ARGENTINE UPDATE – Dec 21, 2015


1. MACRI’S PROMISING START IN ARGENTINA (The Wall Street Journal)

2. ARGENTINA SLIDES DOWN WEALTH TABLES AFTER DEVALUATION (Financial Times)

3. BANKER TO THE WORLD BILL RHODES COUNTING ON ARGENTINA TURNAROUND (Bloomberg News)

4. ARGENTINA STATISTICS AGENCY SAYS TO PUBLISH INTERIM INFLATION DATA (Reuters News)

5. ARGENTINA STATISTICS AGENCY SAYS TO PUBLISH INTERIM INFLATION DATA (Reuters News)

6. WILD BIRD CONSERVATION ACT; BLUE-FRONTED AMAZON PARROTS FROM ARGENTINA’S SUSTAINABLE-USE MANAGEMENT PLAN (Federal Register)

7. GOV’T PLANS TO ROLL OUT NEW INFLATION GAUGE IN ARGENTINA (Fox News)

8. STICKER SHOCK AND CONCERN ABOUT SOARING PRICES IN ARGENTINA AFTER MAJOR CURRENCY DEVALUATION (US News & World Report)

9. US MUST SUPPORT ARGENTINA’S NEW PRESIDENT (The Hill)

10. ARGENTINA’S NEW PRESIDENT MAKES BOLD START (American Enterprise Institute)

1. MACRI’S PROMISING START IN ARGENTINA (The Wall Street Journal)
Dec 18, 2015

The new president lifts capital controls and moves to stabilize the peso.

The world’s biggest 2016 turnaround project is arguably Argentina, where new President Mauricio Macri must repair 12 years of Peronist damage to the rule of law and the economy. He’s off to a good start in his first week on the job.

On Thursday the government took an important step by lifting capital controls and letting the peso exchange rate fall to 13.3 to the dollar from the central bank’s official peg of 9.8. That’s a sharp devaluation but not nearly the catastrophic drop to 15 to 1 or worse that many expected. By Friday the peso had strengthened slightly.

One reason the currency didn’t go into free fall is because the central bank, now under new leadership, raised its short-term lending rate to 35%-38%, sending a signal that it cares about peso stability. Finance Minister Alfonso Prat-Gay said the bank is prepared to act to prevent a peso rout.

A stable peso and the ability to move capital freely are crucial to making Argentina hospitable once again to foreign and domestic investment. “He who wants to import will be able to do so, and he who wants to buy dollars will be able to buy them,” Mr. Prat-Gay said Wednesday. Mr. Macri is also in the process of eliminating export taxes on wheat, corn and beef and cutting them on soybeans to boost output.

The new president has much more to do, but these early portents are encouraging.

2. ARGENTINA SLIDES DOWN WEALTH TABLES AFTER DEVALUATION (Financial Times)
By Steve Johnson
December 18, 2015

Fall in peso leaves country poorer than Equatorial Guinea

Argentines woke up on Thursday richer than Poles, Chileans and Hungarians. By bedtime they were not only poorer than all three, but also more impecunious than Mexicans, Costa Ricans and the good people of Equatorial Guinea.

The country’s slide down the global gross domestic product per capita rankings (as measured in dollar terms at least) was the result of the peso’s 29 per cent tumble against the greenback after Mauricio Macri, the newly elected president, lifted capital controls.

It was just the latest ignominy to hit the seemingly accident-prone nation, which just over a century ago was the seventh-wealthiest country in the world on a per capita basis, ahead of the likes of Denmark, Canada and the Netherlands and five times wealthier than Brazil, a country it is only around 50 per cent richer per head than now, even factoring in the real’s equally sharp slide this year.

Based on IMF forecasts, Argentina was expected to be the world’s 21st largest economy in dollar terms this year, with its GDP of $579bn just below that of Saudi Arabia and ahead of the likes of Nigeria, Sweden and Poland.

After the peso devaluation, Argentina’s GDP will be something in the vicinity of $411bn, potentially relegating the country to 26th place, between Belgium and Norway, as the first chart shows.

