Argentina in the 21st century

The Menem era

With the economy crumbling around him, Alfonsín resigned five months early, and Menem officially took over in July. Menem’s moderate Peronist program called for a free-market economy with lower tariffs, based on a wage-price pact between labour, business, and government. To help carry out his economic scheme, Menem unexpectedly enlisted the aid of former top-level executives from Bunge y Born, one of Argentina’s leading corporations.

Menem, in turn, needed military support in a time of economic emergency, and he sought to draw a veil over the past by pardoning those accused of human rights violations. Criticism of this act was strong but somewhat tempered by the fact that Menem himself had been held in detention for five years. Former president Galtieri also was pardoned. Meanwhile, in October 1989, while quietly sidestepping the question of Falklands sovereignty, Argentina and Great Britain formally agreed to establish full diplomatic relations.

Initially, Menem was no more successful than his predecessor in tackling the economy, and inflation continued unchecked. The situation changed in 1991 when Domingo Cavallo was appointed economy minister. Cavallo implemented a far-reaching program of economic stabilization, as well as measures to enhance revenue collection and prevent tax evasion. By August the annual inflation rate had fallen to 1.5 percent, the lowest in 17 years. The government then privatized numerous state-owned businesses and introduced a new currency, the Argentine peso, the value of which was pegged to the U.S. dollar. Capital flight was reversed, and in 1992 Argentina emerged with a reformed and apparently stable economy.

In 1993 the ruling Justicialist Party (Partido Justicialista, or PJ; Menem’s Peronist party) launched a campaign for a constitutional amendment that would permit the president to run for a second term. In elections held in October, the PJ gained a majority in the Chamber of Deputies but still needed support from the Radicals to change the constitution. Former president Alfonsín eventually consented to support the reforms, in an agreement called the Olivos Pact. The new constitution, promulgated in 1994, had few changes apart from the provision for consecutive presidential terms.

Menem decisively won reelection in 1995. The beginning of his second four-year term was overshadowed by the impact caused by the abrupt devaluation of the Mexican peso (the “Tequila Crisis”) and by increasing disagreements with Cavallo over economic policy. In addition, the government’s popularity was eroded by high unemployment and accusations of corruption, yet the president’s political control remained strong. When Menem finally dismissed Cavallo in July 1996, the economy was unaffected. Within a year, however, another recession took hold, made worse by the overvalued Argentine currency. Abroad, the foreign minister, Guido di Tella, negotiated an agreement with Chile regarding the delineation of their southern borders, and in October 1998 Menem paid a state visit to the United Kingdom. Commercial flights were resumed between the islands and the Argentine mainland in 1999. Later that year Fernando de la Rúa was elected president, heading an alliance of parties led by the Radicals to victory over the Peronists.

De la Rúa inherited a massive foreign debt, a deficit that was larger than expected, and a continuing recession. His administration responded by raising taxes, cutting the salaries of government employees, and encouraging the early retirement of others. As conditions deteriorated, the economy minister resigned, as did his replacement. De la Rúa then reappointed Domingo Cavallo to the post he had held under Menem. Cavallo’s reforms, however, were largely ineffective, and investors and lenders lost confidence in the economy. On December 20, following antigovernment protests in Buenos Aires, both Cavallo and de la Rúa resigned. Under a succession of interim presidents, the government restricted access to bank accounts, defaulted on its foreign-debt payments, and allowed the Argentine peso to decline in value. The country was rocked by another economic collapse in 2002.

The presidency of Néstor Kirchner

The first round of the 2003 presidential elections was held in April against this backdrop of continuing economic and political turmoil. Menem, again a candidate, came out on top in the polling, followed closely by Néstor Kirchner, the governor of Santa Cruz province in Patagonia. However, Menem dropped out of the race before a runoff election could be held, and Kirchner, a centre-left Peronist, was inaugurated in May. During his term, Kirchner helped stabilize Argentina’s economy, and by 2005 he had overseen a restructuring of the country’s debt that satisfied many, though by no means all, of Argentina’s creditors. The second half of his term, however, was plagued by a countrywide energy crisis and high inflation. He did not run for a second term in 2007 and instead supported the candidacy of his wife, Sen. Cristina Fernández de Kirchner, who won by a significant margin and became Argentina’s first elected female president.

The Fernández de Kirchner administration

In 2010 Fernández de Kirchner’s administration engineered a successful debt swap with two-thirds of the “holdout” creditors who had rejected Argentina’s 2005 restructuring of debt upon which the country had defaulted in 2001. This swap, combined with that of 2005, ensured that more than 90 percent of the original bondholders had participated in a restructuring agreement. In July 2010 the Argentine Senate narrowly approved a bill, already passed by the lower house of Congress, legalizing same-sex marriage. Argentina thus became the first country in Latin America to permit gay couples to marry. Though the Fernández de Kirchner administration had supported the legislation, the Roman Catholic Church had organized mass demonstrations against it. Néstor Kirchner, who was expected to contest the presidency at the conclusion of his wife’s term, died suddenly in October 2010. Public sympathy over her husband’s death and wide approval of her social policies, as well as Argentina’s strong economy and a splintered opposition, bolstered Fernández de Kirchner’s standing, and she easily won reelection in October 2011. In legislative elections that month, Fernández de Kirchner’s Front for Victory (FPV) faction of the Peronist party and its allies won enough seats to capture an absolute majority in both the Chamber of Deputies and the Senate.

