December 4, 2013
The days after
Gov’t won’t yield to protest vote
The country duly voted on Sunday and the result is as clear as mud. The electorate delivered a protest vote against the Cristina Fernández de Kirchner administration best described as massive which nevertheless translated into solid government majorities in both Houses of Congress.
At least this should free us from the syndrome four Novembers ago of a frantic volley of drastic legislation before the majorities evaporated — indeed any extremism now would be more likely to make majorities evaporate amid the shifting loyalties of a lame-duck government. At least, too, there is no way this non-confidence vote from two-thirds of the electorate can be interpreted as the two-thirds approval for a third CFK term required by the Constitution. But an electorate which voted for change is stuck with continuity — and with no real cause for complaint because a lame-duck period is complex enough in any country without a hung Congress to bedevil it.
Assuring governability while duly registering complaints might have its advantages but we have neither one nor the other — everything is in limbo in a hyper-presidential democracy with the President on medical leave while the ruling Victory Front insists that it lived up to its name in Sunday’s voting (20 years is nothing according to an Argentine tango and 20 percent of the vote emigrating from the 2011 landslide also nothing according to this logic).
Yet some would argue from Argentine experience that a rational political context for the economy is impossible at the best of times. Last Thursday’s column “The business vote” prompted feedback from a reader asking how many middle-class voters of City Mayor Mauricio Macri expected him to hike ABL rates several times over and how many CFK fans voted for her to sign a deal with Chevron. With personality cults thus replacing political parties and expediency any platforms, businessmen and everybody else are voting in the dark.
Voting in the dark on Sunday and limbo today but that does not mean end of story (or column). Economic problems formed a huge, if not exclusive part of Sunday’s massive protest vote. And if the government’s reaction was to stress that it still runs Congress at the end of the day, that only increases their responsibility to resolve these problems. In theory, this should await the presidential return but if CFK was spared the odium of last Sunday’s electoral setbacks, why not any harsh economic remedies as well since she is already taking enough medicine?
If you asked the government to name the biggest problem, most officials would probably pinpoint the lack of dollars. A double-digit “blue” dollar created a pre-electoral flutter although it subsequently ebbed (creeping official exchange rate devaluation will continue as before). Yet undue obsession with the “blue” only distracts attention from dollar drainage, never mind deeper problems. With tourism accounting for almost 30 million dollars daily of this drainage, a crackdown here can be expected, especially with the CEDIN and BAADE whitewash bonds proving such non-starters.
If anybody else were asked to identify the biggest problem, most would name inflation with Domestic Trade Secretary Guillermo Moreno’s price freezes in total disarray. Moreno is a prime culprit for electoral woes in many circles but rumours of his demise have been wildly exaggerated so many times that his exit would have to be seen to be believed.
Yet there can be no doubt that rising prices were a huge factor in Sunday’s vote drainage even if several economic sectors are crippled without greenbacks. Inflation notoriously punishes the poor hardest and goes a long way towards explaining why the Victory Front could only hang onto four of the 19 districts in the Greater Buenos Aires urban sprawl, even losing in its La Matanza stronghold for most of the night. Yet the same applies within the business vote where the infamous “corporations” are protected by the economies of scale. But at the other end of the pyramid, if taxation and cost inflation have reduced profit margins to two percent (a common enough experience), companies would need to be invoicing a million pesos monthly for their owners to earn more than senior employees — most business voters (although not capital) would fall below this threshold and undoubtedly they made themselves heard on Sunday.
Nevertheless, few economists are expecting any serious action against inflation — or indeed most problems. If the outgoing administration were asked to choose between dirty work to stop the rot and leaving a minefield for the next government, the question would be a total no-brainer for them.
One exception to this attitude of deliberate persistence in error could be action to banish the threat of foreign debt default. This might well even take the bold form of indirect negotiations with the demonized “vulture funds” — an out-of-court settlement (as envisaged by Gramercy and Fintech funds) whereby the “vultures” receive their haircut share from the government plus a sweetheart bonus to approximate full repayment from the 93 percent of creditors within the bond swap, thus avoiding any loss of political face. And this would not be all — the initiative to respect CIADI international arbitration settlements could be followed by redemption of Paris Club debt and a nationwide inflation index could finally replace the parodies of INDEC statistics bureau. But these moves would have their price — the Paris Club alone would deplete Central Bank reserves by some seven billion dollars while CIADI could prove an iceberg.
And the unsustainable fuel and transport subsidy mountain? Undoubtedly, a drive to make transport fare and utility bill subsidies more socially selective in favour of the needy will be launched, as in 2011 — whether it will progress any further is another matter. As for the energy deficit, there still seems nothing more than BAADE.
Neither housing nor infrastructure should be absent from any priority list. Despite Moreno agriculture can take pretty good care of itself but likely bumper harvests in the future would be bottlenecked by inadequate infrastructure. A United Nations figure that shantytown residents will treble globally from one to three billion by the year 2050 should arouse us to the importance of decent housing, the lack of which indirectly feeds not only the drug scourge but also the problem of youths who neither work nor study.
“The past is another country,” it is often said, but what about the future?