Pierpaolo Barbieri: belief

Transcript context

…Why did Argentina’s liberalization attempt under Macri fail? That’s a great question. There’s a very big ongoing debate about that. I think that there was a huge divergence between fiscal policy and monetary policy in the first two years of the Macri administration. The fiscal consolidation was not done fast enough in 2016 and 2017 and then needed to accelerate dramatically after the taper tantrum, if you want to call it, or perceived higher global rates of 2018. So Macri had to run to the IMF and then do a lot of fiscal consolidation — that hadn’t been done in ’16 and ’17 — in’18 and ’19. Ultimately, that’s why he lost the election. Generally speaking, that’s the short-term electoral answer. There’s a wider answer, which is that I think that many of the deep reforms that Argentina needed lack wide consensus. So I think there’s no question that Argentina needs to modify how the state spends money and its propensity to have larger fiscal deficits that eventually need to be monetized. Then we restart the process. There’s a great scholar locally, Pablo Gerchunoff, who’s written a very good paper that analyzes Argentine economic history since the 1950s and shows how we move very schizophrenically between two models, one with a high exchange rate, where we all want to export a lot, and then when elections approach, people want a stronger local currency so that we can import a lot and feel richer. The two models don’t have a wide acceptance on what are the reforms that are needed. I think that, in retrospect, Macri would say that he didn’t seek enough of a wider backing for the kind of reforms that he needed to enact — like Spain did in 1975, if you will, or Chile did after Pinochet — having some basic agreements with the opposition that would outlive a defeat in the elections. As you know, there are other Latin American economies that have reformed. Mexico, fiscally, used to be a mess. Now the central bank, the fiscal authority, are reasonably responsible. What is special about interest groups in Argentina that makes fiscal consolidation infeasible for governments that really mean to do the right thing?…

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