Beginning in late 2011, Fernández de Kirchner ratcheted up Argentina’s claims of sovereignty over the British-held Falkland Islands (Islas Malvinas) as the 30th anniversary of the Falkland Islands War approached and as the islanders voted nearly unanimously in a March 2013 referendum to remain a British overseas territory. In the process, Argentine-British bilateral relations sank to an all-time postwar low. Despite that foreboding atmosphere, many Argentines took heart in the elevation of the archbishop of Buenos Aires, Jorge Mario Bergoglio, to pope as Francis I in March 2013.

For the most part, the Argentine economy rebounded robustly over much of the first decade of the 21st century, but it continued to be plagued by among the highest inflation rates in the Western Hemisphere. Government-imposed price and export controls proved largely ineffective in constraining inflation, which, according to official figures, reached 10.6 percent in 2012, though many foreign and domestic observers believed it to actually be considerably higher, with some estimating it to have reached between 25 percent and 30 percent by 2013. The economy was also imperiled by creditors who had refused to accept any of the earlier debt restructuring and who undertook ongoing legal efforts to recover all of the money they had lent to the Argentine government.

In June 2014 the U.S. Supreme Court chose not to hear Argentina’s appeal of a lower court decision that had ordered the country to pay some $1.3 billion plus interest (the first tranche of a total of about $15 billion) to the U.S. hedge funds that had refused to restructure the debt. The decision prohibited Argentina from making interest payments to those creditors who had agreed to restructuring, and, when further efforts to negotiate a settlement between the hedge funds and Argentina collapsed at the end of July, the country found itself to be in technical default.

In January 2015 a scandal erupted after Alberto Nisman, the special prosecutor investigating the 1994 bombing of a Jewish community centre in Buenos Aires, was found dead the day before he was scheduled to testify before Congress. Just days earlier he had released a report in which he accused Fernández de Kirchner, her foreign minister, and others of engaging in negotiations with Iran to cover up the responsibility of Iranian government officials for the bombing in return for Iran’s entering into a trade deal with Argentina. After initially saying that she believed Nisman’s death was a suicide, the president reversed her opinion, stating that she now believed that Nisman had been the victim of foul play and that rogue intelligence agents had misled him regarding her involvement in the bombing investigation in an attempt to tarnish her reputation. On January 27 Fernández de Kirchner announced her intention to disband the country’s domestic intelligence agency and replace it with a new, more-transparent security organization. On February 26 Congress passed legislation that created that new agency, the Federal Intelligence Agency (Agencia de Inteligencia Federal; AFI).

In May the prosecutor who had taken up the case against Fernández de Kirchner that Nisman had been pursuing informed a court of his desire to drop the case, arguing that there was no crime to be investigated. The three-judge panel agreed; however, the court of public opinion continued to deliberate. Argentines remained deeply divided in their response to the events surrounding Nisman’s death.

The presidency of Mauricio Macri

That division and distrust among some of the electorate over the legitimacy of the court’s ruling seemed to have an impact on the presidential election on October 25, which produced an unexpected runoff between Fernández de Kirchner’s handpicked successor, Daniel Scioli, the governor of Buenos Aires province, and centre-right candidate Mauricio Macri, the mayor of the city of Buenos Aires. (Fernández de Kirchner was constitutionally prohibited from running for a third term.) Scioli, who had been heavily favoured to win, took about 37 percent of the vote; Macri captured more than 34 percent; and onetime Fernández de Kirchner supporter-turned-opponent Sergio Massa garnered about 21 percent. Argentine election law required a candidate to win 45 percent of the total vote or a minimum of 40 percent of the vote with a margin of victory of at least 10 percent in order to preclude a runoff election. On November 22 Macri triumphed in the resultant runoff (the first in the history of the Argentine presidency) by garnering some 51 percent of the vote to about 48 percent for Scioli.

Along with shepherding the removal of taxes on some exports and the relaxation of some exchange controls, Macri took a big step toward putting the economy back on solid footing when he reached compromise deals in February and March 2016 with the holdouts who had refused to negotiate settlements of the Argentine debt they held. Macri benefited from the decision of a judge (responding to the country’s changing political climate) to reverse his earlier requirement that Argentina pay the holdout creditors in full before beginning to repay those creditors who in 2005 had agreed to restructure the debt.

Lacking majority support in both houses of Congress, Macri was forced to take a gradualist approach to reforming the economy. After his administration raised interest rates in an attempt to combat inflation, the economy slid into recession in 2016. By 2017, however, inflation had fallen to about 26 percent and GDP had climbed by about 2.5 percent, according to the International Monetary Fund (IMF).

