President of Argentina, Mauricio Macri, has not taken long to see the writing on the wall: he has officially asked for help from the IMF. On Monday, the peso/$ devalued 5%, which is a savage drop. Domestic and foreign equity have completely lost confidence in the economic governance and have fled terrified, with huge losses, given the peso’s accumulated depreciation.
Emmanuel Gomez Farias Mata and Ivan Farias Pelcastre | Donald Trump’s populist approach led political commentators on both sides of the Atlantic to argue that the US had abandoned its position at the forefront of global politics. Those same commentators quickly turned their heads to Germany as the country that can — and seems willing to — lead the industrialized, liberal democracies into the 21st century, and pronounced German Chancellor Angela Merkel as the new “leader of the free world.”
The precipitous drop in oil prices in particular has forced rentier states, which were able to count on massive energy profits to fund generous state largesse up until a few years ago, to diversify their economic relationships with Europe and the rest of the world. These profits allowed states like Saudi Arabia and Iran to get by with incredibly inefficient economies, which officials in both countries are now actively restructuring in order to stimulate real growth and attract international business.
The world, mostly Latin America governments lined up with social markets economies and the US, like Mexico, Peru, Colombia or Chile, have welcomed the victories of anti populist forces in Argentina and Venezuela. In a run-off election on November 22, voters in Argentina elected centrist Mauricio Macri to succeed peronist Cristina Fernandez de Kirchner, with 51.4% of the vote. In Venezuela, the opposition won a two-thirds majority of 112 seats in the 167-seat National Assembly, 67% of the seats, despite winning only 56% of the popular vote.
The election of Mauricio Macri, the candidate for the Cambiemos (Let’s Change) coalition, as president has been welcomed as a potential turning point in Argentina’s financial, political and foreign policy outlooks. The country’s economic performance has been overshadowed by high inflation and isolation from global capital markets, and planned reforms will likely boost its exports and could accelerate investment in areas such as infrastructure and the nascent shale gas sector.