December 10, 2017

The week

Friday, May 19, 2017

Peeking into the future

President Mauricio Macri welcomed by his host Xi Jinping to Beijing perhaps Xi might like to call his guest Chairman Mau for short.
By Michael Soltys / Senior Editor

Not for the first time a week in which news from abroad eclipsed any local developments. An obvious consequence of the nation’s top dog being absent all week visiting the Chinese superpower but also the latest turn in the screw of Brazil’s endless corruption mega-scandal has nothing and everything to do with Argentina (just ask AFI intelligence chief Gustavo Arribas).

The agreements signed between President Mauricio Macri and his Chinese host Xi Jinping all had the common denominator of infrastructure, where Argentina’s investment needs neatly overlap with the “One Belt, One Road” forum which Macri managed to catch. That scheme (launched in 2013 but now gaining an extra edge with Donald Trump’s protectionism) proposes ploughing almost a trillion dollars worth of soft loans into the roads, railways, ports, power plants, etc. of China’s leading raw material suppliers. The 16 agreements to the tune of at least US$17 billion for two new nuclear power plants, upgrading railways (especially the San Martín freight line) and solar energy in Jujuy (close to the lithium) signed by Macri and Xi fall exactly into this pattern.

A quantum leap, argues the Macri entourage intoxicated by the scale of Chinese capital and consumer market — just another mirage after 18 months of constant Macri investment announcements resulting in plenty of nothing, scoff the “cuento chino” critics. If the US$20 billion of investment announced during the visit of then Chinese President Hu Jintao in 2004 which sent the late Néstor Kirchner into raptures about refounding Argentina came to little or nothing, why should Macri (who has raised the expectations as high as 32 billion) have any better luck?

Perhaps the sceptics are right but people are always underestimating China, something which goes a long way back. Some seven centuries ago Marco Polo was widely ridiculed as “Marco Millionaire,” a nickname he owed to reporting that Hangchow (today Hangzhou) had a million people — an apparently absurd claim considering that only half a dozen European cities then had even 100,000 — only for historians to confirm much more recently that the Sung dynasty capital did indeed have a seven-digit population.

If British influence transformed Argentina so completely in the century between Richard Newton introducing barbed-wire enclosure around 1840 and the Roca-Runciman Pact of 1933, why should not “One Belt, One Road” achieve similar advances in this century?

Yet for now the only signed, sealed and delivered Chinese investment is the Santa Cruz hydro-electric dam duo inherited from Kirchnerism and that is up in the air pending the environmental impact study ordered by the Supreme Court while that agreement contains a cross-default clause halting the other credits (the editorial on the opposite page also explores this aspect). Macri never identified with this project for both objective and subjective reasons — because it was born out of Kirchnerite favouritism for their home province but in any case is out of sync with the national grid — yet his future with China might hinge on the problematic dams.

Beyond the protocol and the “interesting times” and “crisis the same word as opportunity in Mandarin” clichés of the professional China-watchers, that is the substance of a visit which ended last night with Macri dining with the world’s highest-paid soccer players, Ezequiel Lavezzi and Carlos Tevez. As from today it’s Japan’s turn.

Let’s see how Brazil’s tail-spinning political crisis pans out but one preliminary conclusion might be that our giant neighbour discriminates against non-Peronist presidencies — if its maxi-devaluation of 1999 knocked the bottom out of convertibility for Fernando de la Rúa’s Alliance government, the recessive contagion from crisis-stricken Brazil has been a massive headache for Macri from the very start.


Not too much going on here with Macri away. If last week’s protagonist was the Supreme Court with the backlash to its “2x1” ruling culminating in that massive march, it stayed quiet this week as it mulled ways of shooting that scene again but lesser tribunals came to the fore — Federal Judge Marcelo Martínez de Giorgi sent Mothers of Plaza de Mayo leader Hebe de Bonafini and the Schoklender brothers to trial over the “Shared Dreams” housing scam (see the editorial on Page 15) while an appeals court moved to exempt all pensions from income tax (this initiative is obviously being resisted by a deficit-ridden government).