The October 2017 midterm congressional elections were widely seen as a referendum on Macri’s presidency. Nearly half of the seats in the Chamber of Deputies and one-third of the seats in the Senate were contested. Although Macri’s Let’s Change (Cambiemos) coalition did not make enough gains in either house to win a majority, it significantly increased its presence in both bodies. It added 21 seats in the 257-seat Chamber of Deputies to raise its total of deputies from 86 to 107. In the 72-seat Senate, Let’s Change’s representation went from l5 seats to 24. Meanwhile, the Fernández de Kirchner-affiliated Peronists fell from 18 seats to 10 in the Senate and from 77 seats to 67 in the Chamber of Deputies.

Fernández de Kirchner herself was elected to the Senate, representing Buenos Aires province, but her stature as leader of the opposition appeared to be diminished. Macri, on the other hand, could look forward to having an easier path toward effecting changes to economic policy. He also seemed to be well positioned to run for reelection in 2019.

Following the election, Macri did indeed have a freer hand in shaping the country’s economic policy, but the results proved to be deeply disappointing. In 2018 inflation began climbing again (it would exceed 50 percent by 2019), GDP shrunk by more than 2 percent, and the economy again slid into recession. Moreover, after coming into office promising “zero poverty,” Macri saw the poverty rate climb until it included more than one-third of Argentines. In 2018 Macri was forced to turn to the IMF for a $57 billion loan. His rocky stewardship of the economy would be largely responsible for his defeat in the October 2019 presidential election—by Alberto Fernández, running on a Peronist ticket that included Fernández de Kirchner as the candidate for vice president.

The presidency of Alberto Fernández

Once in office, Fernández was faced with the challenge of both restoring the Argentine economy and guiding the country’s response to the COVID-19 global pandemic. After initially responding slowly to the health crisis, Fernández’s government eventually imposed a strict lockdown of the economy and society that lasted more than 230 days—one of the world’s longest continuous preventive shutdowns in response to the pandemic. Although it enjoyed early success in containing the spread of the virus, Argentina experienced significant spikes in infections in May 2021 and January 2022. By February 2022 about 80 percent of eligible Argentines were fully vaccinated against COVID-19. Nevertheless, more than 121,000 individuals had perished as a result of the disease.

The Argentine economy was hit hard by the pandemic, as GDP contracted by about 10 percent in 2020. In 2021 the economy rebounded with GDP growth of some 10 percent, but inflation climbed rapidly, and poverty remained widespread. Dissatisfaction with the economy seemingly contributed to the ruling coalition’s poor showing in the 2021 midterm legislative elections, in which the Front for All (Frente de Todos) lost its majority in the Senate (falling from 41 to 35 seats) and saw its representation in the Chamber of Deputies drop from 120 to 118 seats, though it remained the largest faction in the lower house. Meanwhile, Fernández de Kirchner began publicly criticizing the president and his policies. Despite their differences, however, Fernández responded to a failed assassination attempt against Fernández de Kirchner in September 2022 by declaring a national holiday to allow Argentines to rally together in the wake of the disturbing incident.

Fernández de Kirchner was at the centre of the so-called Vialidad (“Transport”) case, an alleged criminal conspiracy that coincided with her presidency and involved public works funds that had been illicitly funneled to a friend of Fernández de Kirchner. In early December 2022 Fernández de Kirchner was found guilty of “fraudulent administration” in the case, sentenced to six years in prison, and banned for life from holding public office, but the limited immunity granted to her as a member of the government and the likelihood of a long appeals process put into doubt whether her conviction would be enforced.

The next year proved to be another disastrous one for the Argentine economy, as many of the gains of its postpandemic bounce back were reversed. A drought that handicapped Argentine agriculture and disruptions to the global economy caused by the Russia-Ukraine War were partly to blame, but the ongoing challenge of funding the government’s extensive social services while servicing the country’s large debt to the IMF continued to take a heavy toll. By 2023 some two-fifths of Argentines were living at a poverty level. Inflation, seemingly always a bugaboo, spiraled out of control, the annual rate climbing to more than 140 percent (one of the highest rates in the world) by November 2023. The value of the peso went into free fall as its exchange rate for the U.S. dollar plummeted from 300 pesos in July 2022 to 950 pesos in November 2023.

All these issues were central to the 2023 presidential election. As its candidate, the Peronist party chose Sergio Massa, the economy minister, who was the leading vote getter in the first round of balloting in October. He captured 37 percent of the vote to outdistance the two leading conservative candidates, Javier Milei, a far-right libertarian economist, who took about 30 percent of the vote, and Patricia Bullrich, a right-wing onetime security minister, who finished with about 24 percent of the vote. As a result, the November runoff matched Massa, the establishment candidate, with Milei, the brash populist outsider, whose campaign promises included replacing the peso with the dollar as the national currency and drastically cutting taxes and government expenditures. A flamboyant, pugnacious figure who was widely likened to former U.S. president Donald Trump and former Brazilian president Jair Bolsonaro, Milei claimed that there had been fraud in the first round of voting and sought to cast doubt on the integrity of the upcoming runoff. Some pundits characterized the electorate as being divided between those who were angry at what they saw as the political establishment’s failure and those who were afraid of the radical transformation that Milei promised. In the end, Milei was the big winner, taking some 56 percent of the vote, compared with about 44 percent for Massa, in the election on November 19.