Admittedly this is a crude calculation, as currency volatility and unexpectedly strong or weak GDP growth and inflation will impact the figures as well. The 10 per cent fall in the euro against the dollar this year means Belgium’s GDP, measured in dollars, will probably be close to the revised Argentine figure.

Nevertheless, the revision does give an idea as how the size of Argentina’s economy has been buffeted by the plunging peso, which has now lost 77 per cent of its value against the dollar in nominal terms over the past decade.

Perhaps more important, for ordinary people at least, is the impact of the peso slide in GDP per capita terms.

The IMF foresaw Argentina being ranked 53rd by this measure in 2015, with its GDP per head of $13,428 a fraction below that of Latvia but ahead of neighbouring Chile, as well as fellow middle-income nations Poland and Hungary.

Now, with GDP per capita of just $9,534, it has fallen to 64th, below this trio as well as the likes of Equatorial Guinea, Lebanon, Costa Rica, Malaysia and Mexico, as the second chart shows.

Again, this is something of a crude measure, but is still indicative of the broad trend for a country that has long suffered from chronic mismanagement, despite its many natural advantages.

In reality, the removal of capital controls is something of a double-edged sword. Argentines now have free access to dollars, without having to resort to the black market, but at a cost.

“The peso devaluation is a bitter pill for Argentinian households who kept their savings in pesos and for multinationals who had reported peso cash balances at the official exchange rate on financial disclosures,” says Bill Adams, senior international economist at PNC Financial Services Group.

“Eventually, a more competitively valued exchange rate should be positive for Argentine economic growth, as well as for close trading partners like Brazil. But in 2016, a potentially painful period of adjustment is possible.”

3. BANKER TO THE WORLD BILL RHODES COUNTING ON ARGENTINA TURNAROUND (Bloomberg News)
By Katia Porzecanski
December 18, 2015

* Currency devaluation was step in right direction, Rhodes says
* Settling with holdout creditors needs to be top Macri priority

William Rhodes, the former Citigroup Inc. executive who helped restructure hundreds of billions of dollars in debt over three decades, says Argentine President Mauricio Macri is making him optimistic about the country’s future.

Rhodes, 80, who described leading Argentina’s debt restructurings in the 1980s and 1990s in his book “Banker to the World,” said that despite the nation’s history of false starts, Macri will follow through on his plans to normalize the economy and lure investment. After devaluing the currency by the most in 14 years Thursday, Macri will have to move swiftly to settle with leftover creditors from its 2001 default and improve Argentina’s fiscal accounts, Rhodes said in an interview from New York.

“Macri will do what he says as rapidly as he can, given he’s got an opposition congress,” said Rhodes, who is a senior adviser at Citigroup and chief executive officer at William R. Rhodes Global Advisors LLC.
“At the end of the day, if you can’t deliver growth in a reasonable amount of time, the population will turn against you. He’s battling the clock.”

Macri, the center-right former mayor of Buenos Aires, took office Dec. 10 after campaigning on a pledge to revive South America’s second-biggest economy and overcome rampant inflation, a growing deficit, and falling foreign reserves. The 14-year-old standoff with U.S. hedge funds holding defaulted Argentine bonds has made the nation a pariah in international credit markets, and a settlement with holdout creditors offers the only path for Argentina to borrow the money it needs to repair the economy.

Newly-appointed Finance Minister Alfonso Prat-Gay, who led global currency research at JPMorgan Chase & Co. until 2001, this week largely removed the currency controls put in place by former President Cristina Fernandez de Kirchner. The restrictions had hampered businesses by making it difficult to get dollars for imports and spurred the creation of multiple exchange rates that individuals and companies used to skirt the controls.

Prat-Gay’s team will need to settle with defaulted-bond holders led by hedge fund Elliott Management so that the nation can return to international bond markets, Rhodes said. While he says that “restructuring Argentina has never been an easy task” — in his 2011 book he described pulling back-to-back all-nighters when finalizing the restructuring of the nation’s debt into so-called Brady bonds — the incentives for both parties to come to an agreement will drive a deal.

