This year has been a rough one for South America’s two largest states. Brazil—once lauded as a rising global power—has fallen deeper into recession and political turmoil. And although Argentina is finally attempting to transform itself into a model of sober pro-market governance after years of Peronist populism, it shares with its northern neighbor a grim set of economic and political indicators: stagnating growth, endemic corruption, and a new government beset by high expectations. As a result, Argentine President Mauricio Macri’s initially high approval ratings have declined since he took office in December. In Brazil, meanwhile, interim President Michel Temer comes close in unpopularity to the disgraced Dilma Rousseff.
Despite their undeniable problems, however, there remains in both countries a cause for optimism. Argentina and Brazil are, for now, absorbed in their own domestic dramas, but they have within easy reach the long-term solution to their economic woes: each other.
ARGENTINA’S SLOW REFORM
Over the past 12 years, Argentina has suffered from economic mismanagement under the presidencies of Nestor Kirchner and his widow and successor Cristina. Yet even after years of misrule its path forward is easier than that of Brazil, in part because Macri has used his first six months in office to reverse many of his predecessors’ most damaging policies. His government devalued the currency, cut energy subsidies and public spending, removed taxes and other regulatory burdens on most exports, reformed the country’s discredited statistics agency, and resolved a decade-long battle with the “holdouts,” or those international creditors who refused Argentina’s marked-down payment offers on defaulted sovereign debt. Although some of these changes were made by presidential decree, many—including the repeal of the laws preventing a final resolution of the thorny debt issue—were successfully passed through the opposition-held congress.
Argentina and Brazil are, for now, absorbed in their own domestic dramas, but they have within easy reach the long-term solution to their economic woes: each other.
Macri’s push for reform
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