Thursday, June 4, 2020
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OPINION AND ANALYSIS | 21-12-2019 08:50

Goodbye gradual-ism

Macri's ‘gradual-ism’ didn’t work. Marci gradually lost popularity until he gradually lost the election.

At the helm of his united Peronist coalition, President Alberto Fernández has been in office for less than a month and already the speed of his bandwagon is breaking necks. Does that ring a bell? Néstor Kirchner, former president between 2003 and 2007, was prone to running the Republic at the crack of a whip that produced news almost on a daily basis.

Arguably, it’s a contrast with the way former president Mauricio Macri, the now departed leader of Argentina’s centre-right coalition, chose to manage the country up until he lost the presidential election on October 27. Macri, who took office in 2015 and handed over power to Fernández on December 10, preferred to do things gradually and let the public know so. This ‘gradual-ism,’ however, didn’t work. Marci gradually lost popularity until he gradually lost the election.

Now it is back to the Peronist way of doing things and their normal playbook: steamroll your rivals from Day One. The last two Peronist governments (Carlos Menem’s, 1989-1999; Néstor Kirchner and Cristina Fernández de Kirchner, 2003-2015) lasted over a decade in office. Anything less than a decade in power will be seen as failure by the Peronists, who have regained power only four years after losing it.

At press time the Fernández administration was submitting a mammoth “solidarity bill” to Congress that will grant it sweeping powers to increase private sector salaries by decree, freeze private utility rates, dictate pension increases, slap a 30-percent hike on dollar purchases (already limited to US$200) and much more. Already President Fernández has decreed double severance for workers for 180 days, in the hope that this will halt a wave of private sector dismissals.

Retirees collecting the minimum pension (approximately five million senior citizens) payment have been granted a bonus of 5,000 pesos in December and January, but the bill implies that the automatic system of pension increases has also been suspended. Economy Minister Martin Guzmán has announced that the new administration will now take 180 days to figure out a new system to grant pension increases in a nation with an annual inflation rate of at least 50 percent.

Effectively, this means that Guzmán has launched a reform of the pension system, which it’s fair to assume will not necessarily be beneficial to all retirees. The trick is that the majority of pensioners (and families on welfare collecting child benefit payments) will be instantly granted increases that will favour them, at least in the short term. Poor families will also be extended a card to purchase food worth 4,000 to 6,000 pesos a month on top of their monthly child allowance in pesos. But retirees collecting higher pensions will not see immediate hikes. The solidarity bill is also packed with property tax increases for the wealthy and the farm sector must also deal with export duty hikes.

The bill is the government’s first parliamentary contest and it has driven a wedge in Macri’s centre-right coalition Juntos por el Cambio (“Together for Change,” JxC). The centre-right coalition has three legs: Macri’s PRO party, the Radical Civic Union (UCR) and the Civic Coalition (CCARI). The hardliners are outraged with the superpowers that would be delegated on the president, whih include granting the head of state the prerogative to scrap entire agencies with the stroke of a pen, and vowed not to grant quorum. Yet three Radical governors (from Jujuy, Mendoza and Corrientes) refused to endorse the strategy of denying quorum.

There is nothing unusual here, a sector of the opposition initially sending out friendly signals to a new government with a mandate. Menem, famously, was one of the few Peronists to reach out to Raúl Alfonsín, the Radical politician who was elected president in 1983. That placed Menem on the correct side of voters. Radical governors have met with President Fernández and have agreed to also freeze a fiscal pact they signed with Macri, which forced them to gradually lower the taxes that they charge locally.

Guzmán needs the mega bill to be approved to then open negotiations with the International Monetary Fund (IMF), in turn convincing it that the tax increases and the promise not to print money makes sense. It will also have to renegotiate its debt with private bondholders too.

The problem for the pro-Macri hardliners is that the centre-right coalition is inevitably splintering. That stance will only make sense if, say, two years from now, the economy is in a mess and the debt renegotiation has failed. But before that happens they will see their ranks dwindle and suffer defections. Guzmán needs the pension reform to work – past efforts to change the system have triggered a volley of protests and lawsuits by retirees. There will be a problem, especially for the new economy minister, if pensioners in general feel that they have been short-changed once Guzmán shows all his reform cards over the next six months.

Yet the early days always belong to the winner of the election. And the three experienced Radical governors, who only yesterday were on Macri’s side, know this only too well. President Fernández is trying to deliver for his electoral base, the Kirchnerite vote in Greater Buenos Aires, while at the same time trying to show international lenders that his government is fiscally responsible. Whatever he feels needs to be done, he will do fast.

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Martín Gambarotta

Martín Gambarotta

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