In 2018, the International Monetary Fund (IMF) approved the largest bailout package in its 73-year history. The $57 billion loan to Argentina was supposed to backstop the country’s faltering economy and end its pattern of cyclical crises. By way of comparison, the Argentine bailout was roughly five times what the IMF approved in 2016 to stave off economic collapse in Egypt.
One year later, it’s clear that the IMF has lost its largest-ever bet. Argentina’s annual inflation rate is the highest in the region at 54 percent, the credit agency Fitch has downgraded the country’s credit rating from B to CCC, and the crisis shows no signs of improving.
With general elections slated for October 27, both Argentine President Mauricio Macri and his center-right government are in trouble. A businessman and former head of the Boca Juniors football club, Macri won the presidency in 2015 on a platform that emphasized free market reforms. He was a welcome change after eight years under the Peronist President Cristina Fernández de Kirchner, whose free-spending policies and protectionism left the country isolated and indebted.
But Macri’s economic agenda quickly ran into trouble, largely as a result of the gradualism of his reforms, which exhausted investors’ patience, and his reluctance to cut welfare subsidies, which would have pulled the South American state out of the red. The IMF loan should have been a lifeline for Macri, but it came at the worst possible time: rising interest rates in the United States and elsewhere made investments in emerging markets comparatively less attractive and caused most of the bailout funds to return to developed economies.
Ironically, Macri’s inability to stabilize the economy has enabled the rise of another Peronist presidential candidate, Alberto Fernández, a relative upstart whose running mate is none other than Fernández de Kirchner. Although she faces corruption charges from her time in office, Fernández de Kirchner remains popular, especially among poor Argentines who benefited from her generous social welfare policies. Because many observers believe that she would be the power behind the throne in a Fernández-Fernández de Kirchner administration, the announcement in May of her candidacy for vice president destabilized financial markets, paradoxically compounding Macri’s economic difficulties. Fernández de Kirchner’s return to the commanding heights of South America’s second-largest economy now looks likely—a fact that would have been unthinkable four years back.