EVERY Argentine politician knows that clanging pots and pans are the sound of trouble. In 2001, after the government froze bank accounts, furious residents of Buenos Aires staged nightly cacerolazos (pot bangings) until the president resigned. On September 13th it was the turn of Cristina Fernández de Kirchner, the current president, to face the raucous music. Tens of thousands filled the capital’s streets wielding kitchen implements. Ms Fernández was in San Juan, a provincial capital, which saw a smaller protest. Her aides dismissed the protesters as an unpatriotic elite….
But the latest cacerolazo looks more like a turning point than a stumble. The main reason is that the economy has run out of steam. Between 2003 and 2011, Argentina’s annual average growth rate of 7.7% was Latin America’s second-highest. This year, even by the questionable official numbers, it is set to be the lowest (see chart).
Distortions have been building for years under Ms Fernández and her late husband and predecessor, Néstor Kirchner. Price caps have squelched investment in energy and led the treasury to subsidise fuel imports. Public spending has soared, yielding a primary fiscal deficit of 3% of GDP. Thanks to the Kirchners’ quarrel with the IMF, Argentina can only raise external credit at steep interest rates. So the Central Bank has printed pesos. Inflation is around 25% according to unofficial estimates.
Until now, the economy has grown despite these policies, mainly because of high prices for its farm products, and exports to Brazil. But this year drought parched soyabean fields, and Brazil stalled. In addition $18 billion of debt and other payments came due that Argentina could not refinance. Desperate for hard currency, the government imposed curbs on imports and foreign-exchange transactions. It scared investors further by expropriating a majority stake in YPF, the national oil company, held by Spain’s Repsol. All this turned a soft landing into a screeching halt.
A second problem for the president is that she has alienated large chunks of her amorphous Peronist movement. Mr Kirchner dealt deftly with its barons, mayors and unions, who can rally crowds to the streets and voters to the polls. Since being widowed in 2010, Ms Fernández has sidelined many of her husband’s allies, relying instead on a group of youngish leftist activists led by her son, Máximo….
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