Mauricio Macri's victory in Argentina's run-off presidential election on Sunday may light the way for Brazil. The uncharismatic, conservative mayor of Buenos Aires won with promises to break with the populism of fiery outgoing leader Cristina Fernandez and push through reform in Latin America's third-largest economy. How he fares in his four-year term may prove instructive for the country's larger neighbour as the electorate there weighs who succeeds its own leftist president, Dilma Rousseff.
Macri says he wants to reduce capital controls, open up the economy and attract foreign investment, in part by reaching a settlement with hold-out investors in defaulted Argentine bonds. Warnings that he will cut social spending came from his ruling-party opponent Daniel Scioli rather than Macri's own camp, but not all Fernandez's free-spending subsidies will be sustainable. A fiscal deficit of seven per cent looms by year-end, according to private analysts. Reserves are at a nine-year low. If he is to put his country's economic house in order, there will be pain.
Macri will face an unfriendly Congress and a powerful Peronist political machine keen to defend social gains under Fernandez, who may seek the presidency again in 2019. Recent history is also not on his side: since the restoration of democracy after military rule in 1983, no non-Peronist president has finished his term.
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Of course, there's a chance Macri's efforts lead to massive unrest, failed reform or huge social cutbacks. In that case, Brazilian voters may prefer to avoid adopting Macri-economics 101 and favour a more soothingly populist candidate. But the country, which is facing its own fiscal deficit woes and a recession it may barely be recovering from by 2018, wouldn't be able to afford that.
