Walking the Tightrope: President Macri’s G20 Balancing Act

15th November 2018

By Scott Squires

Walking the Tightrope: President Macri’s G20 Balancing Act

When Argentina was awarded the G20 presidency one year ago, it looked as though President Mauricio Macri would ease his country back into the global economic fold like a bombillo fitting snugly into its perfectly matched mate gourd. After more than a dozen years of closed-door economic policies under Kirchnerism, Argentina seemed poised to lead Latin America back into the market-friendly global order by hosting the world’s most high-profile international summit.

But then 2018 happened.

In the past year, Argentina’s economy has been thwacked repeatedly. First by its worst drought in decades; which baked crucial soy and wheat exports during an arid Southern Hemisphere summer. Then, a hike in the U.S. Federal Reserve interest rate and turbulence in other emerging markets walloped Argentina’s currency. As the peso halved in value, international investors questioned Argentina’s ability to service its debts in 2019. To keep the country afloat, Macri was forced to turn to the International Monetary Fund for a $56.3 billion bailout – the largest financing deal in the Fund’s history.

Ahead of the G20, Macri has found himself in an impossibly difficult position. Between trudging ahead with his deeply unpopular IMF-backed austerity program and keeping his re-election dreams alive, Macri will also be playing middle man in the US-China trade war and managing shifts in international leadership that have turned the global order on its head.

It’s the political equivalent of juggling plates while walking a tightrope above a pit full of alligators. And come November 30, Macri’s performance will be the main event to watch at the G20 circus.

Trouble on the outside, trouble on the inside

In recent years, G20 summits have almost always been accompanied by anti-globalization protests, and there is little reason to believe this year will be any different. Adding fuel to the fire will be the leftist political groups and social organizations that have repeatedly flooded the streets in opposition to the IMF and Macri’s fiscal adjustment program, which has raised costs on public utilities, squeezing already vulnerable low-income Argentines across the country.

If last month’s protests against the government’s austere 2019 budget bill are any indication of things to come, security forces have shown they are willing to counter rock-hurling protestors with tear gas, water cannons and rubber bullets.

While the British foreign ministry last week issued a travel warning to its citizens over a possible terrorist attack during the summit, Argentine Security Minister Patricia Bullrich dismissed concerns over any possibility of such an event.

To be sure, the security ministry is taking steps to mitigate any risk of an incident, deploying 20,000 security forces and placing the area around the summit — Buenos Aires’ Centro Costa Salguero — on lockdown. The government even declared Friday, November 30, a national holiday to keep people at home.

But the real drama at the G20 may play out behind closed doors. At nearly every G20 minister’s meeting this year, the U.S.-China trade dispute has taken center stage. At the Leaders’ Summit, all eyes will be on how U.S. President Donald Trump and Chinese Prime Minister Xi Jin Ping handle the dispute.

Trump has extended a diplomatic hand, reportedly offering Xi a “meeting plus dinner” — a rendezvous Xi has “tentatively accepted.” While those talks are a chance for Trump and Xi to scale back the conflict, sources within the Trump administration told Bloomberg that if talks were to go poorly, the U.S. would be ready to levy a new round of tariffs on all remaining Chinese imports by early December.

At this year’s ministerial meetings, however, China has repeatedly called for a reform of the World Trade Organization — an organization Trump has threatened to leave — on the grounds that the body’s dispute resolution protocols are outdated in today’s globalized economy. Diplomats at previous meetings have been tight-lipped about exactly what a WTO reform would include, but they have recognized an “urgent need” to restructure the 20-year-old trade club, and details may be announced at the summit.

G20 fans can also expect the USMCA, or NAFTA 2.0, to be formally signed at the G20, despite strained US-Canadian relations over the deal and uncertainties over how Mexico’s incoming leadership will handle Trump’s tantrums against Central American migrants moving through Mexico.

Finally, a free trade deal between the European Union and MERCOSUR could also be finalized at the summit, as representatives at September’s Trade and Investment meeting expressed high hopes for an agreement by the end of the year. But even if the EU and MERCOSUR were to ink the long-awaited free trade deal this month, Brazil’s incoming Economic Minister, Paulo Guedes, has said MERCOSUR is “not a priority” – calling into question the efficacy of a free trade deal without MERCOSUR’s largest economy.

Speaking of Brazil…

Another elephant in the room at the G20 will be the changes in top leadership roles around the world. As Latin America prepares for the foul-mouthed Jair Bolsonaro to take Brazil’s helm January 1, other shifts may limit some states’ negotiating power at the summit.

For example, German Chancellor Angela Merkel’s resignation next year will vacate Germany’s leadership role. With Britain still waffling on Brexit, Merkel’s resignation will likely tilt EU leadership toward France’s Macron, who may be the loudest European voice still plugging the free trade agenda at future G20 conferences.

In center ring: Mauricio Macri

Despite the precarious political situation facing Macri’s government at home, Argentina has been able to leverage its role as a middleman between feuding powers in more ways than one. In the U.S.-China trade war, Argentina has used its soy crushing capability to process U.S. soybeans, sending value-added soymeal across the Pacific to fill Chinese demand.

This isn’t the only way Argentina has played the U.S. and China to its advantage, however. While the U.S. has thrown its financial support behind the IMF deal, Central Bank President Guido Sandleris announced last week Argentina would nearly double its currency swap agreement with China. An expanded currency swap will boost central bank reserves, shoring up investor confidence while also opening the door to further Chinese investment in domestic infrastructure projects.

As middleman, Macri will meet with Trump on November 29, ahead of a meeting with China’s Xi the following day. This puts him in the unique position of playing interlocutor between the feuding giants.

If Argentina can successfully juggle competing international interests while hosting a conference without a serious security incident, Macri’s Cambiemos government stands to earn serious bragging rights, not just in the global forum, but also for Macri’s re-election campaign next year. This will depend on how well they can keep all the balls in the air.

Scott Squires

Scott Squires a journalist for Reuters in Buenos Aires. He holds a dual-Master's Degree in Global Policy Studies and Journalism from the University of Texas at Austin.