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The Collapse of the Argentinian Bank System

By Sophia Milla (‘20)

Courtesy of WikiCommons

Argentinian president Mauricio Macri stepped to the microphone with a vision during his inauguration ceremony in 2015. On an economic level, Macri promised to remain committed to a “zero fiscal deficit.”

A fiscal deficit itself is when a country’s expenses exceed its revenue. Macri claims he is committed to keeping an economic balance, even though the Argentine economy worsens daily. In fact, it currently runs on an inflation pace of 55%. The holes former president Cristina Kirchner left will be hard for Macri to fill.

Kirchner kept her eye on the unemployed and the poor. Overall, she focused on those that didn’t make financial contributions to the country. Out of her ambitious lust for power and fame, she realized she could reach out to these individuals for her own greater good.

In order to grow her image, Kirchner used Argentine bank money and resources to distribute to the unemployed and low-class. She also reduced consumer prices. Eventually, Argentina got cornered in a penniless rut. Many took advantage of the generosity Kirchner had in giving away resources, which led to numerous bribes.

According to an international news site, France 24, “a total of $160 million in bribes were handed over between 2005 and 2015.”

This year, Kirchner decided to represent the Peronist party against Mauricio Macri’s campaign. Surprisingly, she is choosing to run for vice president during the 2019 presidential election. One of the most important issues to be considered for voters, or if not, the most important issue has to be the Argentine economy.

With a tight Argentinian bank account, the tax burden of civilians had a 69.3% increase. Not only that, but its tax increase is currently the fastest tax rate increase in Latin America. The speed is quite tough to keep up with, which opens more doors to poverty.

According to the World Bank, “Urban poverty in Argentina remains high, approximately 50 percent higher than in new HICs countries and almost two times that of OECD countries. The incidence of poverty reaches 41% among children aged 0 to 14 years old.”

The gradual increase in poverty is mostly linked to the lower wages, lower employment and job insecurity. With nearly 1.2 million jobless Argentinians, not much has been done in the government to fix anything. Since the start of Macri’s terms, the cycle has been the same for those living in poverty.

Argentinian senior citizen Josefina Medina said, “A lot of the retired are struggling in poverty because they can’t pay for their rent, so they don’t have a house. I see retired people eating food from the garbage. It’s terrible… a lot of children will cry because they have nothing to eat at night.”

The strong trend of poverty among many civilians in Argentina connects back to the current fiscal deficit. The fiscal deficit is also motivated by Macri’s ambition in organizing a structural reform agenda. Macri established many projects since his presidency, geared to improve the technology and social structure of Argentina. A lot of them currently reside in Buenos Aires.

According to Bloomberg, “Besides that, the interior ministry is set to inaugurate 770 projects ranging from public housing to waterworks to new public buildings by the end of [2019].”

Infrastructure is one of Argentina’s top three priorities, as noted during its G20 presidency this year. Although it’s essential, the infrastructure itself is falling in Argentina. The plans of constructing buildings, railways, and other structures have left Argentina on a shortage. Thus, Macri is making plans to cut the budget for infrastructure funds.

According to Forbes, “Argentina’s current infrastructure funding shortage is estimated at $26 billion, which amounts to over one-fifth of their total government spending in 2017.”

One of Macri’s recent projects was renovating a public hospital in the Mar del Plata, Buenos Aires region. In reflection of the work, he said that he cared about the good of the Argentinians. He added that with the new hospital, retirees would now be able to come and be taken care of. In reality, many retirees do not have the money to be taken care of.

The value of money has been difficult to maintain, too. Though Macri makes promises to have no fiscal deficit, the goal has become harder to hit due to the constant depreciation of the Argentine peso. Just in a week, the peso lost 16% of its value.

So, what will Macri do? The country’s in a sea of debt, unemployment, and poverty. Currently, Argentina owes at least $50 billion in debt to the International Monetary Fund (IMF). With the 2019 elections this year, Macri is striving to win. However, based on what he has done in the last four years, there is little hope for change in the economy.

Medina also said, “Macri isn’t doing anything. If he wins, the same thing would happen again.”

The current leading parties are the Republican Proposal and the Peronist party represented respectively by Macri and Kirchner. This year, many Argentinians are in a dilemma in who to vote for. Though Macri has had incredible visions to end Argentine poverty and restore employment since 2015, not too much has changed, proved by the 2018 Argentine Economic Crisis. On the other hand, the lack of responsibility Kirchner had in handling money during her presidency led to high inflation and debt in the following years.

Based on the financial mess within the Argentine borders in the past fifteen years, Argentina’s economy may need a radical change in order to completely invoke change, and it may have to happen sooner than ever. In fact, if the peso depreciated 16% in just a week, and such a pattern continues, Argentina may be penniless for sure in four years.

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