Meanwhile the endless pay dispute with teachers in Buenos Aires province was on hold this week for their Suteba trade union’s elections. These were won comfortably by incumbent Roberto Baradel over a Trotskyist Workers Party rival with around three-quarters of the vote, carrying every district except La Matanza, La Plata, Quilmes and Tigre. Under Baradel the teachers are holding out for a 35 percent pay increase and here they are far from being alone among trade unions.

No breakthrough in sight for the deadlock with teachers but perhaps that logic of crisis and opportunity allegedly being the same word in Chinese could be applied here. In other words, allow the collapse of Argentina’s hopelessly obsolete education to run its course and start again on a completely new footing.

With Macri absent and his predecessor Cristina Fernández de Kirchner still playing hard to get, nothing very new in party politics. Endless twists and turns in the Peronist primary about which plenty of space could be wasted but best to await definition (Renewal Front leader Sergio Massa, for one, is saying that he will not be deciding any candidacies until next month). In the last week their options have been reduced by the probable elimination of their 2015 presidential candidate ex-governor Daniel Scioli as a Plan B for CFK. This is not a gossip column so we will not spell out the problem but to describe the situation in colloquial English, Scioli is in a bit of a pickle after putting a bun in the oven.

Late last week City legislator Graciela Ocaña joined Macri’s Let’s Change ruling coalition — the significance of this move is that Ocaña was a leading ally of City Mayor Horacio Rodríguez Larreta’s 2015 run-off rival Martín Lousteau, who is now proposing to renew that competition within a Let’s Change primary. But Ocaña set no such conditions and indeed is calling on Lousteau to stand back. Rodríguez Larreta is insisting on a single list under Civic Coalition maverick Elisa Carrió even if a primary contest with Lousteau would draw far more interest than a mere rubberstamping and thus suck many more votes into the Macri camp. In general, it is surprising how few parties are interested in using the PASO primary mechanism, thus allowing the people rather than party headquarters to choose their candidates.


The “One Belt, One Road” euphoria emanating from China clashes with the stubborn persistence of stagflation here after almost 18 months of Macri’s efforts to change course. While waiting for the Oriental investments to materialise or something to give, the government will need to resolve an underlying contradiction of its economic policy — the co-existence of orthodox monetary policy with fiscal gradualism as neither Central Bank Governor Federico Sturzenegger nor the bulging fiscal deficit seem ready to blink first.

Within this contradiction the Central Bank also speaks with forked tongue. So determined is Sturzenegger to defend the inflation targetting introduced last September that he has jacked up interest rates above 25 percent at the risk of slowing down a barely recovering economy altogether but at the same time money supply has expanded 35 percent in the last 12 months, outstripping inflation estimated at 27 percent for that period. While this money is being printed to service the debt being incurred to absorb the deficit under fiscal gradualism as much as for the deficit itself, this can only perpetuate inflation.

The good news amid this relentless red ink is that while public debt is steadily rising, private debt has receded, even if at a lower rate — because the relaxation of currency controls has made it possible to pay off old debts and because an overvalued peso makes it more attractive to cancel dollar liabilities.

Last but not least, INDEC statistics bureau has produced an extremely interesting report on income distribution showing half the population to be earning less than 8,500 pesos a month even if the average income is just over 11,000 — a reminder that the median and the average are rarely the same in statistics even if they sound the same (in this case because the highest incomes are very much more above the midpoint than the lowest are below). While a third of the population is officially below the poverty line, this report shows far too many people to be hovering dangerously close. Another report seemed even worse because it showed 40 percent of child social welfare recipients to be malnourished but here obesity vastly outweighed starvation.

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Edition No. 5055 - This publication is a property of NEFIR S.A. -RNPI Nº 5343955 - Issn 1852 - 9224 - Te. 4349-1500 - San Juan 141 , (C1063ACY) CABA - Director Perdiodístico: Ricardo Daloia