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Argentina under Macri: Will Political Stability Prevail?

 6 min read / 

Despite public criticism and increasing political pressure on the Argentine President, Mauricio Macri, his ruling coalition ‘the Cambiemos’ or the ‘Let’s Change’ movement, won a vital sweeping victory in Argentina’s mid-term congressional elections on Sunday 23rd October.

With half of the seats in the lower house up for grabs, Macri’s party successfully increased its seats from 86 to 107. Even though it fell short of a majority needing 130 seats, he secured one of the biggest victories in midterm elections since democracy returned to Argentina in 1983.

The business-friendly Macri has now asserted himself as Argentina’s leading power while the Peronist opposition remains politically outcasted. Yet, the question arises of whether this new period of political stability that is crucial for Argentina’s development shall endure?

The Need for Results

While these midterm elections were widely seen as a referendum on Macri’s pro-market reforms, the positive electoral victory for the president shows that he has substantial public support, decisive for Macri to fulfil the rest of his presidential term by passing more reforms. Coincidentally, it will ease pressure from the private sector who want Macri to enact further labour and tax reforms needed for stimulating investment and to lower business costs important for economic progression.

Reforms are clearly important for Macri and his master plans, having mentioned them during his mid-term electoral victory, stating “There are so many reforms we have to do [that] I’m not thinking about 2019 [elections]. Including vowing to reform the country’s retirement system, an amnesty plan for companies and reforms to Argentina’s justice system aimed to combat corruption that has burdened the country for decades.

However, doubts remain over whether the government will be able to deepen its reform agenda because of it facing challenges from an increasing current account deficit and a high fiscal deficit that has forced the government to rely on international credit. Alongside a lack of investment, supposed to have arrived since the implementation of reforms when Macri took office in December 2015, has not yet fully arrived in Argentina.

Despite these doubts, the election results suggest that Macri’s policies are beginning to benefit the Argentine people, especially lower-income households who have opposed his austerity measures so far. Evident by a decrease in the unemployment rate to 8.7% from 9.2% in Q2, alongside the poverty rate falling to 28.6% from 30.3% for 2017 indicating that Macri’s policies have begun to benefit lower-income families. Therefore, it is politically crucial for Macri to continue producing positive growth results to counter any criticism of his reforms that are a key part of his administration.

The Threat from the Past  

An issue for Macri and the politics of Argentina was during the run-up towards the midterm elections with the return of the former left-wing Peronist President, Cristina Fernández de Kirchner, who gained a Senate seat once again after achieving 37.27% of the votes. However, Fernández lost first place to Macri’s right-hand man, Esteban Bullrich, who gained 41.34% of the votes. Her re-election to the Senate means she is entitled to temporary immunity from her prosecution over corruption charges that are currently being investigated.

Fernández used the electoral occasion to declare herself as someone who could lead the opposition against Macri’s government and become a potential candidate in the 2019 presidential elections. Expressing the same anti-Macri rhetoric routine criticising his reform-minded administration, importantly aligning with her most loyal voters of lower/middle-income dissatisfied households who are still feeling the effects of the president’s austerity measures.

“We believe in the need to unite all the different political forces that believe this political and social model of austerity will cause pain to most of the population,” as claimed by Fernández.

While Fernández may applaud herself now, her finishing second for the Senate seat and Macri’s strong electoral victory diminishes her chances of a presidential comeback for 2019. Fundamentally, the former president is becoming politically isolated and more importantly, the Peronist political party has become divided with no clear leader increasing the chances for Macri to be re-elected as president in two years time.

Even some Peronist governors are questioning whether to join Macri’s reform agenda or abandon their political careers enabling Macri to negotiate with a new generation of Peronist politicians and reach political goals together. Exhibiting how Argentina is political evolving and taking a new political path wanted by its people who are taking a chance on business-friendly politics, entrusting Macri’s Cambiemo coalition to do this.

However, the Peronist movement must not be written off given its history and its ability to change with times. Yet, it appears the political faction is fragmented until 2019 alongside it not being able to lean on its predecessor of Fernández for political success. For the former president, the next two years towards the 2019 presidential elections will test how loyal her remaining voters are. Not only burdened by her chaotic and hazy political past for cutting Argentina off from international capital markets and economically isolating the country with vigorous protectionist policies but also for the fact that she is still being investigated for corruption charges. Of which, Fernández’s former chief prosecutor Alejandra Gils Carbo and former Vice President and Economic minister Amado Boudou, were both recently arrested that marks a step towards fighting corruption and erasing its political past.

