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Between a plummeting peso and sky-high inflation, Argentines will elect a new president. The formulas to change this situation are the axis of the campaign of all the candidates for the Casa Rosada. But how did the current debacle come about and why do candidates like the controversial anti-establishment Javier Milei gain followers with promises that free competition will get the country out of an endless crisis? We explain it.
The country is about to vote for its next president and economic policy proposals overshadow the debate in the campaign. It is not for less. Poverty exceeds 40% and misery 18%, the peso has plummeted in the legal market to 350 pesos per dollar, while the ‘blue dollar’, which is sold on the black market, cannot be found for less. twice as much as the official one.
For families, the situation is suffocating. Salaries are disappearing in the midst of rampant inflation, which rose to 124% last August, compared to the same period the previous year. The situation worsens, because food is the product that has increased the most in value (133.3% in the same period). Meanwhile, soup kitchens, lifelines for many families, cannot cope.
How was arrive to this situation?
Although at the beginning of the last century Argentina became one of the richest countries in the world, there are several factors that have influenced the fact that the economy of the South American country has not been able to find long periods of stability and has become conducive to economic crises and vulnerable to external recessions.
One of them is that in recent decades The country’s rulers have not given continuity to the economic policies. Some governments have closed the country with protectionist policies and tariffs on imports, while others have liberalized the economy to the markets. This has distanced the confidence of foreign investors and encouraged capital flight to other countries.
The management of public accounts is another influential factor. The country has a tendency to spend more on its operations than it earns in taxes and other items, which is known in economics as fiscal deficit. The country has had a deficit in 13 of the last 16 years, according to calculations by the Economic Research Institute of the Córdoba Stock Exchange, based on data from the Ministry of Economy.
To solve the lack of liquidity, governments have moved between two quicksands that have ended up sinking the economy even further. A, printing of banknotes. Many governments, including the current one of Alberto Fernández, have asked the Central Bank to issue money in order to continue the functioning of the country. However, a greater circulation of money in the streets is also synonymous with a greater inflation. The other is the loan request to international entities, which frequently end up requiring rulers to impose periods of austerity and cut social aid, which in itself further harms the impoverished social classes.
Finally, despite the fact that the country was emerging as a world economic power, this never made the leap – completely – from the agricultural industry to that of goods and services. Its main source of exports continues to be raw materials, such as soybeans and corn, which account for close to 40% of total exports, according to the Rosario Stock Exchange.
What do the presidential candidates propose?
The debate around the economy is at the center of the presidential debate on October 22.
In this bet, the highly controversial anti-establishment candidate Javier Milei has capitalized on social discontent with the promise of ending the economic policies used until now. He proposes a radical liberalization of the economywhich would involve suppressing the State’s financial entities to the maximum, among which the Central Bank, privatizing state entities and “free currency competition” between the Argentine peso and the dollar, which in practice would end the local currency .
Milei’s proposals scare many, who fear that with his ‘libertarian’ proposals he will hand the country over to the markets. “He is not a lion, he is a cuddly kitten of economic power,” were the words that the leftist candidate Myriam Bregman chose to attack her position during the first debate for the Presidency, among which Milei leads with 35% of voting intention. , followed by the current Minister of Economy Sergio Massa (30%) and the opposition of Together for Change Patricia Bullrich (25.9%), according to an average of the last 18 surveys prior to the debate, carried out by El País.
Massa is committed to creating an Argentine digital currency, allowing those who have money abroad to return it to the country in what he has called a ‘laundering law’, increasing sentences for tax crimes and reducing taxes on small and medium-sized businesses to boost Exports as an engine of development.
For his part, Bullrich promised to wipe inflation off the map and also emphasized exports. The candidate is betting that Argentina adopts the dollar as its second currency, while Massa asks to defend the peso.
On October 22, it will be known if any of these models reach the Presidency, or which ones will face each other in a second round.
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