Are President Alberto Fernández and his Cabinet incompetent, as some of their detractors in the private sector and the opposition suggest, or is Argentina just ungovernable, given the level of political polarisation and economic turmoil it’s facing?
The question, of course, assumes that the current state of affairs is bad and getting worse – and that the government is failing to overcome the obstacles put in front of it. While it is too early into the current administration’s term to qualify its relative merit, it is difficult to challenge the idea that things have begun to break down, from the quarantine to collaboration with the opposition, from the current state of the Central Bank’s reserves to the prospects of a swift economic recovery.
It is undeniable that there is a communications problem within the government. Several key ministers and even the president himself say they have been surprised at the public reaction to several major announcements, including the botched appropriation of agri-business giant Vicentín and the 2021 budget, overshadowed by a tightening of currency controls in order to stem a haemorrhaging of dollar-denominated reserves.
There are at least two major elements to conducting public policy: the construction and execution of successful strategic plans and their communication, in order to generate the correct expectations. Announcing the best plan incorrectly can act as a boomerang, ultimately condemning it to failure. To communicate effectively it is necessary to have a feel for the reaction of multiple stakeholders, and where their future expectations will lay. This is precisely where Alberto and his team are failing.
According to a small but powerful group of businessmen, the Peronist leader is a buffoon and has no idea what he’s doing. His style is erratic, based on trying to please important sectors of his pan-Peronist coalition and his powerful vice-president, Cristina Fernández de Kirchner, in particular. To these people it’s a myth that Cristina is behind several major, unpopular and divisive announcements, starting with the judicial reform bill. It is easier to guarantee the Kirchner family’s impunity by simply doing what pragmatic Peronists do: dial up the judge, sit him down, tell him what is expected of him and ask what he wants in return. That is how Argentina has always worked, they say, so why move to reform the judicial system in the middle of a global pandemic and economic apocalypse? Not only did President Fernández hand the opposition a perfect excuse to rally behind the notion of “defending the Republic” and the Constitution, but he’s also thrown petrol on the burning flames of “la grieta,” at a time when he needs to guarantee governability more than anything.
Another example would be the miscommunication between Economy Minister Martín Guzmán and Central Bank President Miguel Ángel Pesce in recent weeks. They have been having a public-private debate over the draining of the Central Bank’s reserves and whether currency controls should be tightened, which is extremely dangerous when it comes to economic and monetary policy, where every word is interpreted by the market in real time. In Argentina, this almost always means a higher peso-dollar exchange rate and the potential of more inflation. Yet, as Guzmán announced his 2021 budget — which he considered a successful laying out of an economic plan including 5.5 percent GDP growth, a reduction in the fiscal deficit to 4.5 percent and inflation below 30 percent — the Central Bank unveiled further restrictions in US dollar purchases for individuals, along with a forced restructuring of dollar-denominated debt for major corporations.
How did the market respond? The black market or blue chip exchange rate surged, reserves continued to drop and Argentine stocks sunk. Among the most powerful businessmen, the sensation was one of complete shock. They were effectively locked out of foreign financing, which in turn meant even less productive investment in the country, according to them. Even worse, to avoid defaulting they were forced to figure out a way to acquire their own debt in international markets, but at distressed levels, giving them margin to make a hefty return in exchange for the headache. These people have an extremely negative view of President Alberto and his Cabinet, but their interests are also at stake here.
Taking a few steps back for a more considered view, it is evident that the president is careless when he communicates, relying on improvisation and a level of confidence in his oratory that appears exaggerated. Professor Fernández is an expert at penal law, but he doesn’t generate a sensation of empathy and trust in sectors that aren’t completely aligned with the cause when he plays the game of antagonism.
Ultimately, the opposition and those dismayed with Alberto’s attribute those decisions to Mrs. Fernández de Kirchner. Whether that is true or not is not important, its direct impact is to erode the president’s credibility with the public, undermining his capacity to direct their future expectations. The break with Buenos Aires City Mayor Horacio Rodríguez Larreta – with whom he had built a mutually beneficial working relationship during the pandemic – further deteriorates his capacity to govern, not only due to its public impact, but also when pushing for any sort of consensus further down the road.
In the president’s defence, it may be impossible to lead Argentina effectively, given the magnitude of the problems it is facing. Covid-19 was added to the mix of an economy already on the verge of collapse and a societal divide that has generated anger and even hatred on both sides.
Yet the further the Fernández administration moves from its original promise of unity and consensus, the harder it will be to move Argentina in a positive direction.