Argentina Must Drive Demand to Boost Economy, Fernandez Says

(Bloomberg) --

Alberto Fernandez, the opposition leader who’s a firm favorite to win Argentina’s presidency next month, wants to pull the economy out of its slump by reinvigorating consumer demand, though not at the cost of gaping budget deficits.

Argentines have seen their purchasing power plunge under President Mauricio Macri as a devaluation of the peso drives up inflation, which is now running at 54%. The economy is forecast to shrink 2.5% this year. “Capitalism can’t exist without demand,” Fernandez told Radio 10 from Spain.

Fernandez, who’ll be back in Buenos Aires on Monday after a week-long visit to the Iberian Peninsula, said he struck up a bond during a meeting with Portuguese Prime Minister Antonio Costa because Costa has also put money in workers’ and pensioners’ pockets to propel demand, while avoiding running up big budget deficits.

Fernandez, 60, warned that fiscal austerity can “doom millions of people to marginality,” but, even so, running budget surpluses is the only logical choice. He pointed to his time as cabinet chief to Nestor Kirchner, Argentina’s president from 2003 to 2007, saying that government had several consecutive surpluses.

“Costa’s decision to activate the economy but be very strict with the fiscal accounts is a page straight out of Nestor’s book,” Fernandez said of the Portuguese leader.

Fernandez said businesses who risk capital need their investments to pay off because that creates jobs. But those investments won’t happen if there is poverty, he said, in what marks a big difference with Macri, whose policies favor a supply-side theory of economics known as trickle-down.

In the interview, Fernandez attempted to clarify recent comments about access to Argentina’s Vaca Muerta shale formation in which he said there’s no point in having oil to extract if multinational companies “come and take it away.” He said he wants international investment in Argentina’s shale oil and gas fields, but that the country should develop its own technology to truly benefit from a potential energy boom.

Cristina Fernandez de Kirchner, Fernandez’s running mate and the widow of Nestor Kirchner, provided more clues on Saturday about what the duo would do in power. Debt obligations to bondholders and the International Monetary Fund would be met, but on the condition payments do not compromise the needs of Argentines, she said in a speech in Misiones province.

Calling for a “new order,” Kirchner, who’s also a former president, also said the rich should bear the lion’s share of responsibility for lifting Argentina out of its crisis.

Fernandez said he met British and U.S. investment funds during his visit to Europe. Argentina’s presidential election will be held Oct. 27.

©2019 Bloomberg L.P.

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