Macri has already moved to end taxes on most agricultural exports and signaled he’ll reduce subsidies on utility bills, which have contributed to the the country’s widening fiscal deficit. To help stoke demand for pesos amid inflation estimated to be as fast as 30 percent, the central bank boosted interest rates on its short-dated notes to 38 percent earlier this week.

The turnaround won’t be easy. Macri must maintain the public’s support even after Thursday’s devaluation weakened the peso by 27 percent, threatening to exacerbate inflation. The outlook for the prices on the commodities that Argentina depends on to bring foreign currency into the country isn’t great as growth in China slows.

“One should not underestimate the obstacles he has internationally as well as those domestically,” Rhodes said. “It’ll take time, but he’s been preparing for this day for a long time, he’s assembled a good team, and he’s going to work at it. This is a country that can rebound very quickly.”

4. ARGENTINA STATISTICS AGENCY SAYS TO PUBLISH INTERIM INFLATION DATA (Reuters News)
By Maximilian Heath
Dec 19, 2015

Dec 19 The recently appointed head of Argentina’s official statistics office said on Saturday that a new interim consumer price index will be published within a couple of weeks in a bid to produce credible data following an election that brought a new government to power.

Newly elected President Mauricio Macri wants to restore confidence in Latin America’s third-largest economy in order to boost much-needed investment.

For years, data produced by the INDEC, the government’s official statistics agency, has been widely seen as inaccurate and politically motivated.

“I think that in two weeks, we should have a provisional (consumer price) index. Credible, but provisional,” new INDEC Director Jorge Todesca told Radio Mitre. “There is a widespread state of chaos in the statistical bases,” said Todesca, adding that INDEC is working to produce updates to gross domestic product, trade, unemployment and poverty data.

Consumer prices data in particular has shown the official inflation reading at about half the rate estimated privately. Critics said the prior government of two-term President Cristina Fernandez massaged the data to reduce payments on its inflation-indexed debt load and rein in inflation expectations.

The latest official data available reported annual inflation in October of 14.3 percent. But data compiled from private estimates and published by lawmakers in Argentina’s Congress have put it at 25.0 percent.

Todesca said recently that many officials at INDEC had resigned in the wake of the election last month that brought the conservative Macri to power and that the much-maligned statistics office will take months to revamp.

It will “take some time to put the trustworthy people” in place at INDEC, said Todesca. He added that there is a bill to make the institution autonomous.

Macri has promised free-market solutions to Argentina’s long list of economic woes. His predecessor, Fernandez, believed in heavy state control of the economy.

5. ARGENTINA STATISTICS AGENCY SAYS TO PUBLISH INTERIM INFLATION DATA (Reuters News)
19 December 2015

BUENOS AIRES, Dec 19 (Reuters) – The recently appointed head of Argentina’s official statistics office said on Saturday that a new interim consumer price index will be published within a couple of weeks in a bid to produce credible data following an election that brought a new government to power.

Newly elected President Mauricio Macri wants to restore confidence in Latin America’s third-largest economy in order to boost much-needed investment.

For years, data produced by the INDEC, the government’s official statistics agency, has been widely seen as inaccurate and politically motivated.

“I think that in two weeks, we should have a provisional (consumer price) index. Credible, but provisional,” new INDEC Director Jorge Todesca told Radio Mitre.

“There is a widespread state of chaos in the statistical bases,” said Todesca, adding that INDEC is working to produce updates to gross domestic product, trade, unemployment and poverty data.

Consumer prices data in particular has shown the official inflation reading at about half the rate estimated privately. Critics said the prior government of two-term President Cristina Fernandez massaged the data to reduce payments on its inflation-indexed debt load and rein in inflation expectations.

The latest official data available reported annual inflation in October of 14.3 percent. But data compiled from private estimates and published by lawmakers in Argentina’s Congress have put it at 25.0 percent.

Todesca said recently that many officials at INDEC had resigned in the wake of the election last month that brought the conservative Macri to power and that the much-maligned statistics office will take months to revamp.

