The electoral candidate of the right-wing Liberal Party (Javier Mele) won the presidency of Argentina, a candidate with resonant statements and controversial views, but won the election with a percentage of up to 56 percent, an indicator that Argentines willingly chose him.
. Melly promised shock therapy for the Argentine economy, a term that may not appeal to many voters, but they nevertheless chose him. What motivates voters to elect a president that they know may affect them negatively in the near future at least And what is the situation that Argentina has reached to take this path
To understand how desperate the Argentines have become, it is necessary to know some facts about a country that was once one of the wealthy countries, and a country that is still one of the “group of twenty” countries with the largest economies in the world. It is an agricultural country with fertile land, and it owns mineral wealth like that of its neighbor Chile with a booming economy, they share the same mountains that carry strategically valuable minerals such as copper and others. However, today Argentina is experiencing an inflation rate of up to 140 percent, and there is no country worse than Venezuela at this rate. Its currency has lost about 90 per cent of its value over the past four years. It is the highest country that has borrowed from the IMF with a figure exceeding 44 billion dollars, and its loans make up about a third of the loans granted by the fund. The poverty rate has reached such that two out of five Argentines are living below the poverty line.
The Argentine government follows two policies that some countries of the world follow, but mixing them as Argentina does is a recipe for economic calamity.
The first is that the Argentine government depends on the income produced by printing money, so it prints more money annually to finance its budgets. Excessively pursuing this policy incredibly fuels inflation, however, previous governments did not stop following it.
Second: borrowing heavily, and Argentina is one of the most countries that fail to repay its debts, and it has already defaulted more than once, and this has increased the cost of loans for it, this is if you find someone to lend to. Therefore, they usually turn to the IMF, whose many conditions for lending seem to have been useless. To make the situation worse, paying off debts in foreign currency is doubly difficult if the country is experiencing inflation.
The government is in need of high funding, in part because of the large number of government employees, who have reached one third of the country’s workforce. The government also spends generously on subsidies for goods and energy, the latter in particular cost Argentina about 12 billion dollars last year, so that the average energy bills in Argentina were less than 13 percent of those in Europe, which does not provide similar subsidies for energy prices. The dilemma is that if the government wants to raise this subsidy to save expenses, it will be directly reflected in the inflation that it is struggling to curb.
Therefore, the first thing that President-elect Milli targeted was to reduce government spending, and this was evident in his rolling clip in which he removes the cards of ministries and institutions announcing their cancellation, and perhaps the central bank is one of the most controversial of these institutions. The new president wants to abolish the central bank completely, and rely on the dollar completely in what is known as the (dollarization of the economy). Argentina had previously tried a similar solution at the end of the nineties, when it unified the peso exchange rate to one dollar, but backed down from this policy in 2002 after a series of violent protests that accompanied a recession in the country. Argentina is not the first to follow this policy, there are a number of countries such as Ecuador, which internationalized its economy in 2000, El Salvador in 2001 and Panama, which have been using the dollar since independence in 1903, in addition to other countries that use the dollar on various scales such as Zimbabwe, Lebanon and East Timor.
But using the dollar for Argentina is not easy, it means that Argentina’s monetary policy will become not in Buenos Aires, but in Washington. The two economies are completely different in many ways, and what may be good for the American economy may not be so for the Argentine one. Therefore, the exposure to external shocks may be greater if Argentina switches to the dollar, since any change in the United States will be directly reflected on it. Also, the Central Bank of Argentina currently does not have sufficient dollar reserves, so how will Argentina get its dollars to move to this currency
What Argentina has reached today is the result of a long series of wrong decisions, the country is experiencing a budget deficit for the thirteenth year in a row, and governments and presidents are succeeding, and with many of their promises and plans, but their periods usually end with more budget deficits, higher loans than the previous one, and inflation rates that are said to be above average. Today, with the president-elect’s proposal to switch to the dollar, Argentina may be entering into a political gamble that is difficult to get out of, but it seems that the Argentines are fed up with their economic conditions that have been getting worse for decades, so they willingly decided to elect a president who wants to bring radical change, not caring what this change might lead to, as if their mouthpiece says, the situation will not be worse than it is.
