World Economy

Argentina Gets ‘Macri-Economic’ Shock

Argentina Gets ‘Macri-Economic’ ShockArgentina Gets ‘Macri-Economic’ Shock

In just a week as Argentina’s president, conservative Mauricio Macri has passed drastic economic reforms, drawing praise from foreign investors but angry protests from citizens afraid for their salaries.

The so-called “Macri-economic” shock treatment in Latin America’s third-biggest economy saw the peso currency plunge by a third after he scrapped his leftist predecessor’s dollar exchange controls, AFP reported.

That was an even sharper fall than during Argentina’s financial crisis in 2002, when it had to be bailed out by the International Monetary Fund. Macri says a sharp adjustment is needed to make the country competitive, though economists as well as his political opponents warn it will hurt Argentines’ purchasing power in the medium-term.

But cheaper pesos mean ordinary Argentines will be able to buy less. Labor unions demanded the government give vouchers for workers at Christmas to compensate for having their spending power slashed by the currency reforms and by soaring inflation.

And small domestic producers have warned that freeing up exports and imports will drive them out of business. The currency reform was the most dramatic of Macri’s measures since taking office on Dec. 10. He has also axed a controversial tax on agricultural exports including grain and meat and lowered the tax on soybeans, another major export.

The freeing up of Argentine farmers’ stockpiles raised fears on world markets that they would be flooded with cheap Argentine produce. European grain prices fell after Macri’s announcement.

Argentina is the world’s third-biggest soybean producer but the protectionist policies of Macri’s predecessor Cristina Kirchner stifled exports.

Exporters welcomed the agriculture reform. Farmers called them a historic move that could lead them to sow 30% more wheat and corn next year.