Towards a new Argentinazo?

This was not supposed to be happening to Argentina", wrote Ian King, business presenter on Sky News, 8 May 2018. This was a few days before Argentina’s president, Mauricio Macri, announced he was going to the IMF to secure a loan to bail out the economy once again. Following negotiations, the IMF agreed to a US$50 billion package. The Argentine economy has been plunged into yet another crisis. In many respects, it is reminiscent of the Mexican ‘Tequila crisis’ in 1994 and the one in Asia in 1997.

Three years ago, Macri was elected president and this was hailed as proof that Argentina, once Latin America’s richest economy and the ninth strongest economy in the world, was entering a new phase of stability. Macri, a former businessman and ex-chairman of the football club Boca Juniors, was to Latin America what Emmanuel Macron was presented as in France: a ‘moderniser and reformer’.

Macri headed a new centre-right party, Cambiemos (Let’s Change). He promised to clean up the corruption bequeathed from the former Peronist president, Cristina Kirchner. A businessman and technocrat he was presented as offering competence and efficiency. At the same time, his programme of ‘reform’ was a neoliberal policy of counter-reforms and attacks on the working class.

Within months of coming to power he faced a public-sector general strike in protest against cuts. He continued with the counter-reforms but was compelled to phase them in, fearing he would provoke a social explosion. Capital controls were lifted, taxes on business exports lowered, state subsidies on electricity and gas prices were phased out, along with cuts to social security payments.

The speed with which the movement against Macri developed illustrates that, where the right wing is coming to power in Latin America, it does not have the same social base of support that it did in the past. The formation of right-wing governments in a series of countries, like Chile and the parliamentary coup which brought Michel Temer to power in Brazil, are more a reaction against the failure of the ‘left-wing’ governments to challenge capitalism and introduce radical socialist policies.

The same was true in Argentina. Kirchner, a bourgeois Peronist, had combined attacks on workers with some radical nationalist measures from the Peronist tradition – price controls, state subsidies to basic goods, capital controls, etc. The attacks on workers, coupled with widespread corruption and inflation, opened the way for Macri to step into the vacuum which developed from the disillusionment with Kirchner. At the same time, the Frente de Izquierda y de los Trabajadores (FIT – Workers’ Left Front), an alliance of Trotskyist parties, made very significant gains.

The movement against Macri exploded in 2017 as the congress debated pension ‘reforms’ that raised the retirement age from 65 to 70 for men and 60 to 63 for women. On 15 December, due to mass protests outside the congress, which were met with brutal repression including the hospitalisation of FIT deputies who had joined the demonstrations, the president of the chamber had no choice but to suspend and delay the vote.

In February this year, 500,000 took to the streets in Buenos Aires. Workers and poor people joined a mass strike and demos throughout the country in protest against Macri’s neoliberal policies. The government hoped the pension ‘reform’ would open the way for other measures, including weakening the rights of workers to take strike action. However, Macri’s poll ratings have fallen from over 55% to less than 40% as opposition has grown to his attacks. These polls were prior to the recent IMF deal.

At the same time, there has been an increase in brutal repression by the state machine against all the protests. In 2017, following protests by the indigenous Mapuche minority, a young Mapuche, Santiago Maldonado, was shot dead. Big demonstrations also took place on international women’s day this year demanding that abortion be decriminalised – congress voted narrowly in June to legalise abortion in the first 14 weeks of pregnancy.

The economy has now been plunged into a deeper crisis. The foreign currency debt has risen from 26% of GDP in 2015 to 40%. There has also been a rise in the fiscal and current account deficits. Hit by rising oil prices and the rise in the dollar, the Argentinean peso has crashed in value against the US currency. The peso has lost 25% of its value in the last twelve months. Interest rates were raised to 30% and then 40% to try and dissuade investors from selling the peso. This has further slowed the economy as credit became more expensive. Wages have fallen as inflation has soared to over 25%.

It is against this background that Macri has taken the highly risky step of securing the IMF bailout. This provoked protests against the deal as it was announced. There is massive hostility to the IMF in Argentina. According to one poll, 75% are opposed to taking an IMF loan.

This arises from the economic collapse and social disintegration which took place in 2001/02. Millions of workers and the middle class were thrust into poverty, unable to take their money out of the banks, facing destitution. The IMF was held responsible as it had imposed harsh terms. Five presidents fell in the space of two weeks due to the ‘Argentinazo’ of mass protests which erupted. The ghost of this movement and its consequences haunt the ruling class today.

In 2004 Argentina defaulted on its US$80 billion sovereign debt. According to some economists, this was the largest debt default in history! Argentina has defaulted eight times on its bonds since independence from Spain in 1816. Imperialism bided its time following the 2004 default and then struck back as the immediate crisis passed. Creditors went to the US Supreme Court and won a ruling forcing Argentina to repay creditors US$1.3 billion.

This time, sensing the depth of hostility to the IMF and fearing another social explosion like 2001/02, the IMF has been more cautious. Nonetheless, it is demanding a reduction in the deficit to 1.3% of GDP by 2019, and fiscal balance by 2020. It also insists on greater ‘independence’ for the central bank which will inevitably mean even more austerity for the Argentine masses.

Despite the loan, the peso has continued to fall and the crisis will not be resolved quickly. Indeed, it threatens to erupt further. This could have consequences on the global financial markets and possibly trigger another debt crisis, especially if taken together with the turmoil in the Brazilian economy.

The recourse to the IMF for a loan and the attacks that are certain to continue will provoke further upheavals and struggle by the working class. Macri, far from opening a new era of stability, has ushered in a period of conflict and upheaval. He heads a coalition government which has already seen splits and divisions developing. Further attempts at more neoliberal measures could be defeated in the congress under mass pressure from the working class and poor. It is quite possible his government could be defeated in the next elections expected in 2019, or it could even fall before then.

This crisis will provide a big opportunity for the socialist left to build an even stronger base of support than the nearly one million votes it received in the last congressional elections. However, to make an even bigger breakthrough it needs to appeal to and reach the dissident and combative sections of the working class that have continued to support the Peronists. It needs to skilfully explain a socialist alternative, taking into account the traditions and loyalty which exist among sections of workers and the poor to the Peronist movement due to the radical reforms it implemented in the past.