During her election campaign last autumn, Cristina Fernández de Kirchner, Argentina’s new president, promised a change of style and improved institutions. But her administration has been even more confused and high-handed than that of her predecessor and husband, Néstor Kirchner. A change in tone and substance is now imperative.
True, the economy has been growing strongly and Argentina has an unusually healthy cushion of foreign exchange. But problems are piling up. For the past three weeks farmers have been blocking roads and refusing to sell their produce in protest at increases in export taxes. Chicken is scarce and supermarket shelves are empty of beef, a political disaster for this most carnivorous of nations – as are the knock-on effects.
Workers in the booming soya industry are being laid off. Food shortages have come in the wake of energy cuts for business users, pushing up prices. The private sector has no confidence in this meddling government’s inflation statistics. Independent economists say prices rose by about 20 per cent in 2007 and may have increased by as much as 3 per cent last month.
Ms Fernández has failed to advance negotiations either with the Paris Club of bilateral creditors or with those private lenders who refused to accept the debt restructuring deal completed in 2005. Argentina has only limited access to capital markets. Multinationals are cold-shouldering Argentina in preference for Brazil or Chile.
It is high time Ms Fernández realised that the interventionist policies introduced after the 2001-02 crisis are no longer appropriate. In the short term, she should negotiate with farmers and be prepared to offer concessions. Windfall taxes are warranted when commodity prices soar but the scale of those imposed on the farm economy makes little sense, especially when the proceeds are in effect financing subsidies.
The government must start producing credible inflation figures and give electricity companies and other industries affected by price controls the chance to adjust their tariffs to reflect costs. Argentina also needs to start preparing for a potential downturn in commodity prices. Unlike its better-managed neighbour, Chile, it has made no progress in building up a stabilisation fund.
None of this will be easy. But the longer Argentina’s problems are allowed to fester the more difficult they will become to resolve. Argentina is still a long way from the meltdowns of the 1980s and early part of this decade. But it is just as far from seizing yet another golden opportunity to turn itself into the prosperous nation it should be.
Get alerts on Americas politics & policy when a new story is published