Argentina Sacrifices Economy to Ward Off Virus, Winning Praise
When Alberto Fernandez visited Mexico on his first foreign trip since winning Argentina’s presidency, he said that both countries would face the “challenge of globalization” together.
Less than five months later, the respective stances of Fernandez and Mexico’s President Andres Manuel Lopez Obrador to fighting the coronavirus pandemic couldn’t be further apart.
Whereas the Mexican leader has only now started urging citizens to stay at home -- after encouraging them to eat out to support the local economy -- Argentina shuttered social life and imposed a strict stay-at-home policy a week ago, even at the risk of disproportionately affecting the livelihoods of Fernandez’s mostly middle-to-lower class voter base.
Key to that decision was the upgrade of the virus to a pandemic and stark conversations with leaders at the heart of fighting the disease, people familiar with the strategy said.
“The choice is to take care of the economy or take care of lives,” Fernandez said Wednesday. “I chose to take care of lives.”
In Latin America, where huge numbers of people rely on the informal economy to survive, there are no good options for leaders. Fernandez’s decision to go all-in to fight Covid-19 stands out not just for its contrast with Mexico but also with Brazil, where President Jair Bolsonaro has downplayed the risks and publicly clashed with state governors who are taking stringent measures to combat the virus locally.
“This is a make or break moment for Alberto Fernandez to show he’s in control and leading the country,” said Jimena Blanco, head of Latin America political research at consulting firm Verisk Maplecroft. “The worst scenario is to get a disorderly response -- or no response at all -- which is what we’re seeing in Mexico and Brazil.”
Fernandez’s move to put his country into quarantine was deeply influenced by the World Health Organization’s March 11 announcement that the coronavirus was a pandemic, according to a senior government official. Dr. Maureen Birmingham, the WHO representative in Argentina, is in constant communication with the authorities and Fernandez himself.
That decision was reinforced when the president saw cases balloon rapidly in Italy and Spain -- two countries where many Argentines’ ancestors hail from. Prior to his announcement of a lockdown, Fernandez spoke with the Italian and Spanish prime ministers, Giuseppe Conte and Pedro Sanchez, to hear their experiences, the official said. Fernandez developed good relations with both men after visiting them earlier this year. Mexico’s president is by contrast famously loath to travel abroad.
He also wanted to buy time for Argentina’s fragile health-care system by trying to flatten the curve as soon as possible, the official said. The president speaks on a daily basis with the governor of Buenos Aires province and the city’s mayor, where most cases are concentrated.
On Thursday night, the government ordered the closing of the borders to stop even Argentines from going out and into the country until the quarantine ends. At the same time, Fernandez, who has publicly conceded his strategy will put the economy in a bigger hole, has said that he expects cases to peak in the first half of May and is willing to extend the lockdown that ends March 31 if needed.
ARGENTINA INSIGHT: Lockdown, Uncertainty to Deepen Recession
Governments worldwide are adopting their own approaches to curb the spread of the virus, with some countries like Japan that are relatively unaffected taking minimal measures, others including Spain and Italy at the heart of the epidemic in total lockdown, and a third group including Australia seeking to balance economic damage with protecting public health.
While each stance is contentious, in Argentina, a land of chronic financial crisis and fiercely divisive politics, the challenge of tackling the coronavirus is bringing an unusual sense of unity. Fernandez stood together with leaders from different ends of the political spectrum for the March 19 lockdown announcement, a rare display of consensus made all the more unlikely given that the country is enduring a third year of economic crisis and again flirting with default.
Under the Shadow
Beyond purely humanitarian motives, the show of consensus hands Fernandez an opportunity to emerge from the shadow of his vice president, Cristina Fernandez de Kirchner, the two-time former president who was instrumental in catapulting her namesake -- who is no relation -- to his election victory in October.
“A mass external shock that makes things terrible everywhere, instead of just where you are, can be politically useful,” said Daniel Lansberg-Rodriguez, a geopolitical risk analyst who teaches at Northwestern University’s Kellogg School of Management. “The early adopters were often the leaders who were most ready to change the conversation.”
Polls shows a majority of Argentines approving the government’s response.
Still, it’s a huge gamble for Fernandez. While the wealthy can sit out the crisis working from home, that’s not a luxury afforded the less well-off who make up his base. As of 2018, almost half of Argentine workers were in the informal economy, according to the research institute at the Universidad Catolica de Argentina, including jobs like street vendors and household workers.
The government’s financial response to the crisis has attempted to bridge that gap, with measures like extra payments for low-income parents and retirees, a 10,000-peso ($155) transfer for informal and some independent workers in April, and a price freeze on 2,300 essential products.
There is still no guarantee that his harsh measures, also implemented by some other smaller economies such as Chile, Peru and Colombia, will be successful in fighting a pandemic that’s quickly spreading throughout Latin America.
Cases rose to 589 as of Thursday evening, with 12 deaths recorded. Also, with just about 2,800 tests performed this month, Argentina shows a poor testing rate when compared to neighbors like Chile, where President Sebastian Pinera’s government has conducted more than 7,500.
The sudden bipartisan cordiality may not last long either. Yet it still represents a political bargain notably absent in Brazil and Mexico, the region’s No. 1 and No. 2 economies respectively.
In Mexico, Lopez Obrador is taking advantage of his popularity and majority in congress to follow a more Quixotic route, focusing for weeks on preventing an economic collapse before shifting gears Thursday when he called on people to stay home. Bolsonaro has left state governors with no other option than to take the difficult decisions themselves, sending conflicting messages to the country of 210 million.
It’s true the coronavirus offers a distraction for Fernandez, who has yet to unveil a comprehensive plan to take Argentina out of the economic crisis. It also justifies more social spending on his base. Regardless of any political motives, he may have bought Argentina valuable time to fight the virus.
“We saw what was happening in Europe, we had the images in newspapers of Spain and Italy, countries very close to us, that created anxiety and stress in Argentina, and the government went out to attack the situation,” said Juan Negri, a political science professor at Torcuato Di Tella University in Buenos Aires. “He’s trying to anticipate the worst case scenario of a social crisis exploding.”
It’s too early to say if Fernandez’s approach will work any better than those of Lopez Obrador or Bolsonaro. But if it does, he might just have a chance to heal Argentina’s bitter political divide, according to Blanco, of Verisk Maplecroft.
“If steered well, it could cement him as the leader for the population, including people who didn’t vote for him,” she said.
©2020 Bloomberg L.P.