Argentina found itself in the middle of a brewing political shakeup recently with the Minister of Economy, Martín Guzmán, abruptly announcing his exit
from the government. Guzmán was a close ally of the ruling centre-left government of Alberto Fernández. Yet, despite close relations with the leader of the country, Guzmán consistently clashed with the current Vice-President, Cristina Fernández de Kirchner. These issues include spending cuts and tighter fiscal policy
, amongst others. Political experts claim that Guzmán’s exit is just another step in the direction of an increasingly isolated President in the government as well as the country, with a 25-percent approval rate.
Cristina Fernández has previously served as the Argentinian president for two terms, from 2007–2015. She continues to hold a relatively strong base of support in the country but had picked Alberto Fernández to lead the ticket with herself as vice-president for the 2019 elections
as she recognised that she did not have the numbers required to be elected president. However, in the recent past, it has been observed by experts that the Vice-President is increasingly gaining influence within the government. Guzmán’s replacement, Silvina Batakis
is a left-leaning ally of Cristina Fernández and is further proof of the latter’s growing advance on the administration. Guzmán’s loss is the latest in a series of such departures of allies of the President.
The government needs to put aside their differences and focus on the structural issues in Argentina that continue to cause persistent inflationary pressures and meet its international sovereign commitments.
This government upheaval is taking place amidst one of the worst economic crises that Argentina has seen in recent times. The country’s annual inflation rate reached 60.7 percent
in the last month and is consistently accelerating. The average inflation in the country is likely to remain over 50 percent. While such a situation is not an anomaly for Argentina, as it has been known to have a ‘pathological relationship’
with inflation, the situation has been exacerbated by the pandemic economic woes as well as the impact of the Russia–Ukraine conflict.
Prices of goods vary wildly from store to store as Argentinians try to track down their daily essentials at the most affordable rates
. Inflation woes and the government’s inability to handle them have previously taken down governments in Argentina and with the current President’s approval ratings, he may be heading down the same path in the presidential elections that are to take place next year.
It was in light of this crushing economic crisis that Guzmán finalised a deal with the International Monetary Fund (IMF) to restructure US$44 billion in debt
. However, this deal was heavily criticised by the Vice-President, claiming that it makes too many concessions to the IMF and will in all probability hamper economic growth. With Batakis replacing Guzmán and stating her intentions to reach out to IMF officials and restructure the deal, the fate of this possible relief is also up in the air for the nation. The economic crisis has spooked investors in Argentina, especially as the nation sees its foreign currency reserves shrink with each passing day. The uncertainty in the policies of the government, due to the internal rifts, has caused further fear among its investors
and market jitters.
The China factor
Against this backdrop, an interesting development in Argentina’s international positioning took place when Xi Jinping invited Alberto Fernández to participate in the 2022 BRICS summit, renewing the debate about Argentina’s possible accession to the BRICS grouping
. This was not the first time an Argentine president has participated in a BRICS meeting; Cristina Fernández attended the summit in 2014, as did Mauricio Macri in 2018
. Alberto Fernández has been quite vocal about his desire to accede Argentina into the BRICS grouping, describing it as a cooperative alternative to a world order that has been working for the benefit of a few
. He also stressed that Argentina’s interests align with those of the bloc.
However, accession into BRICS will not be a seamless process for Argentina, at a stage when its economy is in the doldrums, doubled down by the global economic situation, owing to both the Ukrainian conflict and the lingering impact of the pandemic. Furthermore, the economic situation of Argentina will not be ideal for BRICS to make the country a part of the ‘emerging economies’ bloc. Although China appears to be keen to expand the BRICS platform to make it more robust
, formal incorporation within the grouping
of any new member requires full consensus of all members as well as complex administrative and diplomatic processes. Additionally, the bloc’s heterogeneity further makes its enlargement a tedious process. While China and Brazil
have been vocal about wanting Argentina to join the group because of their interests within the country, the same may not be true for South Africa, India, and Russia. There is an additional fear about Argentina’s presence in BRICS potentially undermining Brazil’s position, as the addition would mean a country from the same continent as well as a commercial competitor in the main agro-industrial markets
. By extension, this could be concern with other members of the BRICS which are substantial contributors to the agro-industrial sector. However, China’s proposition to include Argentina within BRICS is telling of its comfortable relationship with the latter. For one, China is the most conspicuous exporter to Argentina outside Latin America. Besides, Argentina is already a part of the Asian Infrastructure Investment Bank and has also formally joined China’s Belt and Road Initiative (BRI) this year.
Perhaps, an easier option for Argentina currently, could be to join the New Development Bank, also known as the BRICS bank. The bank does not require membership of BRICS for potential members, with Uruguay, the United Arab Emirates (UAE), and Bangladesh being its most recent members. The New Development Bank was established in 2014 and has since approved close to 80 projects
across its member countries, backing them with US$30 billion. Therefore, joining the BRICS bank would lead to the creation of a new financing channel for Argentina, something its economy requires direly.
Although China appears to be keen to expand the BRICS platform to make it more robust, formal incorporation within the grouping of any new member requires full consensus of all members as well as complex administrative and diplomatic processes.
Domestically, there are more pressing issues in Argentina which need political attention. The President needs to find a way to control the sky-rocketing inflation, especially instead of the upcoming elections in 2023. The Peronist leader does have a loyal base of support among the Argentinians, however, the developing full-scale crisis, both in the markets and his cabinet could put this loyalty to test, heightened by the very public disagreements with the Vice-President. The government needs to put aside their differences and focus on the structural issues in Argentina that continue to cause persistent inflationary pressures and meet its international sovereign commitments.
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.