will seek to hold onto their seats but current unsettledness may be what favours the opposing right-wing party. Former President Mauricio Macri is said to be leading the race for the right but failure to stimulate the economy in his tenure may cause him to fall short in the polls.

An opportunity to remodel Argentine politics lies open and third-party libertarian candidate Javier Milei could be the one to implement change. He has been compared to the likes of Donald Trump, and is an open critic of standard economic practices. His fresh outlook on the political economy may be what gains him popularity with the public as many seek reform. 

There has been controversy surrounding previous protectionist policies implemented by the  Argentine government to help both their agricultural and manufacturing industries. These were seen to hurt trade as due to the use of tariffs, their previous trade surplus fell to a deficit. There remains a large debate in economics as to whether protectionism or free trade is better for a country and with protectionism failing, there are many who advocate for free trade in hope that it will bring new investment opportunities and growth. Argentina is one of four countries that form the Mercosur bloc. The aim of the economic bloc is to act as a common market similar to that of the EU. A free trade agreement was struck between the two common markets in 2019 but has yet to be ratified. If it moves forward this year it could facilitate economic growth – if advocates are correct. 

Further hope comes from trade as the Argentine economy could experience benefits from lithium mining. The resource is vast in some regions of the country and is increasingly in demand as countries strive to go green. It is an essential component used in batteries that are present in electric vehicles and electronics, widely-used products in this day and age. India has identified two new lithium mines in Argentina and is expected to start mining. Not only is this beneficial for the economy, but it will also build important foreign relations as other countries like India seek to make use of the resource. 

Stimulation from the World Cup could also prove to be a vital part of Argentina’s recovery. The win could increase tourism, consumption, and employment by raising their global profile​​. It is estimated that the win will lead to an additional 0.25 percentage point increase in economic growth in the succeeding two quarters. 

As the Argentine economy currently faces stagflation, the economy needs to continue to grow if there is to be any hope of exiting the vicious cycle it is currently in. Stagflation comprises  both slow economic growth and high inflation, two factors that require opposing monetary policies to drive the economy back to ‘normal’. By continuing to grow the country will be able to alleviate their economic troubles and regain some stability within the country. 

The importance of the World Cup win was that it brought light to the people of Argentina whose moods have been dampened for so long. There remains a long road ahead for as they continue to battle high inflation and interest rates – however, there does remain hope. The upcoming elections could bring a more stable and cohesive cabinet which could headway important and effective policies rather than the futile policies that have been enacted over the past decade. In combination with Argentina’s abundant natural resources and new trade agreement, 2023 could prove a pivotal turning point for the country.

The views expressed in this article are the author’s own, and may not reflect the opinions of The St Andrews Economist.

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