Sigmund Freud wrote of transforming pathology into common unhappiness. Since 2015 President Mauricio Macri has been trying something similar with the Argentine economy. It’s an uncomfortable zigzag ride.
The country’s peso currency fell more than 6% against the dollar on Thursday, leading to the departure of the central bank chief. Federico Sturzenegger will be replaced by Luis Caputo, previously finance minister and an ex-JPMorgan banker.
The shake-up, together with a larger-than-expected $50 billion assistance package from the International Monetary Fund announced last week, should help stabilize the roughly $500 billion economy, though the peso sold off further after an initial rebound on Friday.
Mr. Macri cant hark back forever to the mess he inherited from his predecessor Cristina Fernandez, a spendthrift populist enamoured of statist policies, and her late husband Nestor Kirchner. But it was a big one, all the same. The Peronist pair left Argentina a pariah in international credit markets and freighted public finances with subsidies and social spending that were unsustainable, however desirable.
Mr. Macri has ground through two-and-a-half years of gradual adjustment, trying to balance the pain of cuts against the prospects of renewed growth. Still-fragile results were appearing until Argentina was sideswiped in recent weeks by a downturn in investor sentiment toward emerging markets.
It’s worth keeping faith. The first tranche of the IMF help, called upon by Mr. Macri as prevention for trouble more than treatment, should arrive next week. Argentina may keep part of the rest in reserve as a defensive bulwark. Shrinking the fiscal deficit, as required by the IMF, looks feasible. The terms of the agreement still rightly allow for protecting the most vulnerable in society.
If Mr. Macri and his team can make enough progress to win a second term in 2019 — and he’d be the first non-Peronist since the 1983 restoration of democracy even to finish his first — he’d have a chance of establishing a welcome new normal.
( The author is a Reuters Breakingviews columnist. The opinions expressed are his own )
