Argentina Slowly Integrates Back Into World Community

January 22, 2016Argentinaby EW News Desk Team

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At the World Economic Forum, Argentine President Mauricio Macri made positive headway with U.S. and European leaders, according to the Associated Press. Investors and the world community praise his reform approaches, such as slashing export taxes and lifting restrictions off the peso. The center-right president replaced leftist leader Christina Fernandez de Kirchner in December.

The new president has been busy since he took office late last year, and analysts expect his market-oriented approach to have a positive impact on Argentina. His reforms counter Kirchner's worldview of tax and control as viable solutions, and the president wishes to undo most of her policies while seeking to repair relations with investors.

Because of Macri's conciliatory positions, the United States removed an official opposition to Argentina collecting loans from development banks. This is crucial because the U.S. holds most of the equity in such organizations as the World Bank and International Monetary Fund, and loan access will give the South American country the capital it needs to improve the economy. The opposition policy took effect in 2011 in order to place greater pressure on Kirchner in working with U.S. creditors, but to no avail.

Brighter Future

Finance Minister Alfonso Prat-Gay believes the new president's changes will yield growth in the next few years. The government expects the economy to resume growth by anywhere from 0.5 to 1.0 percent in 2016, with 4.5 percent annual growth from 2017 to 2019, notes Reuters. The growth may be small, but it is a step in the right direction when compared to the country's previous status. Argentina is inching closer to stability as Macri woos investors, but primary barriers come in the form of Congress and Kirchner herself.

Potential Hurdles

Kirchner and her late husband commanded a great deal of respect on the political scene, and she retains a wide following, with a son that works in Congress. Moreover, the ruling party does not have a majority in Congress, and the president will need to work with the opposition to get major reforms passed. One presidential priority includes a potential settlement with bondholders who sued Argentina in a New York court under the Kirchner administration.

Argentina owes $20 billion to those bondholders, but the government would have to get approval from Congress before approving any deal. Congress could prove obstructionist at every turn, but Mauricio has already made significant progress in a short amount of time, but the world will have to wait and see if he can live up to his promises.

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