- Legislative elections in October will determine the future of Argentina’s economic reforms.
- A stronger ruling coalition in Congress will allow President Mauricio Macri to move forward with deeper structural reforms.
- Fears of a populist revival will emerge if the ruling coalition is weakened.
Great expectations accompanied Argentine President Mauricio Macri into office in December 2015. It was hoped that he would liberalize the country’s economic and trade policies, and to his merit, he quickly met some of those expectations with action. During Macri’s first months in power, his administration reached a deal with bondholders that retained defaulted Argentine debt, lifted restrictions on the purchase of foreign currency, removed bureaucratic red tape on some foreign trade, and reduced energy and public transportation subsidies as a way to bring down Argentina’s fiscal deficit. But Macri’s initial successes may prove illusory moving forward. With the exception of the agreement with bondholders, Macri was able to implement most of his reforms rather quickly because they did not require congressional approval.
There lies the challenge as Macri embarks on the second part of his agenda to liberalize Argentina’s economy before his presidential term ends in 2019. Macri will need congressional approval to enact deeper — and in some cases very unpopular — structural economic reforms that affect pensions, labor laws, taxes and foreign trade. How well his ruling coalition, Cambiemos, does in legislative elections on Oct. 22 will be key for the fate of Macri’s economic reform plans.
The Ruling Coalition in Congress
Primaries for October’s congressional elections are Aug. 13. One of the main challenges confronting Macri as his government undertakes structural reforms that need congressional approval is the fact that Cambiemos controls only 87 of 257 seats in the Chamber of Deputies and 17 of 72 seats in the Senate. One-third of the Senate and 127 of 257 seats in the lower house are up for re-election, meaning Cambiemos won’t win a majority of seats in either house of Congress even if it does well in October. Nonetheless, a strong performance by Cambiemos will signal how deeply Macri’s push to liberalize the Argentine economy still resonates with voters.
If it increases its congressional numbers, the government believes it then will be easier for it to reach out to more moderate opposition political parties, such as the Renewal Front led by congressman Sergio Massa, to build enough support to pass some economic reforms. Although Massa has criticized the government’s economic policies of late, especially its proposal to increase the minimum retirement age, he has issued statements in favor of discussing certain economic amendments with the government, such as tax reform.
The government already has opponents that are unlikely to negotiate any structural reform it might send Congress after October, including members of the recently created Citizens United Front, led by former President Cristina Fernandez de Kirchner. There are also factions of the Peronist Party and members of Fernandez’s former party, Front for Victory, that will oppose Macri’s plans. These parties combined hold almost 40 percent of the seats in the lower house of Congress and almost 60 percent of the seats in the Senate. In the lower house, more than 40 percent of the members of the main opposition parties as well as members of the ruling coalition are up for re-election, but in the Senate, only 22 percent of the ruling coalition…