Saturday
January 21, 2017
Friday, December 30, 2016

... and in comes another

There seems to be a rare unanimity among the pundits as to the direction of the electoral year beginning today, both politically and economically, even if there are some important differences of degree. Concerning the midterm elections themselves, pretty much everybody agrees that President Mauricio Macri’s Let’s Change coalition will have more rather than less representatives in the future Congress but absolutely nobody sees him as anywhere near an overall majority — the decisive weight often attributed to these elections contrasts sharply with the fact that no detailed scenario shows them as changing anything. The economic forecasts are considerably more varied — while almost none see the negative growth of 2016 being repeated, the percentages range from an absolutely minimal upturn to a robust five percent. The assessments of the quality of this growth differ as much as over the quantitative — while Macri’s more enthusiastic supporters might view the more positive data as the emergence of a modern Argentina from a difficult year struggling with the populist inheritance, others would see them as a temporary electoral stimulation recouping some of the heavy 2016 losses rather than any serious change to snap out of the stagflation of the last five years.

Yet despite this unanimity, it is possible to envisage both a far more optimistic and a far more pessimistic scenario for Macri — both of them perhaps equally likely. The optimistic starts with such factors as the tax whitewash, the harvest and public works electioneering bringing enough capital inflow to reactivate sufficient idle capacity to reach the rosier growth forecasts of four or five percent. Not only does the resultant feelgood factor help Macri win big but much bigger than anybody is expecting — especially inland (the rising strength of Macri’s PRO in the traditionally Peronist northern provinces is underestimated by most pollsters nor should it be forgotten that Buenos Aires province, generally regarded as the key to all elections, has only 70 of the 257 deputies). This unexpected triumph then leads to the implosion of the opposition and the more venal legislators clustering around the government — everybody loves a winner. Yet the opposite scenario is also closer than many people think. The recession and real wage losses of 2016, the poor quality of government in proportion to the enormous size of the fiscal deficit have created cumulative frustrations in millions of people which could boil over if they detect only minimal improvements in the second year of Macri. The consequences would then be more than an electoral defeat — multiple seeds for a full-scale crisis are already there.

Wishing everybody a Happy New Year is always said more in hope than expectation but at least it would not take very much for 2017 to be better than 2016.

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