Argentine-US Relations: Cooperation and Uncertainty

By Martina Farías Bouvier

While the newly elected Argentine President Mauricio Macri gets closer to his first hundred days in office, President Obama’s time at the White House is coming to an end. But both governments are making sure that the little time they share is worthwhile: in less than two months, diplomatic relations between Argentina and the U.S. have been stronger and more promising than that of the past 12 years.

Argentina

The Kirchners’ Legacy: Populism and an Anti-Imperialist Rhetoric

Nestor Kirchner (2003-2007) and Cristina F. de Kirchner (2007-2011, 2011-2015) governed Argentina through short-term policies and a magical populist rhetoric that would squash reality more often that not. Increased government intervention, complex regulations, currency manipulation, nationalization of foreign property, increased tax burden (that did not necessarily translate into better public services), added to a self-ostracism from the international financial and trade community were the norm.

As many other Latin American populist leaders, they both found support among the popular classes. While pushing for broad redistributive programs and increased employment in the public sector, there was a complete mishandling of state-owned-enterprises where nationalist sentiment proved to be more appealing than efficient management. The private sector was doomed: foreign businesses and local entrepreneurship were discouraged through trade barriers, complex regulations and what ended up being one of the highest corporate taxes (35%) in the world.

Populism needs fiscal support. But increased government spending, mostly sustained by soy export revenues and a mounting tax burden, was no longer sustainable as Argentina saw how the 2000s commodity boom came to an end and the world entered one of its worst recessions –deteriorating its already complicated macroeconomic and business environment.

Mauricio Macri’s Policies and Promises

Uncertainty has ruled Argentina’s political and economic history, but newly elected President Mauricio Macri seeks to regain the nation’s and the world’s trust. Having dropped in various international rankings, with a hampered credibility and a gradual shutdown from the international community during the past decade, the country’s prosperity depends on more transparent, predictable and sustainable policies.

During his first months in office, Macri has already reversed many of the unresolved issues inherited from C. F. de Kirchner’s government. He lifted capital and currency controls and brought export taxes and import restrictions (some of which were ruled by the WTO as “unlawful”) to an end. He publicly denounced human rights’ violations in Venezuela and has taken the first steps to settle negotiations with holdout creditors. True to his presidential platform, he seems to be pushing for stronger political and social consensus, economic development based on more coherent macroeconomic policies, and a stronger and more transparent institutional framework.

Obama’s Last Shot in Latin America

In the upcoming month Obama will travel to Cuba (March 20th to 22nd) and Argentina (arriving on March 23rd), setting the pace for a new chapter of continental relationships. It’s been 88 years since a U.S. President visited Cuba and, as for Argentina, it’s the only Latin American and G20 member country that Obama hasn’t visited during his time in office. So, why now?

The long-forgotten region might be the next one to watch, as several countries seem to be putting an end to Anti-American leftist governments such as those of Chavez, Kirchner and Morales. It’s not only about Argentina’s way back to normal –Venezuela and Bolivia have recently evidenced political changes that will hopefully lead to more open markets and friendlier governments.

As Argentina sets itself to live up to its potential, Obama is not the only world leader who has noticed this. At the World Economic Forum held in Davos last month, Macri met with several world leaders. Prime Ministers Benjamin Netanyahu (Israel) and David Cameron (U.K.) and Mexican President Enrique Peña Nieto showed great interest in the opportunities that the new government will bring. The same goes for French President F. Hollande and Italian Prime Minister Renzi, who flew down to Argentina during the past two weeks. Being the third largest country in the region, and with Brazil’s uncertain economic and political future, Argentina seems to be Latin America’s cornerstone for the next years to come.

Is There Enough Common Ground For Long-Term Cooperation?

Obama’s and Macri’s long-term, transnational goals seem to match: cooperation in trade and investment, mutual concern for climate change and drug trade, renewable energies’ promotion and human rights issues.

Diplomatic relations are being restored. U.S. Dept. of State Councelor, K. Kenney, and Assistant Secretary of State for Economic and Business Affairs, C. Rivkin, have visited Argentina last month and met with political leaders and American and Argentine businessmen to discuss future trade opportunities between the two countries. President Obama welcomed the newly appointed Argentine Ambassador to the U.S., Martin Lousteau, into the Oval Office and discussed further cooperation in culture and education, and at a government and firm level. And Macri is now awaiting the return –after more than ten years- of the U.S. President into Argentine territory.

From an investment and trade perspective, Argentina is open for business. Tariffs are being lowered, regulatory barriers are being removed and long-term macroeconomic policies are being put in place. There’s no doubt that during the next years, the country will become more business-friendly, rolling back many of the policies implemented during the Kirchners’ administration and increasing opportunities for both domestic and foreign companies.

But despite the ongoing optimism and Macri’s willingness to commence a new chapter of stronger and better relations, great uncertainty lies ahead. Hard economic, political and social adjustments are urgently needed in the domestic front as the country faces anemic growth, there’s a continued devaluation of the peso and fiscal deficit, foreign reserves are scarce and the political party system is completely fragmented. And, however enthusiastic Obama is about this new chapter of engagement, in little over six months there will be a new President office with his/her own agenda for the region.

Martina Farías Bouvier is a member of the project support team at the Global Research Institute of International Trade. She has a Bachelor´s degree in International Relations and is about to graduate from UCLA’s International Trade and Commerce Certificate. Martina is passionate about economic development and democratic governance issues in Latin American countries. She hopes to help develop the region’s potential, especially through public-private partnerships.

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Creative Commons License This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

Photo courtesy of domdeen at freedigitalphotos.net

About Dr. Sarita D. Jackson

is the President and CEO of the Global Research Institute of International Trade, a think-tank/consulting firm that examines trade policies and their impact on domestic businesses. Prior to heading GRIIT, Dr. Jackson was a tenured associate professor of political science in North Carolina and worked as a trade policy consultant for an Arlington-based consulting firm. She has participated in trade policy projects and conducted research on free trade negotiations in Botswana, Antigua and Barbuda, Dominica, Dominican Republic, Mexico and Panama. Dr. Jackson has also traveled to Chile and Argentina to study their political systems and economic integration policies.
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