“People are more confident in the future, the economy, in making investments. They are tired of corruption and populism,” as stated by Cecilia de Francesca, a writer celebrating Macri’s mid-term victory at the Cambiemos campaign headquarters.

Looking Ahead

While Fernández’s re-election for president seems unlikely due to her political career being in decline, her return to politics could be an opportunity to sabotage Macri’s efforts, burdening Macri with unnecessary political headaches.

Alongside this, the decline of the Peronist movement should not be overlooked. So, it is crucial for Macri to utilize the next two years and push forward with more reforms to embody his people with increasing confidence in his pro-market reforms and leadership abilities to solidify his chances of re-election for president in 2019, thus preventing any chance of a backward Peronist return to political leadership.

Most importantly, these historical mid-term elections show there is growing political stability for Argentina. Not only was it a victory for Macri, but also a victory for Argentina is a political turning point by moving away from its Peronist past. Hence, the Argentine people need to see these elections as an important sign by ignoring its tainted political past and move forward together into an era of greater economic and political stability with Macri as their best chance to lead the way.

 

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Americas

Venezuelan Digital Currency Backed by Oil

 2 min read / 

Venezuelan Digital Currency

The Story

Venezuela has announced plans to launch a digital currency, “the petro”, backed by the country’s oil and mineral reserves. The petro aims to help ease the country’s monetary crisis but sceptics claim the proposal has no credibility and will not help those in extreme need.

Why It’s Important


source: tradingeconomics.com

Hyperinflation has eroded the Venezuelan bolivia’s value by 97% this year, making imports incredibly expensive and causing many to abandon trust in the currency. The country’s oil reserves made up 95% of its exports in 2016, while oil and gas extraction accounted for 25% of GDP. Rich supplies of resources provide some initial credibility to the proposal, but President Maduro’s questionable track record when it comes to monetary policy is making many sceptical about the proposal. His currency controls and money printing have only added to the monetary crisis. Maduro has not announced when the digital currency would come into use or any details regarding how the country would create such a system.

Opposition leaders argue the country’s shortages of food and medication are far more pressing and that the digital currency will not address this. The digital currency may provide a more trusted medium of exchange, but it is unlikely to help those in excessive poverty.

Keep reading |  2 min read

Americas

The US Senate Approves the Republican Tax Bill

 2 min read / 

senate tax bill

During the early hours of Saturday morning, the Senate passed the Republicans’ landmark bill in what could become the USA’s first tax overhaul since 1986 and the first legislative success of the Trump presidency. Meanwhile, Democrats have denounced the bill as essentially a handout to the wealthy that will disproportionately squeeze other segments of society.

Mixed Feelings

There is also a strong feeling among many Democrats and Republicans that the bill was hastily drafted and improperly thought through. Democrat senator Chuck Schumer said:

“I have not seen a more regressive piece of legislation, so devoid of rational, so ill-suited for the condition of the country”.

For Trump, however, this is a victory and a step towards making good on some of the policy promises that formed his election manifesto. So far, the Trump presidency has been characterised by racial tensions, a failure to repeal Obamacare and no sign of the infamous border wall being built. Accordingly, the President made his feelings known on Twitter following the Senate’s approval of the tax bill.

The tax bill is not yet in the clear, however. It will now be amalgamated with legislation that has passed through the House of Representatives. This process will commence next week and it is likely that there will be further complaints from Democrat lawmakers.

Meanwhile, business groups, who will be the primary beneficiary of the tabled plan to reduce corporation tax from 35% to 20%, have welcomed the bill’s progress. Jamie Dimon, JPMorgan’s CEO, congratulated the Senate and said that the reforms would “boost [our] economy and benefit American workers.”

Uncertainty Ahead

It is yet unclear what impact the tax cuts will have on the USA’s national budget. Despite Trump’s promise to balance the nation’s books, a congressional watchdog has recently said that Trump’s tax plan will send the deficit soaring and only put slightly more cash in the wallets of millions of ordinary American families across the country.

