Argentina tries to avoid economic plunge
August 14, 2019
Argentine President Mauricio Macri announced a government scheme for salary hikes and tax cuts on Wednesday just days after he suffered a crushing defeat in a primary election.
Macri said he plans to cut income taxes for workers, increase subsidies and stabilize fuel prices for three months to ease the harsh impact of an ongoing economic crisis.
The president also announced an unspecified increase in salaries – currently 12,500 pesos ($208, €186).
"My task is to ensure governance. Dialogue is the only way. Uncertainty has caused a lot of damage and forced us to be responsible. I want to convey peace of mind in this electoral process that has begun," he said in a message.
Macri said his economic measures would "benefit 17 million workers and their families, and all small and medium-sized businesses – formal and informal, state and private."
Argentine opposition presidential candidate Alberto Fernandez said that the new economic measures announced by Macri are positive, but too late.
The results ahead of October presidential elections indicated that free-spending and state-interventionist populists may crush the market-friendly Macri.
Read more: Argentina's Macri imposes new austerity measures
Peso still falling
The Argentine currency opened 12.3% weaker at 61 per US dollar after the president unveiled his package of welfare subsidies on Wednesday. The peso suffered heavy losses for the third consecutive day due to market concerns about an ongoing political instability.
Read more: Argentina's peso, stock exchange plunge after Macri vote defeat
The economic crisis became more severe in 2018 when the peso lost about half its value, forcing Macri to strike a $55-billion (€49-billion) deal with the International Monetary Fund (IMF).
Macri initiated a painful austerity program that is widely unpopular with many Argentines, with some 35% now living below the poverty line. Many blame IMF-backed polices for leading to the country's worst economic crisis in 2001, when the government defaulted on its debt following several years of depression.
Read more: Argentina's President Mauricio Macri accused of 'abuse of power' over IMF loan
Political crisis
The political uncertainty has further aggravated the South American nation's economic woes.
Opposition candidate Fernandez — whose running mate is scandal-plagued former President Cristina Fernandez de Kirchner — secured an unexpected 15.5 percentage point margin over the president.
Fernandez has suggested he would seek to "rework" Argentina's standby agreement with the IMF.
Markets are also worried over de Kirchner, whose years as president from 2007 to 2015 were marked by a balance of payments crisis, interventionist state policies, currency controls and protectionism. She currently faces multiple corruption probes.
"This is just a taste of what's going to happen" if the populist opposition wins the election, Macri warned on Monday. "We cannot go back to the past because the world sees this as the end of Argentina. The Kirchnerist alternative has no credibility in the world." Macri said he hoped to reverse the negative results from the primary.
shs/aw (AFP, Reuters)