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Argentina: Oil nationalization and currency controls divide a nation

Months after Argentine President Cristina Fernández de Kirchner’s nationalization of the YPF energy company and controversial economic policies, where does Argentina stand?

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Mixed reactions at home

Kirchner’s recent policies have been met by mixed reaction at home. Reelected last year with 54 percent of the vote, her approval rating started dropping as economic controls tightened this year. Despite a spike in approval in the aftermath of the YPF expropriation, approval now stands at 38 percent.

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Kirchner’s lagging popularity ratings and her battle with the IMF are linked, says Boris Segura, a Latin America analyst at investment bank Nomura.

“We wouldn’t rule out her further escalating the IMF dispute in order to prop up popularity ahead of next year’s midterm elections – key to her prospects of [staying in power],” Mr. Segura said in a research note. 

Despite the presence of mistrust toward the Argentine government, there are still many Argentines who have faith in Kirchner’s administration and applaud her policies.

“The [protectionist measures] are important to reverse the neoliberal reforms of the 1990s,” insists a member of the pro-government youth movement La Cámpora, echoing recent comments made by Axel Kicillof, the neo-Keynesian deputy economy minister.

“Inflation can’t be 24 percent,” says Ramiro Domínguez, an economics student the University of Buenos Aires. “Prices haven’t gone up that much.”

But Leandro Bullor, an economist at the University of Buenos Aires says he believes costs are indeed rising. Salary increases – including a 25 percent increase in the minimum wage in August – however, ensure that Argentines can keep spending.

In response to questions about the high inflation rate, Kirchner told an audience at Georgetown University last week that Argentina’s model is geared toward “growth not inflation.”

The country has expanded at an internationally accepted average of nearly eight percent a year since 2003, when Néstor Kirchner came to power, and enjoyed big trade surpluses.

Import restrictions – another protectionist measure – ensured a $1.6 billion surplus in August and are supposed to promote national industry, but have succeeded in achieving the opposite in some sectors.

“A lot of materials are not coming in,” says Esteban Martín, president of the Chamber for Spare Car Parts Dealers in Córdoba. “We’re having to make do with used parts.”

Mr. Bullor believes policies need to be more conciliatory, including a multiple exchange rate to favor local industry. “The peso is overvalued again. It can’t be sustained,” he says.

Back at the Buenos Aires rally, Ms. Pagano paused from chanting along with the crowd. "It’s all going to come tumbling down,” she says.


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