It will “take some time to put the trustworthy people” in place at INDEC, said Todesca. He added that there is a bill to make the institution autonomous.

Macri has promised free-market solutions to Argentina’s long list of economic woes. His predecessor, Fernandez, believed in heavy state control of the economy. (Reporting by Maximilian Heath, writing by Anthony Esposito, editing by G Crosse)

6. WILD BIRD CONSERVATION ACT; BLUE-FRONTED AMAZON PARROTS FROM ARGENTINA’S SUSTAINABLE-USE MANAGEMENT PLAN (Federal Register)
21 December 2015

SUMMARY: We, the U.S. Fish and Wildlife Service (Service, or we), withdraw a 2003 proposed rule to approve a sustainable-use management plan developed by the Management Authority of Argentina for blue-fronted amazon parrots (Amazona aestiva), under the Wild Bird Conservation Act of 1992. We are taking this action because Argentina has withdrawn their application. As a result, we will no longer consider allowing importation of this species from Argentina under this plan.

EFFECTIVE DATE: This document is withdrawn as of December 21, 2015.

FOR FURTHER INFORMATION CONTACT: Craig Hoover, Chief, Division of Management Authority, U.S. Fish and Wildlife Service Headquarters, MS: IA; 5275 Leesburg Pike, Falls Church, VA 22041-3803; telephone 703-358-2095; facsimile 703-358-2298. If you use a telecommunications device for the deaf (TDD), call the Federal Information Relay Service (FIRS) at 800-877-8339.

SUPPLEMENTARY INFORMATION: The Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) is an international treaty designed to regulate international trade in certain animal and plant species that are now, or may become, threatened with extinction. These species are listed in the Appendices to CITES, which are available on the CITES Secretariat’s Web site at http://www.cites.org/eng/app/appendices.php. Currently 180 countries and the European Union have ratified, accepted, approved, or acceded to CITES; these 181 entities are known as Parties. The U.S. Fish and Wildlife Service has been delegated authority to carry out U.S. responsibilities under CITES.

The Wild Bird Conservation Act of 1992 (WBCA) limits or prohibits import into the United States of exotic bird species to ensure that their wild populations are not harmed by international trade. It also encourages wild bird conservation programs in countries of origin by ensuring that all imports of such species are biologically sustainable and not detrimental to the survival of the species.

Previous Federal Actions

On November 16, 1993, we published a final rule in the Federal Register (58 FR 60524) that implemented the prohibitions stipulated in the WBCA and provided permit requirements and procedures for some allowed exemptions. In that rule, we informed the public that imports of all CITES-listed birds (as defined in the rule) were prohibited, except for (a) species included in an approved list; (b) specimens for which an import permit has been issued; (c) species from countries that have approved sustainable-use management plans for those species; or (d) specimens from approved foreign captive-breeding facilities. Criteria for approval of sustainable-use management plans are in title 50 of the Code of Federal Regulations at 50 CFR 15.32.

Argentina petitioned the Service to allow the import into the United States of blue-fronted amazon parrots (Amazona aestiva) removed from the wild in Argentina under an approved sustainable-use management plan. Consequently, on August 10, 2000, we published a notice of receipt of application for approval in the Federal Register (65 FR 49007) that announced the receipt of a petition from the CITES Management Authority of Argentina, Direccion de Fauna and Flora Silvestre, for approval of a sustainable-use management plan for the blue- fronted amazon parrot in Argentina. On January 8, 2003, we published a notice in the Federal Register (68 FR 1066) announcing the availability of a draft environmental assessment of the addition of blue-fronted amazon parrots from a sustainable-use management plan in Argentina to the approved list of non- captive-bred birds under the WBCA.

Later that year, on August 6, 2003, we published a proposed rule in the Federal Register (68 FR 46559) to approve a sustainable-use management plan developed by the CITES Management Authority of Argentina for blue-fronted amazon parrots under the WBCA. The proposed rule would add blue-fronted amazon parrots from Argentina’s program to the approved list of non-captive-bred (wild-caught) species contained at 50 CFR 15.33(b).

