Macri Goes to Davos

Argentina’s new President, Mauricio Macri, is in Davos for the World Economic Forum, where he hopes to persuade investors and world leaders that Argentina’s economy has bottomed out and is poised for renewal. The Financial Times reports that he plans to meet face-to-face with UK Prime Minister David Cameron, with whom he hopes to start work on resolving the long-running clash over the contested Falkand Islands. Such an agreement could, depending on its terms, play very well back home.

Macri is also rumored to be preparing an offer to a group of holdout vulture funds, headed by prominent U.S. investor Paul Singer, which could be announced as early as next week. Given that an important Argentinian opposition leader, Sergio Massa, has agreed to join Macri on the Davos trip, some observers believe Macri and the hedge funds may be closing in on a deal.Macri’s hopes for Argentina are admirable, and Barclay’s economists said his devaluation of the Argentine peso was “perfectly orchestrated.” But even the most able sailors need favorable winds. World economic conditions aren’t very good for anyone right now, least of all commodities exporters like Argentina. In a world flush with raw materials and short on demand because of China’s slowdown, it’s going to be difficult for Argentina to regain its footing. And as we’ve noted before, Macri is only one part of a corrupt and inefficient government. It will take years for him to reform Argentina’s bureaucracy, particularly in the face of an opposition-controlled Congress.On the other hand, things have been very bad in Argentina lately, and Macri may find enough low-hanging fruit (restructuring and reducing the debt, attracting foreign investment) to stabilize the economy and keep his constituents sated until the global storm has subsided. Reports from the end of last year suggested that while Macri’s reforms are creating some discontent, many Argentines understand the depths of their country’s problems and are willing to give the new president some time. We hope so, because he’ll need it.