Trouble Looming for Fernández de Kirchner’s Justicialists: Argentina Battered by Economic and Social Problems

  • Argentina is plagued by continually rising inflation rates and high fiscal and foreign debt, while Argentine society experiences problems with rising violence and drug use.
  • The administration of President Fernández de Kirchner has so far been unsuccessful in resolving these issues.
  • Troubles are in view for Fernández’s Justicialist party in upcoming 2015 elections.

Having suffered through a financial meltdown following its $80 billion USD debt default in 2001, Argentina, Latin America’s third largest economy, has continued to experience crippling economic distress. The economy’s largest constraint has arrived in the form of explosive inflation rates. In 2013 alone, prices rose 30 percent, with some prices having risen by 160 percent. The situation will probably get worse before it gets better, as some analysts believe prices are expected to rise by 45 percent next year [1]. President Cristina Fernández de Kirchner’s focus on paying off foreign debt has further exacerbated the situation for average Argentines. These economic troubles, coupled with persisting social strife in Argentina, create a recipe for disaster for Fernández’s Justicialist party in the 2015 elections.

Economic Strife and the Government’s Reaction

President Fernández de Kirchner’s dual economic objectives have theoretically been to cut government deficit spending and to continue to pay off foreign debt. One step Fernández’s administration has taken has been to print large sums of national currency in order to pay off creditors. Yet as one Argentine citizen put it, “It’s a rule that’s older than the world. If you print money, there’s inflation.” [2] In view of inflation rates, President Fernández de Kirchner has even encouraged Argentines to buy USD in hopes of reducing the exchange rate premium and decreasing inflation [3]. Although the exchange rate premium has decreased slightly, it has not been enough to freeze devaluation or inhibit inflation expectations [4].

Argentina’s Central Bank has also sought to tackle the effects of inflation by raising interest rates, but the real interest rates still remain negative. With inflation rates still at 30 percent and GDP growth hovering around two percent, one can clearly see that the administration’s approaches, on the whole, have been ineffective [5]. Meanwhile, Economy Minister Axel Kicillof has downplayed the detrimental effects of inflation, stating they are not the sole explanation for the movement of prices [6]. However, Mr. Kicillof’s statements are far removed from the streets of Argentina, where people can barely afford basic consumable goods. On top of rising prices, Argentines are experiencing high taxes: Tax revenue is at 40 percent of GDP. These tax revenues are being used to pay off foreign debt instead of the more pressing fiscal debt, which currently is five percent of GDP [7]. Between high taxes and high inflation, Argentines have a rapidly diminishing purchasing power; “My salary isn’t enough for anything” according to a blacksmith in Buenos Aires with a family of four who makes less than $800 a month [8].

Additionally, economists have been scrutinizing the Fernández de Kirchner administration for not being entirely honest in reporting its growth statistics for the last six years. Although President Fernández de Kirchner claimed that the Argentine economy had been growing at its fastest rates in the decades since her 2011 re-election campaign, she publicly acknowledged on May 9 the misrepresentation of growth statistics on the part of her administration [9]. This has become an exceedingly important issue because the Argentine government has been required to pay off billions of dollars in GDP Warrants to foreign creditors (GDP Warrants are government-sold securities that a government doesn’t have to pay off if its GDP growth is less than 3.1 percent, and Argentina’s true growth rate in 2012 was around two percent) [10].

Still, President Fernández de Kirchner has tried to adhere to international rules. Argentina increased transparency in its growth and inflation data after the IMF censored the country in 2013. It also has been actively settling its debt, particularly the debt owed to foreign companies. This has been executed through the World Bank’s arbitration arm and through negotiations with the Paris Club of creditors, a group of financial officials from 19 of the world’s largest economies [11]. These advances are exactly what international market entities want. This fact was evident on May 12 when JPMorgan felt confident enough that Argentina would continue to appease potential investors by becoming more compliant with the ebb and flow of international capital markets that it bought $3.25 billion USD worth of Argentine bonds, even in light of a possible regime change in 2015 [12].

Spread of Social Issues

President Fernández de Kirchner is at a decisive fork in the road with respect to the future prosperity of the Argentine economy, and, as has been the case for decades, the solution involves taming the country’s love-hate relationship with the global market. Presently, it looks as if Argentina is swaying towards attempting to pay off foreign debt while at the same time trying to balance the fiscal budget at home. While this has worked in slightly assuaging foreign investors’ concerns, Argentines are continuing to profoundly suffer. Salaries aren’t keeping up with inflation, so purchasing power is declining more each day. What the country now needs is a government that will end redundant spending, such as subsidies to wealthy energy companies, and, instead, will focus more on reducing inflation and investing in more infrastructure projects. Buenos Aires needs to invest in the long-term health of its economy instead of the short term. Currently, in this respect, there seems to be no light at the end of the tunnel.

