ARGENTINA : CRISES -DIFFICULT HISTORY- CURES

Argentina's difficult road to redemption.

LATE OCTOBER, last year, on Calle Florida, in the center of Buenos Aires, the money-changers were back, offering dollars at black market exchange rate.

In the villas miserias [shanty towns] on the periphery of the metropolis, demand for food hand outs at comedores [soup kitchens] has risen sharply, prompting congress to approve emergency food aid.

Poverty now afflicts 35% of Argentines, up from 27% in January-June 2018, say official figures.  Even the solidly middle-class districts in a city of slowly fading grandeur were feeling the pinch.

''Before local people helped more,'' says Sister Norma Arronda, who runs the Madre Camila comedor in Rocelata, which helps the homeless in late middle-age. ''Now we get fewer donations.''

FOR the sixth time since the 1980s, Argentina is suffering an economic crisis. Memories are still fresh of the collapse of 2001-02, when after a slump the country defaulted-

Defaulted on its debt, savings were frozen, the economy contracted by 15% and the poverty rate reached 56%. In many ways this crisis is less severe and easier to escape. But in others it is more challenging.

It began sometime in 2018 when investors jibbed at continuing to finance the pro-market bust fiscally lax government of Mauricio Macri, prompting a run on the peso.

After the IMF stepped in with a $57 billion loan, the biggest in its history, things seemed to stablise. But with a inflation at over 50%, real wages falling and the economy in recession, Mr. Macri's chances of winning an election on October 27th waned.

''Argentina has exhausted its credit,'' says a former official whom Mr. Fernandez consults. ''We finally have to face reality.''

Many economists think that requires a comprehensive plan to bring down inflation and generate fiscal and external surpluses. A new IMF agreement and the restructuring of private debt are inevitable.

''Exporting more is the only way to get more dollars,'' Mr. Fernandez told a business audience recently, saying that neither controls nor debt were solutions.

His advisers talk, too, of a social pact that would freeze wages, prices, pensions and utility tariffs. That is the way of finessing the indexation of pensions to past inflation, for which the government will lack the money.

Argentina's economic plight is less severe than in 2002. The banks are sound After a belated fiscal squeeze last year, the deficit will be about 4% of GDP [compared with 6.3%], The recession is shallower and the peso is not wildly overvalued as it was back then.

The IMF is more flexible, partly because of the opprobrium it attracted last time. ''I think the politicians are a bit more responsible now,'' says Doniel Marx, who was the finance secretary in 2001.

He worries less about Mr. Fernandez's intentions than about whether the new government's economic plan will be sweeping enough and competently executed. If all goes well, the recession could end soon.

But in some ways, Argentina is worse off than it will was as the beginning of the century. Decades of economic stop-and-go have turned into stagnation since 2010. This partly because so many people now live, one way or another, off the state.

Despite Mr. Macri's tenure, the economy over-protected and many businesses are cheerfully uncompetitive.

''It's sad to see Argentina like this,'' says Sister Norma. ''We have the memory of our parents and grandparents who worked hard and made progress. We lost the idea of work and of values.'' 

The World Students Society thanks, ''The Economist''.