Economics is an uncertain science (or is “art” the right word?) at the best of times but charting Argentina’s economic course for this year seems especially hazardous because both politics and litigation are entering policy-making as random factors. The litigation largely concerns oil (both a potential legal conflict with Spain’s Repsol over cancelled Patagonian oilfield concessions and the pledge to sue oil exploration companies straying into Argentine South Atlantic waters) — as President Cristina Fernández de Kirchner correctly said in her State of the Nation speech at the start of the month, litigation is seriously underestimated as a complication for business decision-making but she did not add that this complication can cut both ways. To the degree that litigation mushrooms (at the expense of legal security), the Argentine economy becomes a hostage to fortune.
As for politics, the complications lie far less with a helpless opposition than within the government. The enormous protagonism enjoyed by Domestic Trade Secretary Guillermo Moreno (with Deputy Economy Minister Axel Kicilloff advancing rapidly in the background, not always in harmony with Moreno) often leads to the assumption that the battle is already won by the hyper-interventionism associated with that pugnacious official but the jury is still out on whether Moreno is being given free rein or enough rope to hang himself — if his methods succeed, the glory will go entirely to the CFK administration but if his experiments fail, he alone will fall. The Central Bank charter reform cleared by the Lower House last week sends out a more ambiguous message on the direction of economic policy than emerges at first sight. The enhanced ability to turn Central Bank reserves into Treasury funding might look like pure gain for state omnipotence but if the reform’s real purpose (as suggested by the centre-left opposition) is to use reserves to pay debt and thus re-enter global capital markets, a more pro-market (or at least mixed economy) line will prevail — a line advocated by Economy Minister Hernán Lorenzino and his predecessor Vice-President Amado Boudou before him.
Various ingredients (a more populist and a more leftist Peronism and also a more orthodox approach) thus go into the cocktail with various policy mixes possible — and also outcomes. While hardly anybody is expecting the halcyon years of the last decade to be repeated, 2012 could be moderately successful, mediocre or semi-disastrous according to the decisions taken — among other factors.