Moreover, the tunnel becomes even ever darker as Argentines experience the degradation of their social fabric. The beleaguered country has already been battered by everything from an increase in incidents of violent crimes and vandalisms, to a rise in heavy drug use and drug trafficking [14]. A growing number of Argentine citizens indignant up with how President Fernández de Kirchner is handling the economy, government corruption issues (amidst criminal charges filed against the Vice President for an energy company bailout scandal), and how her government has failed to address the increase in crime rates [15]. “Society is fragile;” says Carlos F. De Angelis, a sociologist at the University of Buneos Aires, “everything is hanging by a thread.” [16]

According to the survey by Management & Fit, an Argentine consulting firm, 80 percent of Argentines say that crime is the country’s primary problem; 64 percent say that inflation is the second most pressing problem, and 50 percent say that unemployment is the third most serious plague. In the same survey, 34 percent blame President Fernández de Kirchner for not handling crime appropriately. Part of this disappointment was voiced in 2013’s midterm elections, during which President Fernández de Kirchner was hospitalized and unable to campaign, and in which the opposing Renewal Front Party won 22 congressional seats in Buenos Aires Province, significantly eating into President Kirchner’s Peronist base [17]. People are fuming in the streets as they can barely afford basic consumables and are worried about rising rates in robbery and assault, and have massively taken this discontent to the polls.

Where Does this Leave Argentina?

The Fernández de Kirchner administration’s main focus has been on maintaining government spending [18]. Meanwhile, the desperation of Argentina’s economy seems to be spilling over into a rising tide of crime and strikes. In other words, Argentina still has a long way to go. What Argentina’s economy needs is a drastic reform in how things are run; it has to start focusing on its domestic problems. This means that Argentina must reduce government clientelism and corruption, continue to improve public infrastructure, and focus more fully on solving inflation-related problems. In the battle between the appeasement of the global markets and the Argentine population, the people must come first through responsible fiscal spending.

What Fernández de Kirchner’s administration has done so far has made investors happy, but the President’s approval ratings, for good cause have plummeted, and it remains doubtful that these policies have noticeably contributed to long-term growth. The economy shows no signs of improving anytime soon, and the people are certainly not dancing in the streets to celebrate the government’s latest reforms. Despite its bravery and willingness to meet challenges head on, the Fernández de Kirchner administration has failed the people with its policies. With elections coming up in 2015, it seems that a decade of Fernández de Kirchner’s Justicialist Party’s rule could very likely to come to an end.

Patrick Burchat is a Research Associate at the Council on Hemispheric Affairs

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[1] Gilbert, Jonathan, “Soaring Prices Fuel Frustrations Among Weary Argentines,” New York Times, March 13, 2014,

[2] Ibid.

[3] “A Century of Decline”, The Economist, February 15, 2014,

[4] Vuletin, Guillermo, and Julia Ruiz Pozuelo, “Argentina’s Currency Devaluation: Back to the Future”, The Brookings Institute, February 4, 2014,

[5] “Argentina: Country at a Glance,” The World Bank Group, May 15, 2014,; The Economist.

[6] “Kicillof plays down effect of inflation on prices,” Buenos Aires Herald, May 11, 2014,

[7] The World Bank Group.

[8] Russo, Camilla, and Katia Porzecanski, “JPMorgan Bets 46% Surge Not Done With Bond Buy: Argentina Credit”, Bloomberg, May 13, 2014,

[9] Taos Turner, “Argentina Paid a High Price for Overstating GDP Numbers”, The Wall Street Journal, May 13, 2014,

[10] Ibid.

[11] Russo, Camilla, and Katia Porzecanski.

[12] Ibid.

[13] Gilbert, Jonathan.

[14] “Argentina: Sick with Violence,” Latin American News, May 15, 2014,

[15] The Economist.

[16] Gilbert, Jonathan, “Voters, In Midterm Elections, Give New Momentum to the Opposition in Argentina”, New York Times, October 28, 2013,;_r=0&adxnnl=1&smid=tw-share&adxnnlx=1400077407-AiWJWZ2hJW7cjpM1NZKiiQ

[17] Gilbert, Jonathan.

[18] The Economist.