Argentina's Economy under President Millet: A Mix of Success and Challenges

CGTN Europe

CGTN Europe speaks to Jorge Piedrahita, Chief Executive Officer of the Gear Capital Partners.

Transcript

00:00A year after being sworn in as Argentina's president,

00:03Javier Mele has made his mark with his political conservatism and support of free markets.

00:08Stepping into office during a crippling economic crisis,

00:11the economist pledged shock therapy, warning things would get worse before they got better.

00:17So how has Latin America's third largest economy coped with his medicine?

00:22Well, Mele's austerity measures included slashing energy and transport subsidies,

00:27laying off tens of thousands of government workers, and freezing wages and pensions.

00:32Monthly inflation has tumbled from more than 25% when he took office,

00:36to close to 3%, its lowest in three years.

00:39And Mele's polling numbers, which have remained high, are still rising.

00:43Some analysts say that Mele has managed to pull off a near miraculous feat.

00:47Argentina's long mismanaged economy is starting to boom,

00:51with its Merval stock index soaring almost 140% this year.

00:56And the peso currency has strengthened in some markets.

00:59But brutal austerity has sunk the country into a deeper recession.

01:04Consumer spending has shrunk by 20%.

01:07There's been a rise in unemployment, while poverty rates have reached a 20-year high.

01:12Well, let's talk now to Jorge Pia de Rejita,

01:14who is chief executive officer for Gear Capital Partners, a consulting and advisory firm.

01:19Welcome to the program, Jorge. Good to see you.

01:21So, Javier Mele set out as president promising to do things differently,

01:26and he has. What has worked?

01:31Thank you for the invitation.

01:33Well, very much, I think that what he did was a 180-degree change.

01:38And what has worked has been bringing inflation down, improving security,

01:45having a fiscal surplus.

01:47Those things that Argentines were craving for

01:50was kind of putting an end or putting a solution to those big problems.

01:56And it has been a sort of a miracle, as you hinted,

01:58in the sense that very few expected he would be so successful and so quickly.

02:03Still, there is a lot of work to be done, but he's in the right direction.

02:09There are some elements into his policies that are not necessarily orthodox,

02:14but he is in route to change very much Argentina from what we used to know about Argentina.

02:22Still, some investors are a little hesitant, and I think that will not

02:26change until we see the midterm elections towards the end of next year.

02:32So, what hasn't worked then? What could he have done differently so far?

02:37Well, one of the things that people are concerned about is the strong

02:42appreciation of the peso, in the sense that while the dollar has been strengthened around

02:47the world, particularly with the incoming administration of President Donald Trump,

02:53we have the real that has been depreciating, which is, you know,

02:56Brazil is a major trading partner to Argentina.

02:59So, you have the peso has appreciated about 40 percent, and the other currencies have depreciated.

03:04That will create some pressures unless Argentina receives a large influx of dollars

03:10within the next couple of years, and that is a situation that was sort of an Achilles heel

03:16back in the late 90s. So, that's one of the things that concern people.

03:22Now, the recession has been deep, as you signal, but there are some

03:26signs of recovery, although the pace of recovery is slow.

03:31And you hinted at that there. There have been some long-term problems for Argentina's economy,

03:37structural, systemic issues. Have these begun to be addressed?

03:44Yes, actually, he has a minister that is exactly Sturzenegger, who is just focused on modernizing

03:54the laws, the regulations, the restrictions that Argentina has, so that the country has

04:02the flexibility it needs to flourish. So, that is probably the most important task for

04:09Argentina at this point in time, and there are changes almost daily in that sense.

04:15Now, it will take several years to untangle all that. So, those are the things that I'm more

04:21hopeful on because those are – while they are long-term, they are absolutely needed to succeed.

04:29Jorge, thank you very much for joining us on the program.

04:31That's Jorge Piedrahita from Gear Capital Partners.

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