Why Argentina’s good fortune did not last
of Mauricio Macri in 2015 was supposed to usher in a new era in Argentina, a country with a reputation for toothsome steaks, rapid inflation and defaulting on its debts. Mr Macri promised to tame soaring prices with tight monetary policy, a problem Cristina Fernández de Kirchner, Argentina’s previous president, had tried to obfuscate by publishing dodgy macroeconomic data and imposing currency controls.
The reaction of investors was swift and vicious. On August 12th they rushed to dump Argentine assets. Mr Macri may not have been a panacea for all Argentina’s ills, but his stewardship of the economy was far more sober than that of his predecessor, who now seems likely to be restored to high office. Argentina’s stockmarket, the Merval, fell by 37%. At one point in the day the peso was down by 30% before the central bank intervened and raised interest rates to 74%. It still closed 15% lower.
Second, investors are rightly fearful of the policies the pair may put in place. Ms Fernández’s spendthrift reputation precedes her. Mr Fernández warned in the final days of the campaign that devaluation of the peso was coming. He also promised to renegotiate the $57bnIn the aftermath of the vote, Mr Fernández tried to strike a more moderate tone. “We weren’t crazy in government before,” he declared.
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