by Benjamin Collinger
BUENOS AIRES – “There are four kinds of countries in the world: developed countries, undeveloped countries, Japan and Argentina,” Simon Kuznets, a Nobel laureate in economics, purportedly remarked. Indeed, Argentina’s development during the 20th century and its government’s recent shift to the political right represent just a few aspects of the country’s strange economic path. As I walk the streets of Buenos Aires, the architecture, frequent political activism, and monuments make this clear. In 1914, Argentina was one of the ten richest countries in the world. Then, the country’s income per capita was 92 percent of the average of 16 rich countries. Yet, the growth of the early 20th century – known as the Belle Époque to locals – did not continue.
As the Economist remarked in 2014, “the real danger is inadvertently becoming the Argentina of the 21st century. Slipping casually into steady decline would not be hard. Extremism is not a necessary ingredient, at least not much of it: weak institutions, nativist politicians, lazy dependence on a few assets and a persistent refusal to confront reality will do the trick.” Argentina’s vacillation between democracy and dictatorship, neoliberalism and populism, and other contrasting approaches to governance damaged the institutions it needed required to develop sustainably. According to the most recent global growth indicators, Argentina lags behind most of the G20 – a group of the twenty richest economies in the world and the name of an annual forum for the leaders of those countries.
Argentina’s 21.5 percent increase in consumer prices since this time last year is the second highest in the world (Egypt’s rate is 31.9 percent). The country lost 2.5 percent of industrial production during the same period, and the unemployment rate stands at 9.2 percent. Jens Arnold and Alberto González Pandiella of the Organization for Economic Cooperation and Development (OECD) explained recently that to improve its position among the G20, Argentina must ensure macroeconomic stability, boost investment and productivity, and make growth more inclusive to boost living standards.
Although many such indicators depend upon internal economic adjustments, Argentina’s stake in international institutions will have a large impact upon its prospects. The country’s inclusion in China’s Asian Infrastructure Investment Bank hosting of the 11th WTO Ministerial Conference in December 2017 are positive steps to that effect. But international investment, involvement in capital markets, and multilateral trade will likely not be popular in a country with a strong consensus around populist policies.
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Yet, the task ahead of President Mauricio Macri’s government is to reinvigorate the country’s economic growth vis-à-vis its global leadership; Argentina’s presidency of the G20 in 2018 provides it the opportunity to do just that. Since Argentina seems to be undergoing a series of gradual changes, observers of the country’s position in the world should ask this question: how will Argentina’s G20 presidency impact its global influence and national politics?
Center-right governments across the world greeted Mauricio Macri’s ascendance to power in 2015. His government’s quasi-rejection of populism has changed Argentina’s relationship to the world. Indeed, at the 2016 G20 summit, Macri remarked that he was happy to leave behind “years of populism that has inhibited our integration with the world.”Recently, Macri’s neoliberal approach earned him a friend in the US and Vice President Mike Pence, save the US Department of Commerce’s preliminary decision to raise tariffs on Argentine biodiesel exporters.
The government called the opportunity to chair the G20 “outstanding recognition” that is a “cause for pride” because the G20 is the world’s “main forum for international economic and financial coordination.” The government will prioritize working groups on Energy Sustainability, Development (whose main goal is implementing the 2030 Agenda for Sustainable Development), and Employment.
“The G20 also deals with trade as a driving force of the global economy, working to strengthening the multilateral trade system with the World Trade Organization (WTO). Likewise, it works on the relation and complementarity of Regional Trade Agreements with the WTO system, the increase in global trade, and the integration of SMEs and lower-income countries into global value chains,” the government stated.
But first, the government will likely have to deal with a great deal of logistical and security issues; Macri has formed an organization to ensure that Argentina avoids the domestic disruptions and chaos of Hamburg in 2017.
The G-Zero World?
