A leading candidate in Argentina would overhaul economy

AP News
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Posted: Apr 16, 2015 1:05 PM
A leading candidate in Argentina would overhaul economy

BUENOS AIRES, Argentina (AP) — The man who could be Argentina's next president wants to put an end to tight government currency controls, make peace with the nation's creditors and improve severely frayed ties to the United States. In short, Mauricio Macri is promising to undo much of what President Cristina Fernandez and her late husband Nestor Kirchner created over the past 13 years.

It's a platform that appears to be gaining traction.

The right-leaning Buenos Aires mayor leads many polls ahead of the October elections. His popularity is buoyed by economic frustration and widespread anger over the mysterious death of federal prosecutor Alberto Nisman, who accused Fernandez of protecting those responsible for Argentina's most serious terror attack.

Macri believes pro-market reforms will restore confidence in Argentina, both at home and abroad. Those themes are resonating: A handful of polls conducted in March gave him single-digit leads, a big change from six months ago when he consistently came in third.

Macri says if he is elected, he would move quickly to lift restrictions on Argentines' ability to trade pesos for U.S. dollars.

But critics warn against doing too much, too fast. Lifting currency controls overnight could unleash a financial "bloodbath," according to former Central Bank President Aldo Pignanelli.

Economists say ending currency controls would require at least two other major changes: shoring up foreign reserves by taking on more debt, and devaluing the peso to bring it to true market value. Macri has not waded into the policy details of a devaluation, but has repeatedly said Argentina must negotiate with a group of holdout creditors, which would allow the country to access international debt.

Such proposals are frightening for many in a nation still spooked by a $100 billion default in 2001 that came amid an economic collapse. Overnight, many Argentines saw their savings evaporate and the country turned into a financial pariah.

Daniel Scioli, a ruling party front-runner who has tied or had a slight lead over Macri in some polls, has cautioned that change must come gradually.

While the strong hand of Fernandez's Justicialista Party helped stabilize the economy after it took power in 2003, Argentina's recovery has stalled, struggling with inflation that private economists put at over 30 percent, capital flight and increasingly frosty relations with many trading partners, including the U.S.

Fernandez's government "isn't giving people solutions," Macri said during a campaign rally in the central city of Rosario this week. "There is an important need for change."

Macri, currently on a campaign blitz across the countryside, declined several requests for an interview.

The son of an Italian-born industrial magnate, the 56-year-old Macri has said his political career was inspired by his 1991 kidnapping at the hands of federal police officers, who reportedly received several million dollars in ransom from Macri's father.

Seized by several men while returning home one night, Macri was held in a basement two weeks, not allowed to see daylight or even the faces of his captors. The ordeal, Macri has said, helped him see how poverty and violence lead people to do extreme things, situations he had never experienced growing up in a rich family.

In the 1990s, Macri made a name for himself as president of the Boca Juniors soccer team as it won numerous international titles, making him popular throughout the country of 41 million people.

In 2007, Macri was elected mayor of Buenos Aires and quickly showed his willingness to break political convention. Upon taking office, he fired 2,400 city employees he claimed were "gnocchis" — a term coming from the Italian dumplings which Argentines use to describe bureaucratic freeloaders. He also rubbed against the federal government by forming the capital's first city police unit, countering the federal police force. He's credited with improving transportation in Argentina's biggest city.

With a business-casual style and a full head of salt-and-pepper hair, Macri often appeared in the society sections of Buenos Aires media, which closely followed the romantic life of the rising politician, now married for a third time.

Macri's support comes mainly from Buenos Aires, particularly among the business elite and the middle and upper classes. He will have to work hard to win over the provinces, where poorer people benefit most from government programs and the ruling party has strong organizational muscle.

Gas subsidies keep energy costs low, hefty annual pay raises are common for public workers and Argentines enjoy some of the most generous vacation allotments in the Western Hemisphere.

However, high inflation erodes many perks and ordinary Argentines are increasingly fed up with limited job opportunities and frequent market fluctuations that complicate basic transactions like buying and selling property.

"The economic situation is a disaster," said 29-year-old Juan Carlos Fedyna, who runs a small bookstore dedicated to Pope Francis, an Argentine native.

Fedyna said the store stopped exporting its books and trinkets two years ago because the government-set exchange rate ensured the business would always take a loss.

Such controls are the basis of rampant black-market trading. Tourists and Argentines returning from abroad trade dollars or euros in spots like Calle Florida, an upscale promenade where men standing between designer clothes stores and high-end bakeries call out "Cambio! Money change!"

While the official rate hovers around 8 pesos to the dollar, the black-market rate hit 15 pesos at times the last year.

Fernandez, who is barred from seeking a third term, has blamed much of the economic troubles on the United States, demonizing in particular a group of U.S. bondholders who refused to renegotiate terms on Argentina's debt.

The 2001 default shut Argentina out of international credit markets and its foreign reserves have sunk to $31.5 billion, low for one of the largest economies in Latin America.

The most likely way to shore up reserves would be to reach a deal with the U.S. creditors, a group Fernandez has blasted as "vultures." That would end a legal battle over the debt and allow the country to access credit overseas.

Macri hasn't spoken publicly about the dispute in recent months, but he has suggested Argentina must reach an agreement to restore trust in the economy — a step he would like to be the one to take.

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Associated Press reporter Debora Rey contributed to this report.

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