Economy

Argentina’s two Peronist-led economic recoveries

19th September 2019

By The Essential Staff

Argentina’s two Peronist-led economic recoveries

Many economic analysts are fearful of what a Peronist presidency might do to the economy (especially after the market downturn seen since its win in the August primary), with heavy-handed state intervention, a hard line towards creditors and the poor results seen in the last few years of Kirchnerism often cited as reasons.

Yet while examples of mismanagement are easy to find in the party’s history, others point at the fact that the two largest recoveries in Argentina’s modern history also took place after a Peronist administration took over at the peak of massive crises triggered under non-Peronist stewardship.

</p> <img class="wp-image-3797 aligncenter" src="https://gettheessential.com/wp-content/uploads/2019/09/Graphic-1909-300x220.jpg" alt="Argentina's yearly GDP growth throughout its recent administrations" width="619" height="454" srcset="https://gettheessential.com/wp-content/uploads/2019/09/Graphic-1909-300x220.jpg 300w, https://gettheessential.com/wp-content/uploads/2019/09/Graphic-1909-768x563.jpg 768w, https://gettheessential.com/wp-content/uploads/2019/09/Graphic-1909-1024x751.jpg 1024w, https://gettheessential.com/wp-content/uploads/2019/09/Graphic-1909-600x440.jpg 600w" sizes="(max-width: 619px) 100vw, 619px" /> <p>&nbsp;</p> <p>The first came after the 1989 hyperinflation, a period which an increasing amount of analysts are comparing to the present, even if the run away from the peso has not yet reached the scale seen in those days. Peronism was kept away from policymaking since the 1976 coup, but even though the economic decision-makers of the period were among the <a href="https://en.wikipedia.org/wiki/Jos%C3%A9_Alfredo_Mart%C3%ADnez_de_Hoz">most</a> <a href="https://en.wikipedia.org/wiki/Adolfo_Diz">trusted</a> by local and foreign elites, the country&#8217;s Central Bank and Treasury used that credit to accumulate massive amounts of debt which, when confidence over repayment broke down, led to ever-worsening crises up to the final collapse of &#8217;89.</p> <p>Peronist leader Carlos Menem inspired fear to the middle classes and elites throughout the 1989 campaign, but his approach ended up being ultra-orthodox, with privatizations, spending cuts, tax and pension reform pushed forward to plug the holes in state finances. Crucially, the Central Bank ended up doing much of the dirty work, buying US dollars instead of selling them and unilaterally swapping its short-term toxic assets for longer-term ones that proved more feasible to pay. In a mere couple of years, the economy turned around from a 7 percent yearly contraction to several 8+ percent years of growth, while inflation also shrank from four digits in 1989 and 1990 to just one by 1993.</p> <p>Eduardo Duhalde was also strongly disliked by the middle classes, and still is today, as his banking overhaul led to many losing a large part of their hard-earned savings. Yet the country also quickly bounced following his devaluation and unorthodox solution to the 2001 <a href="https://gettheessential.com/economy/2019/09/12/argentine-banking-system-at-risk-corralito-cepo-2001-2019-dollar-deposits-peso">freezing of bank withdrawals</a>. The recovery continued well into the years of his presidential candidate Néstor Kirchner until the global financial crisis of 2008.</p> <p>The quick turnaround from that worldwide crisis could also merit a mention, as Argentina was growing again by 2010 after a classic Keynesian-style stimulus package, even if the continued failure to save when the good times returned ended up proving costly to the country in the long run.</p> <p>Both Menem and Duhalde/Kirchner failed at making the recoveries sustainable. And the launch of the upwards part of the economic cycles under their leadership came at a significant social cost, with devaluations hitting savings and purchasing power massively in 1990 and 2002, a sign that the worst of the current cycle is likely still to come. But the precedent of these recoveries shows that hopelessness over Argentina&#8217;s future could be too simplistic.</p> <p>Of course, examples of the contrary can also be found. In some of her presentations, vice-presidential favorite Cristina Kirchner has mentioned Perón&#8217;s 1973 economy minister José Ber Gelbard&#8217;s &#8220;social pact&#8221; as an example to follow, even though the plan&#8217;s price and salary controls ultimately failed at stabilizing the country, which spiraled into three-digit inflation and crudely violent social conflict by 1975. The politically pragmatic, shape-shifting nature of <a href="https://gettheessential.com/politics/2019/09/19/is-fear-of-a-peronist-return-justified-argentina-peronism-peron-history-democracy-authoritarianism">Peronism</a> suggests that a broad range of outcomes is still on the cards.</p> <p>

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The Essential Staff

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