It didn’t take Argentina’s new president very long to ruin Lorena Garcia’s business.
Garcia, a money changer, is one of legions whose livelihood was turned upside down when Mauricio Macri, in one of his first acts as president, eliminated a subsidized exchange rate for the Argentine peso.
“The golden age is over,” Garcia said in a low voice, a calculator by her side, as she sat in her jewelry shop on Florida Street. Her district in central Buenos Aires has long been home to legions of “arbolitos,” or “little trees,” as money changers are known here, in a reference to the green of the U.S. dollar.
The buying and selling of dollars has long been an under-the-table, technically illegal side business at shops like hers. Business boomed under Macri’s predecessor, Cristina Fernandez de Kirchner, who kept the official dollar exchange rate at an artificially low level, as much as 50% under the market value, in a bid to restrain inflation.
Before Dec. 16, when Macri’s center-right government abolished the subsidized rate, the peso was officially trading at about 9.5 to the dollar, but shops like Garcia’s were offering around 14 to the dollar. Once Macri’s changes went into effect, the peso’s value floated to about 13 to the dollar, close to the rate on the “blue market,” as the off-books money changers were known.
Almost instantly, some two thirds of the arbolitos closed up shop, by Garcia’s estimate. Although she continues to change money for tourists and informal business owners who keep their cash under the official radar, volume is down sharply.
“This has happened before and arbolitos have always come back,” Garcia said.
The elimination of an official exchange rate was one of Macri’s first acts after taking office on Dec. 10. He made no secret during his campaign of his plans to scrap much of Fernandez’s left-leaning economic policies and wasted little time in doing so, blaming them for Argentina’s dismal economy, which currently suffers from stagnant growth and 28% inflation.
Despite the pain felt by Garcia and other moneychangers, Macri’s policy shifts have generated positive public response overall, pollsters say.
“According to a survey we did for a private firm, we figure that the Mauricio Macri government now can count on 60% support,” said Analia del Franco of the Analogias polling firm in Buenos Aires.
In his short time in office, Macri has slashed high taxes on farm goods, eliminated some export controls and moved to cut a yawning budget deficit caused partially by Fernandez’s expansive spending on social-welfare programs. The red ink this year will equal 7% of the country’s total economic output, economists expect.
Macri has been busy dismantling some of Fernandez’s foreign policies as well. He scolded Fernandez’s former ally Venezuela for alleged human rights abuses at a recent meeting of regional leaders and has reiterated his campaign pledge to improve relations with the United States, a frequent rhetorical punching bag for his populist predecessor.
Among the sectors most pleased with Macri is Argentina’s farm and cattle sector, which chafed under controls implemented by Fernandez that were designed to limit many goods’ access to export markets in a bid to keep overall demand, and thus prices, low for domestic consumers.
“There is a strong optimism,” said Jaime Campos, president of Argentina Business Assn., a leading trade group, in an interview with Clarin newspaper. “We are confident that the government will do things correctly. [Macri has] a team that is well prepared, integrated and that knows the issues.”
Campos also applauded Macri’s efforts to reach out for better relations with Brazil and Chile while “keeping a distance from countries that don’t respect human rights,” a reference to Venezuela.
At the meeting of South American leaders earlier this month, Macri called on Venezuelan President Nicolas Maduro to release political prisoners, including Leopoldo Lopez, the former Caracas borough mayor jailed since February 2014 on incitement to violence charges, which Lopez and his supporters say are trumped up.
Fernandez was a staunch defender of Venezuela’s socialist policies and a close colleague of that country’s late president, Hugo Chavez.
Soon after taking the oath of office, Macri said he would not try to block, as Fernandez did, a 2014 ruling by a federal prosecutor that an agreement between Iran and Argentina regarding the bombing investigation was unconstitutional. The prosecutor said the agreement Fernandez made with Iran shielded certain suspects from international arrest warrants.
Macri also made friends among some U.S. investors by indicating he was open to settling a $100-billion bond default dating back to 2002 by making good on unpaid judgments.
White House aides have been quoted as saying that President Obama is considering a Latin America trip next year that will include a stop in Argentina, partly in recognition of Macri’s stated desire to improve bilateral relations.
In another move cheered by many free-speech advocates, Macri said he will “normalize” the calculation of government economic data, a reference to allegations that Fernandez pressured government statisticians to paint a rosier economic picture than warranted.
Not all Argentines approve of Macri’s market-friendly policies. Although Fernandez herself has been silent, groups of her supporters have organized three marches since Macri took power to protest his changes in telecommunications policy, his upcoming judicial appointments and other changes.
“These economic measures produce the transfer of millions from Argentine workers to large exporters and to financial powers who benefit from the liberalization of the economy [and] put at risk the workers, their savings, production and jobs,” said a joint statement issued by several workers groups closely associated with Fernandez.
And some economists also warn that Macri’s domestic policy changes could exacerbate Argentines’ financial pain, at least in the short term. Few expect the current high inflation rate to moderate over the next few months and some warn that the economy could shrink over the first six months of 2016, before resuming growth by the end of next year.
But Macri says the first dividends of his more market-friendly policies have begun to arrive; he announced this month that private firms had committed $500 million in new investment in energy projects. Foreign oil and natural gas companies by and large stayed away from Argentina’s promising oil reserves during Fernandez’s administration because of her price controls and history of having nationalized energy firms.
“People and markets have reacted positively,” said Mariano Gorodisch, a Buenos Aires-based financial analyst and journalist. “Signs of confidence indicate an improved future.”
Special correspondents D’Alessandro and Kraul reported from Buenos Aires and Bogota, Colombia, respectively.