Taken together, Kirchner's economic policies -- nationalizing private pensions and private companies without offering just compensation to the owners; handing out lavish government subsidies; imposing draconian import, exchange and capital controls; using central-bank reserves to repay defaulted debt -- amount to authoritarian socialism. (According to Latinvex, an online business journal, "Argentina ranks second worldwide in recent protectionist measures likely to affect foreign trade.") Not surprisingly, her policies have led to massive inflation, massive capital flight and a massive black market in U.S. dollars. "In the heart of downtown Buenos Aires," the Financial Times reported last September, "it is hard to walk more than 20 paces without being accosted by hawkers buying and selling dollars." At the January 15 Hudson Institute event, Diego Ferro of Greylock Capital Management predicted that the country was headed for a "self-inflicted crisis" driven by bad policy decisions rather than by external economic conditions. Unless Kirchner changes course, said Ferro, "I doubt that Argentina can reach 2015 in one piece."
Shortly after the Hudson conference, Argentina experienced its largest currency devaluation in more than a decade, despite Kirchner's 2013 pledge that she would oppose devaluation. ("As long as I'm president," she said last May, "those who want to make money through devaluations, which working class people have to pay for, will have to wait for another government.") On January 27, Moody's Investors Service estimated that the Argentine peso would decline by another 50 percent this year, and that the country's 2014 inflation rate would surpass 30 percent. Its total foreign-exchange reserves have plunged below $28 billion, down from $34.8 billion in late September and $52.6 billion in 2011. Ever since its historic 2001-02 sovereign default -- which led to a prolonged exile from global credit markets -- Argentina's main source of foreign currency has been its trade surplus. But that surplus dropped from $12.4 billion in 2012 to just $9 billion in 2013. Meanwhile, the government continues to battle with former creditors -- including private hedge funds and the Paris Club of nations -- over repayment of defaulted bonds.
Kirchner maintained her popularity during the so-called global commodity supercycle, but her approval rating has plummeted since her reelection in 2011, and her ruling coalition suffered big losses in the nation's October 2013 legislative elections. Over the past year, Argentina has been rocked by large-scale anti-government protests, lengthy power outages, serious labor unrest and deadly riots. To quote Moody's: "Although the devaluation may temporarily stem the pressure on foreign currency reserves, it remains unclear what policies the government plans to pursue to address the underlying causes of capital flight, curb inflation and restore investor confidence."
Some nations are plunged into crisis because of outside economic forces -- Argentina's wounds are self-inflicted. In that sense, it's important to distinguish the financial turmoil in Argentina from the turmoil in other emerging markets. "Argentina's problems are considerably more serious than those of emerging countries such as Turkey, Brazil and South Africa," notes the Washington Post, "and have little to do with international markets." Indeed, they have almost everything to do with Kirchnerism. Many of the voters who cast ballots for the leftist president back in 2011 are surely regretting their decision today. They may regret it even more in six months.