NEW ARGENTINE President Mauricio Macri faced a daunting legacy when he took office Dec. 10: an economy paralyzed by exchange controls, deprived of foreign investment and stricken with inflation of more than 25 percent; institutions compromised by political interference, including a weakened judiciary and press; and a foreign policy that had left the country closer to Iran and Venezuela than the United States and other major democracies. His response has been to move with astonishing speed to change the course of a South American giant — with mostly admirable results.
Mr. Macri began by lifting the exchange controls that had strangled Argentine importers and fed a black market where the dollar traded 35 percent higher than the official rate. The currency quickly plunged, then stabilized — thanks to the fact that the new government had also reduced or abolished taxes on agricultural exporters. Farmers, the foundation of Argentina’s economy, quickly began shipping grains they had been hoarding and sending fresh dollars to the central bank.
The government also renewed negotiations with holdout creditors who had prompted an Argentine default in 2014; began revamping the official statistics agency, which had been falsifying inflation reports; and promised long-overdue increases in utility rates needed to end chronic power shortages.
The new president, meanwhile, lost no time in dropping the shady alliances forged by former President Cristina Fernández de Kirchner. At a regional summit meeting, he called for the release of political prisoners by Venezuela’s Chavista government, which had dispatched envoys with suitcases full of cash to the Kirchner regime. He also dropped a controversial agreement with Iran that appeared intended to quash Argentina’s indictment of several senior Iranian officials in the 1994 bombing of a Buenos Aires Jewish center. A prosecutor is seeking to revive another criminal complaint brought by colleague Alberto Nisman, who was found shot to death last Jan. 18, the night before he intended to charge Ms. Kirchner with striking an illicit bargain with Tehran.
Mr. Macri’s blitz is risky in several respects. The currency float could trigger even higher inflation, especially if it is not backed up with new inflows of capital and reductions in out-of-control government spending. Most economists expect the tough medicine will produce a recession in 2016. It has already triggered street protests by Argentina’s strong unions and Ms. Kirchner’s Peronist party. The militant opposition and lack of a congressional majority could make it difficult for Mr. Macri to enact deeper reforms.
In some cases, too, the new president may have overreached. He tried to use a congressional recess to appoint two new Supreme Court justices by decree, forgoing the usual confirmation process, before postponing the move. In the name of ending Ms. Kirchner’s “war against journalism,” he used police to force the removal of officials who had been hounding a media conglomerate. While the intent to stop the persecution of media critical of Ms. Kirchner was praiseworthy, Mr. Macri is being accused of trampling established laws.
Latin Americans will be watching closely in the coming months to see if Mr. Macri’s attempt to turn Argentina around is sustainable — and if the rule of law is strengthened. If it is, the region’s liberal and democratic forces will get a major boost.