The citizens of Argentina today turned a new page in Argentine history by voting out the Peronists after 12 troublesome years of rule. I've written several times over the years about the ravages of Peronism and the disturbing echoes of the same here in the U.S. It's a relief to know that things should be changing for the better. Congratulations to all my friends and family in Argentina!
The new president, Mauricio Macri, promises to be much more business friendly than the outgoing Cristina Kirchner. Although he is quite likely to officially devalue the peso, it will only be to the extent that it has already been devalued in the black market. If he successfully pursues the right policies—liberalizing the exchange rate market, lowering the punitive taxes and tariffs on exports, and squeezing out wasteful and corrupt government spending, to name just a few—it would not be surprising to see the peso strengthen a bit from the 15 pesos/dollar level that has prevailed in the black market. Once capital knows that it is free to leave, once creditors know that their loans will be repaid, once exporters know they can keep the fruit of their efforts, then the capital outflows of recent years should reverse. Already the stock market has been celebrating in anticipation, turning in one of the strongest performances in the Western Hemisphere.
Like the U.S., the Argentine economy has been underperforming for years. It only takes a few things to go right in order to unleash stronger growth.
PS: Macri takes over beginning December 10th.
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