Why an Argentine leader seeks to break the pull of populism

Young Andrés Watle has only been around for about three decades – and yet that’s long enough to have known the economic ups and downs of Argentina’s legendary populist governance.

“It seems great when you’re living the good times of el populismo, with services practically given away and a feeling that we’re a wealthy country,” says Mr. Watle, a Buenos Aires travel agent.

“But inevitably comes the fall to the not-so-good times, and that feels less good, and it hurts a lot of people,” he says. “It’s a pattern we need to break.”

Breaking the pattern of the boom-and-bust economic cycles that have defined Argentina’s economy for decades was a central objective of Argentine President Mauricio Macri when he took office in 2015.

Mr. Macri’s winning campaign pledge: to make Argentina a “normal” country, permanently off the populist roller-coaster.

In Argentina, populismo is historically associated with the left: leaders who are charismatic and pledge to serve “the people” over national elites, and rely on widespread public spending and subsidies. They’ve played a key part in perpetuating a boomerang economy. A populist will typically spend widely on social programming, and when the coffers are empty and a new, typically opposition leader is elected, the nation takes on austerity measures.

Ricardo Mazalan/AP

Breaking the pattern of the boom-and-bust economic cycles that have defined Argentina’s economy for decades was a central objective of Argentine President Mauricio Macri when he took office in 2015.

Macri inherited an economy that was careening toward default. His predecessor, Cristina Fernández de Kirchner, used the proceeds of the recent commodities boom to heavily subsidize gasoline and provide electricity that was practically free.

For many economists, especially free-market liberals, Macri’s task was nothing short of halting Argentina’s slide under the Kirchners to something approaching the economic collapse of Venezuela.

But three years later, Macri is finding that weaning “the people” off the milk of populism is not easy – perhaps all the more so in a country where the populist tradition extends back to the post-WWII boom years of Juan and Eva Perón.

To stave off default, Macri this year negotiated a $57 billion loan from the International Monetary Fund. But the loan came with strings attached: cuts in spending, slashed subsidies, cutbacks in the pension programs that had been expanded by Kirchner and her predecessor in office, her late husband Néstor Kirchner.

As electricity bills and gas prices have soared, and unemployment rates and small-business bankruptcies have risen, Macri’s popularity and prospects for re-election next fall have plummeted.

“This is a country that after so many years of populism has become used to the government handing out more all the time,” says Juan Luís Bour, chief economist at FIEL, the Foundation for Latin American Economic Studies, in Bueno Aires. “Argentines basically understood this system was not sustainable – which is one reason Macri won,” he says. “But to get to ‘normal’ the government has had to break some eggs, and that kind of change is going to hurt a lot of people.”

As Macri’s fortunes have crashed, prospects for the return to power of Kirchner – and for yet another swing to the populist left – have risen.

“The popular thinking out there is, ‘Macri tried to move us away from populism – and look where it got us, to even higher debt, higher and rising unemployment, and more difficult living conditions,’ ” says Matías Carugati, chief economist at Management & Fit, a Buenos Aires consulting and public opinion firm. “People tend to remember the good times of populism, but no so much the bad.”

‘We can't eliminate it in four years’

Polls show Macri retaining support of about a quarter of the electorate. They show Kirchner with similar levels of support. That leaves a huge slice of the population dissatisfied with both options – and seemingly open to some third candidate, yet to emerge.

Noting that many economists expect the government’s tough adjustment measures to begin yielding positive results next year, Mr. Carugati says an economic recovery that is perceptible to the public might not come soon enough to boost Macri’s electoral fortunes.

Global conditions haven’t helped, Carugati says. Macri banked on a recovery through opening up the country to the world – just as the global trend moved to heightened protectionism and less enthusiasm for trade accords.

Pointing to a shantytown that has sprung up within eyesight of the sleek high-rise where he works, Carugati says South American migrants – most recently from Venezuela – have streamed in, exacerbating conditions for poor Argentines.

But perhaps most important is that one presidential term may not be enough to change a national mindset, he says.

“If it’s a cultural thing that we Argentines are fond of populism, maybe the reality is that we can’t eliminate it in four years.”

Carugati says other Latin American countries, including next-door neighbors Uruguay, Chile, and Peru, have moved away from populist pasts, “so we know it’s possible.”

Yet, not all populist models in the region are alike. In Chile, for example, populism was carried out by a brutal military dictatorship. No one emulates that today, making it easier to banish the approach.

‘A populist 'habit’?

It’s not difficult to find unhappiness with Macri’s project on the streets. Alfonso Andrade, a produce vendor in the city’s San Telmo neighborhood, says electricity price hikes alone – he claims to have been hit by a rise of 4,000 percent in his bills – could do him in. “At this rate I could lose my business,” he says.

But that’s just in the center of the capital, which by most measures is far better off than the rest of the country.

“Where we are right now, this is New York, you wouldn’t know we’re in a stagnant economy,” says Martín Ortiz, referring to the upscale section of Buenos Aires where he teaches English for a living. “But come out to where I live, and it starts to be more like Detroit,” he says, referring to where he lives about 20 miles south of the capital.

Mr. Ortiz says Macri hasn’t been radical enough in forcing change in Argentina.

“He started out in the right direction,” he says. But, he’s “pulling back from what he promised in the interest of getting re-elected.”

One reason for Macri’s retreat is that in order to change the country, he has had to challenge how Argentines see themselves, some social observers say – and that has not always gone down well.

Take the example of beef. For much of the 20^th century, Argentina was one of the world’s top beef exporters. But the emphasis on exports made it increasingly expensive at home.

Mr. Bour of FIEL says the Kirchners saw imposing high taxes on beef exports as a way to kill two birds with one stone – fill government coffers to help pay for subsidies, and make beef a staple of the Argentine dinner plate again. Argentina slumped from its top-tier ranking among world meat exporters to 11th or 12th place, Bour says.

Last month Macri announced Argentina’s re-entry into the US meat market during President Trump’s visit for the Group of 20 industrialized countries summit. But higher domestic prices have once again led to public grumbling.

Bour says that older Argentines are among the biggest supporters of a return to populism – in part because Kirchner made a government pension the right of everyone, whether they contributed to the system or not.

But perhaps more surprising is the strong youth support for Kirchner in the polls.

“The younger people grew up with the Kirchners, and many of them associate those years with good times,” says Carugati. Mrs. Kirchner’s time in office is also associated with an era of idealistic themes like human rights and regional solidarity.

Compared to that, the idea “of making Argentina a ‘normal country’ isn’t as attractive,” he says.

“But I’m a young person too,” says Watle, the travel agent. “I think there are a lot of others like me who believe that as difficult as it might be, we have to break the populist habit.”