[Page Number 79301]

The public comment period on the proposed rule was open for 60 days.

On March 29, 2005, we published a notice in the Federal Register (70 FR 15798) reopening the comment period on the proposed rule for 30 days to enter into the record Dr. Jorge Rabinovich’s 2004 study, “Modeling the Sustainable Use of the Blue-Fronted Parrot (Amazona aestiva) in the Dry Chaco Region of Argentina,” and to accept comments related to the relationship of this study to the proposed addition of blue-fronted amazon parrots from Argentina’s program to the approved list of non-captive-bred (wild-caught) species under the WBCA. On May 24, 2005, we published a notice in the Federal Register (70 FR 29711) reopening the comment period for an additional 45 days.

Reason for Withdrawal of Proposed Rule

We reviewed the public comments received during the open comment periods for the notice and the proposed rule and new information that became available after the publication of the proposed rule. We also reevaluated information in our files, our proposed rule, and Argentina’s request, in accordance with our approval criteria in 50 CFR 15.32. As a result, we determined that it was unlikely that we would be able to make a positive finding for the sustainable- use management plan developed by Argentina for blue-fronted amazon parrots under the WBCA. Subsequently, Argentina determined that the best course of action would be to withdraw their application. Argentina withdrew its application by letter (undated) from the CITES Management Authority of Argentina (Ministry of the Environment of Sustainable Development), therefore, we are withdrawing our proposed rule of August 6, 2003 (68 FR 46559).

Author

The primary author of this document is Clifton A. Horton, Division of Management Authority, U.S. Fish and Wildlife Service (see FOR FURTHER INFORMATION CONTACT).

Authority
The authority for this action is the Endangered Species Act of 1973, as amended (16 U.S.C. 1531 et seq.).

Dated: December 9, 2015.

Stephen Guertin,
Acting Director, U.S. Fish and Wildlife Service.

7. GOV’T PLANS TO ROLL OUT NEW INFLATION GAUGE IN ARGENTINA (Fox News)
December 20, 2015

The government plans to start using a new, temporary but “believable” inflation indicator in the next two weeks in Argentina, National Statistics and Census Institute, or Indec, director Jorge Todesca said.

The statistics agency is “working on some different alternatives” for the inflation gauge, which has been criticized since 2007, Todesca told the Mitre radio network.

The Indec has not been able to “create a transition structure” between incoming and outgoing officials, Todesca, who was recently appointed to his post by new President Mauricio Macri, said.

“We have a legal problem over putting in our own specialists, people who can be trusted, and that takes time,” Todesca said.

Indec’s figures have been criticized since 2007, especially the consumer price index, for underreporting the inflation rate, compared to gauges prepared by private economic consulting firms.

The statistics agency has not released figures on the poverty rate in Argentina in some time, with the last reports coming out in the first half of 2013.

The latest Indec report said consumer prices rose 1.1 percent in Argentina in October, while private economic consulting firms estimated that prices rose 1.52 percent during the same month.

Under former President Cristina Fernandez’s administration, the Indec reported that the year-on-year inflation rate in October was 14.3 percent, while private forecasters put the number at 25.02 percent.

8. STICKER SHOCK AND CONCERN ABOUT SOARING PRICES IN ARGENTINA AFTER MAJOR CURRENCY DEVALUATION (US News & World Report)
By Peter Prengaman
December 18, 2015

BUENOS AIRES, Argentina — Argentines expressed shock at soaring prices on Friday and a major union called for protests to demand salary increases in the initial fallout from a major devaluation of the South American nation’s currency.

The price hikes came after the new administration of President Mauricio Macri on Thursday lifted restrictions on the buying of U.S. dollars. That led to a 30 percent devaluation of the Argentine peso vis a vis the dollar, which was immediately felt across the country.

Supermarket shoppers said Friday they’ll have to buy less of some products like bread and even cut out some things like beef, practically sacrilegious in a country known for its choice meats.

