BUENOS AIRES—Last October, Argentine President Mauricio Macri celebrated the triumph of his Cambiemos, or “Let’s Change,” coalition in midterm legislative elections. For Macri, the victory represented a much-needed public endorsement of his agenda of incremental economic reforms, known as “gradualismo.” Looking at the midterm results, some analysts and politicians practically guaranteed that Macri would be re-elected in 2019. In Argentina, however, a few months can be an eternity, and Macri is now facing a string of bad economic news, which has increased popular discontent and fired up a resurgent opposition.
Macri won the 2015 presidential elections by promising that his plan for economic reforms, though painful at first, would reignite economic growth after years of stagnation and contain inflation, a chronic problem for Argentina. Yet after more than two years, the second part of the deal has not come true for many Argentines, who seem to be losing their patience. Macri’s gradualism—including trade liberalization, the promotion of market competition and the reduction of Argentina’s fiscal deficit by cutting massive state subsidies—simply hasn’t delivered results yet.
The economy overcame a recession in 2016, but the International Monetary Fund forecasts just 2 percent growth this year, among the lowest in Latin America, excluding the catastrophe that is Venezuela. Inflation is expected to reach 20 percent, close to the average for the past decade. And the fiscal deficit is coming down at a listless pace: Counting debt payments, it will reach 5.3 percent of GDP this year—down from 6.1 percent in 2017—and is not expected to fall below 3 percent until at least 2021. To cover this fiscal gap, the government is forced to issue debt, exposing itself to market volatility and the impact of the U.S. Federal Reserve’s policy of raising interest rates.