Keep reading |  2 min read

Americas

How Trump Inadvertently Prompts Discussions of Unlikely Issues

 5 min read / 

trump discussion

In 1916, in a letter to David Lloyd George’s daughter, Winston Churchill admitted:

“I think a curse should rest on me – because I love this war. I know it’s smashing and shattering the lives of thousands every moment, and yet, I can’t help it, I enjoy every second of it”

Can Trump be considered the moral equivalent of World War One in terms of the mayhem he has wrought upon civilised notions of the way the world should be? Probably not, but the damage he has caused is nonetheless considerable. The juxtaposition of Trump with Churchill seems appropriate because, as the President dismantles so much of what has come to be normative behaviour in civilised society, he is inadvertently promoting a re-examination of the things that America holds dear – in the same way that the world has re-examined its opinion on war in the 100 years since Churchill made his aforementioned remark.

The fact that Trump was elected notwithstanding the revelations in the Access Hollywood tape has likely been responsible for women finally declaring enough to be enough. Would Harvey Weinstein, Kevin Spacey, Louis CK, Matt Lauer have been exposed in a Hillary Clinton administration? The fact that Trump’s tweets are ill-considered, often factually wrong and inflammatory, has promoted a sober discussion of how to deal appropriately with the issues of racism and immigration.

The fact that Trump is actively withdrawing from the theaters of international endeavor – trade, diplomacy and climate change – has led to a careful consideration of why those things might be important to Americans. The fact that Trump shamelessly panders to his base, regardless of collateral damage to broader public opinion, has resulted in a careful review of the stakes involved in tribal loyalty.

Sexual Assault and Tax Reform

Susan Collins, one of the senators for Maine, was asked at a recent Christian Science Monitor Breakfast whether, if Roy Moore were elected to fill the Alabama Senate seat vacated by Jeff Sessions, he should be unseated by the Senate. She stressed, firstly, that she protested his candidacy even before the allegations of sexual assault. She went on to say that the question of whether the Senate would have the right to unseat him if he were to be elected by the people of Alabama, accusations of sexual assault notwithstanding, was a very difficult one.

She is right. A trial in the court of public opinion has a different standard and different procedures from a trial in the justice system. An election is perhaps the most exacting kind of public opinion trial. An acquittal by the voters does not preclude future legal proceedings, but, while it is clear that NBC is within its rights to fire Matt Lauer, it is less clear that the US Senate or House of Representatives has the right to unseat Moore – if elected – or, respectively, John Conyers as Nancy Pelosi has urged.

Tax reform is currently top of mind in DC and, as this article is written, the Senate is close to passage of its bill. As it stands, neither Moore not Conyers will be voting for tax reform: Moore because the vote will likely pre-date his election; Conyers because he is a Democrat and votes for the bill that is presented to both Houses of Congress, after it has been to conference committee to sort out the differences between House and Senate versions, are expected to proceed along party lines.

Hypocrisy and Principle

Fitness to serve and uphold the values for which representatives are elected are both called into question by the context in which the current tax reform legislation is proceeding.

Mitch McConnell, Senate Majority leader made it clear in an interview in May 2017 that he believed any tax overhaul could not add to the growing budget deficit. Steve Mnuchin, Treasury Secretary, claimed the proposed tax reforms, which include a reduction in the corporate tax rate from 35% to 20% would pay for themselves.

The Joint Committee on Taxation was asked to conduct a macroeconomic analysis of the impact of the Senate Tax Cuts and Jobs Act bill – the so-called dynamic scoring report that would validate Mnuchin’s statements. The report revealed approximately $458bn of savings due to economic growth. That left a deficit increase over the next ten years of $1trn.

The report leaves the Republican party with the uncomfortable choice of passing a bill that contradicts its stated, fiscally prudent governing principle of not increasing the deficit or failing to pass tax reform, which, it is assumed, would have dire electoral consequences in 2018.In the court of public opinion as it stands in 2017, hypocrisy and lack of principle may prevail.

Conclusion

Churchill was a little ashamed of enjoying World War One. Should one be equally ashamed while watching the unravelling of the hypocrisies of the elite-world order? Perhaps, but there is a decent chance that, as public officials (Mike Flynn, for example) are convicted of lying in the service of their president and the unwinding of male privilege rolls through the power venues of Hollywood and Washington DC, hypocrisy and abandonment of principle may extract a price and the Republican Party may find that it has made a profound mistake.

Keep reading |  5 min read

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