The G20 was formed in 1999 in response to the Asian financial crisis at that time to unite finance ministers in emerging economies. Unlike other international institutions, the G20 does not have a headquarters, staff, or offices. As a Council on Foreign Relations (CFR) backgrounder notes, “its leadership rotates on an annual basis among its members, its decisions are made by consensus, and implementation of its agenda depends on the political will of the individual states.”
As a result, the success of any country’s agenda in the G20 depends especially on its clout and ability to drive consensus. Germany’s presidency of the group in 2017 was quite successful by most standards. Chancellor Angela Merkel’s agenda guided the G20 to 14 separate agreements on topics such as financial regulation and information sharing to combat corruption, increasing investment in Africa, reaffirming commitment to free trade, and recommitting countries to reducing carbon emissions.
Argentina may want to continue Germany’s progress on combating corruption due to how corruption impacts its economy. Between 1990 and 2013, corruption cost Argentina’s economy US $6.2 billion. Macri’s recently declared tax amnesty – which catalyzed the declaration of $116.8 billion in assets – and efforts to fight corruption are a positive sign, but have done little to change the perception of corruption in Argentina. In fact, the 2016 Corruption Perceptions Index published by Transparency International revealed that Argentina ranked 95th out of 176 countries in transparency.
Unfortunately, Argentina does not have the same clout as Germany to drive consensus at the G20.
Regardless, the G20 has only showed its potency during crises. During the financial crisis of 2008-2009, the G20 agreed to stimulus measures worth US $4 trillion, implement financial reforms, and reject trade barriers. Yet, As Council on Foreign Relations Senior Fellow in Global Governance Stewart Patrick noted, “The G20, which rescued a global financial system in freefall during 2009-2010, has more recently disappointed, failing to emerge as a steering group capable of providing strategic direction for the world economy.”
Since the financial crisis – an event that generated broad consensus – governments are more reluctant to accept agreements. It is difficult to reach a compromise with so many parties at once. Therefore, Argentina’s confidence in the G20 is somewhat misplaced. As Eurasia Group founder Ian Bremer wrote, it is especially difficult to reach agreements with a group of countries that do “not share a common set of assumptions about the proper role of the state in an economy, or about the value of the rule of law, transparency and freedoms of speech, press and assembly. Competing values create competing interests.”
For example, the Trump administration’s hostility to multilateral engagement – especially with countries who do not agree with its positions on refugees or climate change – could be a prohibitive factor. The G20 simply replicates the division and dysfunction of other international institutions. Macri surely knows this unfortunate fact, and has made steps to form bilateral partnerships accordingly.
When US Vice President Mike Pence visited Buenos Aires in August, President Macri struck a delicate balance between acknowledging the Trump administration’s desire for bilateral ties and agreements, while also applying American leverage to strengthen Argentina’s position in multilateral forums.
“We hope that this December, in the meeting of the World Trade Organization, we will find points which deepen this potential, regardless of the fact that in this moment the United States is not very attracted to multilateral relations like bilateral relations,” Macri said. Pence described the United States’ commitment to helping Argentina join the OECD and praised its leadership in other international institutions.
Perhaps Macri will find a way to successfully negotiate its way to international strength vis-à-vis the US and other bilateral alliances in 2018. If he can exercise influence, his government will push for several priorities.
Separately, the G20 could provide Argentina the opportunity to deepen its partnership with China and other nations interested in making infrastructure investments. China’s investments in Argentina’s infrastructure total US $24.24 billion in energy and transportation, US $12.5 billion for two nuclear power plants, US $1.8 billion for natural gas pipelines and US $1.15 billion for solar projects.” Argentina is also a part of China’s One Belt One Road project: the equivalent of a Chinese Marshall plan for central Asia.
Benjamin Collinger is a sophomore at Trinity University majoring in International Studies and History, and is the Executive Director of The Contemporary. He is studying this semester in Buenos Aires, Argentina.
The views expressed in this article are those of the writer. The Contemporary takes no position on matters of policy or opinion.
The photos above are in the public domain and/or given appropriate credit. The photos of Mauricio Macri were taken by the City of Buenos Aires and are under a CC BY-SA 2.0.