Gisela Guana, a 26-year-old maid, said that earlier this week she could buy bread for 13 Argentine pesos (US$0.92) per kilogram (42 cents a pound). Now it’s 17 pesos (US$1.21)(55 cents a pound).

“What’s happening is scary,” said Guana, who earns 7,500 pesos (US$535) a month. “Workers are the ones who are going to pay” for the devaluation.

Even before Thursday, Argentines had been complaining for weeks about prices rising even faster than usual in a country with one of the hemisphere’s most rapid inflation rates.

Macri, who ran on promises to liberalize Latin America’s third-largest economy, repeatedly said he would lift currency restrictions.

So between his election victory on Nov. 22 and his inauguration on Dec. 10, supermarkets had been increasing prices to brace themselves for a devaluation. Several businesses, from textile factories to construction companies, simply shut down, figuring it was better to see what happened with the peso rather than risk decisions that might later be costly.

Despite the long run-up, Thursday’s devaluation was a blow for many. It was also confirmation that major changes were coming after 12 years of largely protectionist economic policies.

The ripple effects were immediate.

Pablo Micheli, leader of the large Argentine Central Workers union, demanded a 5,000-peso (US$357) bonus for workers as compensation for the devaluation. He promised a march on Tuesday to reject all of Macri’s economic changes of the past week, including the lifting of export taxes that will be a boon to the agricultural sector.

The Argentine Chamber of Supermarkets acknowledged the price hikes and warned shoppers that even more increases were inevitable.

Yearly inflation is estimated at around 30 percent, a figure certain to rise in coming months. Finance Minister Alfonso Prat-Gay said earlier this week that Macri’s administration was negotiating with many businesses to keep prices at the level they were at the end of November.

Many were skeptical.

“Prices always go up,” said Adrian Portas, 51-year-old security guard who said he would curtail the amount of meat his family eats. “But our salaries do not.”

Currency restrictions were implemented by former President Cristina Fernandez in 2011 in attempts to curtail capital flight. They were a major pillar of an economic policy that included subsidies, price controls and social works programs for the poor.

But the measures were also deeply unpopular and led to a booming black market.

Macri frequently argued that the “cepo,” or “clamp,” hurt Argentina’s competitiveness, scared away would-be investors and created distortions in the economy.

“The devaluation here happened a long time ago. Everything is very expensive, said Alicia Fernandez, a 58-year-old lawyer who says she frequently visits her adult children living in Florida. “In the United States, with US$100 you can fill up your shopping cart. Here you can only get a few things.”

9. US MUST SUPPORT ARGENTINA’S NEW PRESIDENT (The Hill)
By Jack Rosen
December 18, 2015

The election of Mauricio Macri as Argentina’s new president is a promising development, not just for his long-suffering nation, but for the prospects that Latin America can move successfully into a post-Chavez period of reintegration with the West. As Argentina works to reinvigorate its economy, abandon a provocative and failed foreign policy and assure citizens that rule of law and an independent judiciary will be respected, the U.S. has a rare opportunity to make a real difference by supporting the fresh wind blowing through the Western Hemisphere.

Macri already is living up to early expectations by announcing that Argentina’s agreement with Iran to whitewash responsibility for the deadly 1994 bombing of the AMIA Jewish center is null and void. But his challenge to achieve lasting change is enormous. As the first president from outside Argentina’s two major political parties – the Peronists and the Radical Civic Union – in more than 100 years, the election of the center-right conservative Macri is a monumental development for a nation whose attempts at securing a democratic political system too often have been forestalled by military intervention and intrigue. Surely Macri’s election is a sign that Argentinians are seeking a change from the status quo.

Having personally gotten to know Macri over the past few years, I believe he has the leadership qualities to fulfill his vision of leading Argentina into a new era of economic prosperity. Renewing strong economic relations with the United States and other western nations will be part of Macri’s effort to repair the damage of Buenos Aires’ default on its debt and exit from the dollar in 2002 amid the Argentine Great Depression. Reversing his predecessor’s isolationist trade policies will be applauded in Washington and most other western capitals, and contribute to jump starting Argentina’s stalled economy.

