A Macri "shock doctrine" in Argentina?

Argentine President Mauricio Macri is applying his neoliberal economics doctrines rapidly, in what looks like a "shock doctrine" approach. As of Thursday, a week after his inauguration, Macri's government announced it would let the peso float, which represents in practice a sudden dose of inflation, possibly 30% or more. In the absence of corresponding increases in salaries, it will represent a significant reduction in real wages and salaries for a potentially large majority of the country.

This part of a larger move that also drops the de facto wage and price guidelines Cristina Fernández' government had maintained and a removal of controls on capital mobility into and out of the country. All this adds up to a boon for multinational banks and corporations at the expense of Argentine employment and some industries that had been protected under the previous controls.

Maximilian Heath and Hugh Bronstein report for Reuters (Argentina lifts currency controls, floats peso in bid to boost economy 12/16/2015)

Argentina said on Wednesday it was lifting its currency controls and would allow the peso to float when markets open, setting the stage for a sharp devaluation, following promises by President Mauricio Macri for reforms in order to increase exports and spur economic growth.

Macri, a free-market advocate who took office last week, has vowed to regain investor trust in Argentina, shattered by its 2002 record default, a lack of trustworthy official economic data and heavy state intervention.

Argentina's previous leader, Cristina Fernandez, used central bank reserves to prop up the peso.

By lifting controls, Macri also hopes to spark a wave of investment in an economy that is battling low foreign reserves and double digit inflation.

"He who wants to import will be able to do so, and he who wants to buy dollars will be able to buy them," said Finance Minister Alfonso Prat-Gay, adding that this government intended to normalize the economy, after eight years of interventionism under Fernandez.

A fresh new experiment in neoliberal (Herbert Hoover-style) economics is underway, this one in Argentina.

Of course, Macri and his oligarchical supporters are pushing these as measure to boost the economy, which has entered a slowdown after a remarkable and sustained recovery since 2001 from the financial crash that ended the last long experiment in neoliberal economics there. This Financial Times report picks up on that framing (Daniel Politi, Argentine peso falls by almost a third as controls are lifted 12/17/2015):

The Argentine peso fell by as much as 30 per cent against the dollar on Thursday after Mauricio Macro, the country’s newly elected president, lifted capital controls late on Wednesday night. ...

... the unwinding of capital controls was understood by the market as a key — albeit painful — part of Mr Macri’s plan to open and reform Argentina’s ailing economy. [my emphasis]

As in the eurozone, "reform" in this context means neoliberal measures: deregulation of business, cutbacks in public services, weakening of labor unions, reduction of workers' and pensioners' incomes, subservience to international finance and business.

The move to undo what was popularly referred to as the “dollar clamp” is the biggest step taken yet by Mr Macri toward opening up Argentina’s economy since he was sworn-in as president on December 10.

The wholesale market closed at 13.4 pesos to the dollar, implying a devaluation of 27 per cent. The retail market closed at 14 pesos to the dollar, implying a devaluation of 30 per cent. But there were few operations, with most banks and foreign exchange houses not operating in the foreign currency market.

Not suprisingly, the new Finance Minister Alfonso Prat-Gay declared himself happy with the results on the first day.

Raúl Dellatorre (El país de la ciclovía financiera Página/12 18.12.2015) cautions about the large impact of the two measures of floating the currency and removal of capital controls, expected they are "destined to generate financial and exchange-rate instability" ("destinados a generar inestabilidad financiera y cambiaria"). He expects the effects will negatively impact a "large majority" of Argentinians.

The country's two most prominent union leaders, Hugo Yasky of the CTA (General de la Central de Trabajadores) and Hugo Moyano of the CGT (Confederación General del Trabajo), both rightly observed that without substantial salary increases, the result will be a major reduction in real wages. (Ajuste brutal con olor a los 90 Página/12 18.12.2015) Even though Mayano is party of the Peronist Partido Justilicialista (PT), he supported Macri in the election, while Yasky backed the Peronist candidate Daniel Scioli. Since Macri's margin of victory was 2%, Mayano's support and his hostility to Scioli's candidacy could well have been decisive for Macri's win.

Macri's government also dropped some export controls that were a key part of Cristina's government's plan to increase Argentina's domestic development. (Macri ditches wheat, corn, beef export taxes Buenos Aires Herald 12/14/2015)

Outside of the economy, Macri is also moving to modify the media law to allow more monopoly media concentration. He has taken a controversial step to start appointing judges by decree, bypassing the normal Congressional approval process. He is abrogating the memorandum of understanding with Iran that was put into place to facilitate the ongoing investigation of the AMIA Jewish Community Center bombing in Buenos Aires in 1994. And he's pushing for a closer association with Washington and promoting neoliberal "free trade" agreements that are mainly about reducing regulations and blocking labor and environmental protections.

Daniel Scioli and former Finance Minister Axel Kiciloff both participated in a large Peronist demonstration in front of the Congress Thursday to protest the changes to the media law, in particular. (Marcha del kirchnerismo frente al Congreso contra las primeras medidas de Mauricio Macri Infobae 17.12.2015)

Macri and his neoliberal experiment are not going to have a smooth ride politically the next four years.