By Deepak Bhojwani
On 27 October Argentina's voters showed they were the ones who matter. Over 80 per cent turned up to vote, handing the first-round victory to the opposition candidate, Alberto Fernandez of the (Peronist) Justicialist Party: 48 per cent against about 40 per cent for incumbent President Mauricio Macri. Fernandez will be sworn in on 10 December.
The outcome was expected after the economy tanked earlier this year under a heavy debt burden and massive currency devaluation. Macri's efforts to steady the economy since he became President in December 2015 seemed to work at first, but structural problems and a global slowdown put paid to his efforts. An unprecedented IMF loan commitment of USD 57 billion could not prevent the collapse.
Voters are predictably refocused on the allure of Peronism, a loose ideology named after the legendary military origin President Juan Domingo Peron (1947-55 and 1973-4), founder of the Justicialist Party, who relied upon the support of trade unions and populist policies that ignored the structural deficiencies of the economy and offered palliatives to a restless working class. Argentina has defaulted on its foreign debt nine times since 1838. GDP has contracted for 22 of the past 58 years. Peronists held power for 24 of the 36 years since democracy returned in 1983. If Dutch Disease symbolizes the detrimental effects of a resource-rich economy, a so-called Argentine Disease reveals an economy excessively reliant on commodities, mainly agricultural, subject to international economic vicissitudes. Argentina is a leading exporter of soya and edible oil as well as meat, principally beef. It has begun to exploit its considerable hydrocarbon potential, mainly shale gas deposits. The economy is not very diversified and exports are inelastic, no matter how steep the devaluation of the peso. Meanwhile, the national debt has crossed 90 per cent of GDP.
More important than the change of party at the helm is the return of Ms Cristina Fernandez de Kirschner, President between 2007 and 2015 and the widow of President Nestor Kirschner (2003-7). Cristina is a highly autocratic and divisive figure who promoted the populist policies that characterized Argentina's emergence from its worst economic crisis early this century. Sensing that her politics may drive away centrist voters, she ran as Vice-Presidential candidate with her namesake, who had served in the administration of her husband and briefly under her. The question on minds of analysts-and Argentineans-is the role she will play. She has been indicted by the Macri administration for corruption and bribery and covering up the involvement of Iran in 1994 bombing of a Jewish institution in Buenos Aires.
While circumstances today cannot be blamed entirely on Macri, with inflation at 56 per cent and poverty at 35 per cent, his formula for pulling Argentina through has obviously failed. Though Alberto Fernandez is a Peronist, he is considered more moderate – he left Cristina's administration early. He may steer a path more acceptable to the international community and financial institutions, whose support he will need to stem the bleeding. He was widely accredited with the economic turnaround earlier this century under Nestor Kirschner.
Last February, during President Macri's visit to India, ten documents were signed – including cooperation in defence, space and nuclear technology – and a Special Declaration on Terrorism "particularly emphasizing the scourge of cross border terrorism". India's public sector mining companies, grouped under Khanij Videsh India Limited (KABIL) maybe the spearhead for lithium mining in Argentina. ONGC Videsh Ltd (OVL) will work with Argentina’s YPF to analyse opportunities in the upstream sector in Argentina, India and other countries. OVL has started exploration in nearly 50 blocks, while Oil India is working on 3 shale blocks in Argentina. Under a 2009 Agreement for Cooperation in the Peaceful Uses of Nuclear Energy, there is an ongoing Fission Molly Project and a molybdenum plant to be built in Mumbai by the Argentine company INVAP by 2020.
Argentina is an important member of the South American economic bloc MERCOSUR, along with Brazil. India has a partial free trade agreement with this bloc which it is trying to expand. A protectionist Argentina had resisted these attempts, though the Macri administration had sent some positive signals. Alberto Fernandez has called for the release of imprisoned President Lula in Brazil, a move that could lead to a major political confrontation with Brazilian President Jair Bolsonaro and roll back the progress made so far.
Argentina bought USD562 million worth from India in 2018-19 and sold USD 1.95 billion, of which 1.72 billion consisted of edible oil. This year India should buy more if the informal embargo on the purchase of Malaysian palm oil continues. Indian pharmaceutical has managed to get a foothold in that market. India needs to consolidate relations with this important Latin American country, no matter who is in charge.
(The author is a retired diplomat who served in Latin America. Views expressed are personal.)