However, enacting new policies will be easier than creating a deeper national appreciation and adherence to the values represented by civil society.

His decision to reopen the investigation of the AMIA Jewish Center bombing, in which 85 Argentines lost their lives in a terrorist bombing more than 20 years ago, has the potential to restore confidence among citizens that rule of law and justice will be administered without compromise. In a case where not one person has been prosecuted notwithstanding the vast evidence of Iranian complicity in funding Hezbollah’s criminality, it is not too late for Argentina to do the right thing. Further, even as many Latin American leaders seem cowed or complacent, Macri has demonstrated his independence and leadership by condemning the Venezuelan regime for its rampant human rights abuses.

I had the good fortune of hosting then-Mayor of Buenos Aires Macri as a guest at the annual International Mayors Conference in Israel last year, where he met with Prime Minister Netanyahu and other senior Israeli political, civic and business leaders. Macri expressed his genuine commitment to develop closer political and economic ties with Israel.

Only time will tell how well President Macri fulfills the promise of these early days in his presidency. Unsurprisingly, he has made new enemies by taking bold stands. The United States must take advantage of the opportunity Macri’s election brings to help Argentina and its neighbors achieve a stronger, more stable and more prosperous future. Argentines need to know that the leader of the free world is committed to their success, and that Macri’s efforts have American support; they deserve no less.

10. ARGENTINA’S NEW PRESIDENT MAKES BOLD START (American Enterprise Institute)
By Roger F. Noriega
December 18, 2015

Argentina’s new President Mauricio Macri hit the ground running after being elected on a center-right platform that promised to fix Argentina’s foundering economy.

Macri’s victory ended 15 years of the statist and authoritarian policies of the outgoing president Cristina Fernández de Kirchner and her successor and late husband, Nestor. “Kirchnerism” bred corruption, inflation, and economic uncertainty. With barely a week in office under his belt, Macri is making tough decisions that may cause short-term pain while jump-starting economic growth.

Macri this week lifted currency controls that were artificially propping up the peso, a key step in attracting investors to Argentina and combatting inflation. He also lifted export taxes on crops that led farmers to hoard soybeans and other grains. Finance Minister Alfonso Prat-Gay announced the news saying, “We have reached an agreement with grain exporters that, starting tomorrow, will bring in $400 million a day over three weeks,” totaling $6 billion in revenue in three weeks. These measures have been hailed by investors and should attract capital to the cash-strapped country as Macri follows through on his market-friendly agenda.

I expressed my optimism over the positive effect of Macri’s platform in my recent testimony before the House Subcommittee on the Western Hemisphere, and in my December AEI Research paper entitled, “Argentina’s Road to Recovery.” However, I also warned about the challenges the incoming administration faces.

“Polling shows that Argentinians are unhappy with the economic repercussions of bloated public spending and excessive government control,” I explained in my report, “but they are not necessarily opposed to the policies and programs themselves. The close election also indicates that many in Argentina do not trust the policies of a center-right leader such as Macri, despite his moderate track record.”

Moreover, Macri’s coalition does not have a working majority in either chamber of the National Congress. Although the presidency provides Macri with significant power over economic policy, as he moves toward adopting more substantive reforms, his administration will have to work with congressmen from opposition parties and blocs to pass legislation.

These challenges are formidable, but by no means insurmountable. Macri’s predecessor was a particularly divisive figure who alienated her party’s moderates. Some of these disillusioned Peronists may work with Macri to salvage Argentina’s economy and global reputation — but they may keep their distance until his early measures produce results.

After a decade of US-Argentine relations dominated by the provincial and prickly Kirchners, US interests in the region stand to benefit from more constructive leadership in Buenos Aires. If Macri is able to demonstrate the value of free-market policies and overcome ideological polarization, he has the opportunity to change the political landscape in Argentina as well as influence a centrist trend in Latin America.

As I testified last week, the full potential of this opportunity will only be realized if Washington seeks ways to expand trade and regional cooperation.

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