Gregorina Victorica, 86, a retired woman in Buenos Aires, has been celebrating Argentina’s win in the World Cup, which has cheered up the South American country and offered happiness to those who have been negatively impacted by rising costs and the economy.
However, reality is biting with inflation rising towards 100%, strict capital controls, near 40% poverty, and worries of further debt defaults on the horizon. This is despite the light of victory from a dramatic and topsy-turvy final versus France.
“The World Cup is an immense joy that revives us after suffering economic crisis for so long,” Victorica said. “But soon we will have to fall back into reality and face the situations that weigh us down every day.”
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Argentina’s stirring victory, their first since Diego Maradona lifted the trophy in 1986, brought millions on to the streets on Tuesday to cheer the team led by star Lionel Messi, a release valve for frustrations at leaders failing to right the economy for years.
The crowds were so huge and delirious – with some estimates of 4-5 million people on the streets – that the open-top bus parade had to be cut short and the players transferred to helicopters to fly over the city.
But in the hazy hangover of the victory party, Argentines are coming back to earth. The major grains producing country, once one of the wealthiest nations in the world, posted annual inflation of 92.4% in November. The benchmark interest rate is 75%.
Issues of money printing, an artificially over-valued peso and low foreign reserves are sharpening. Investors worry economy Minister Sergio Massa, brought in to fix things in August, is not making enough policy reforms, with an eye on a general election late next year the government fears losing.
“Massa is just trying to play whack-a-mole, he’s desperate to not make any degree of meaningful adjustment ahead of the 2023 elections,” said Ted Mann, a senior emerging markets equities analyst at AllianceBernstein.
“Under Massa, Argentines are can-kickers extraordinaire. They are better at kicking cans than Messi is at kicking footballs.”
Some Argentines are more optimistic.
“The World Cup gives us hope and the desire to believe,” said Osvaldo Hassan, a 62-year-old merchant in Buenos Aires. “It might be the kick we needed to build consensus and move the economy forward.”
Camila Gotelli, 25, who works in marketing said the “historic” win could boost Argentina by attracting more tourism, creating jobs and raising the country’s global profile.
World Cup wins can give a small boost to a country’s economy in the months following, an academic paper from Britain’s University of Surrey found, helping raise exports.
In the short-term it may also give leftist President Alberto Fernandez a lift. His popularity has sunk due to the impact of the COVID-19 pandemic and economic woes, despite clinching a new $44 billion deal with the International Monetary Fund this year.
“For me this is going to favor the government for a few days, because people are distracted,” said Carlos Zarate, a 63-year-old tradesman in the city, adding though that once the southern hemisphere summer was over “reality was going to hit”.
Last month ratings agency Moody’s rapped the country, citing rising central bank debt as a risk to financial stability. S&P cut the rating on Argentina’s already distressed local currency bonds further into “junk” territory.
According to Graham Stock, senior strategist at BlueBay Asset Management, the upcoming election, where a change of government is anticipated after the ruling coalition suffered a severe loss in the mid-term elections last year, could potentially spark favorable economic developments.
However, economic reforms would take time and would require contributions from everyone, not just the soccer team, according to 32-year-old primary school teacher Mara Belén Pereyra.
We celebrate because it symbolizes who we are as a nation, but over 30 people gave their lives for this, she added. “We all need to advocate for change in the economy,”
