Is Argentina about to tank?

Is Argentina heading for another of its famous busts? The Economist seems to think talk of impending doom following recent investor jitters is unwarranted, but warns that without a change of direction in policy, things could get shaky.

Having scratched its head over Argentina’s sustained 9% growth rate despite its rejection of neo-liberal economic orthodoxy, the magazine has now joined a chorus of voices – including the S&P index, which recently downgraded Argentina’s credit rating from B+ to B – that suggest Argentina’s economy is headed for danger.

Argentina’s president, Cristina Fernandez de Kirchner, has had a tough year. She stared down a three-month farmers’ strike over increased export duties, only to have her own vice president dump the policy in a nail-biting senate vote that had half the country glued to the TV as though it were showing a River-Boca match.

Rising prices are as hot a topic as the weather among Argentina’s highly inflation-sensitive population. The government’s determination to manipulate inflation data – INDEC’s official rate is 9% so far this year, though reliable estimates set it at around 25% – may keep some of its debt repayments down but is met with increasing indignation by Argentine consumers.

The Economist’s advice is that the government reduce its enormous energy and transport subsidies. But with Argentines enduring increasing discomfort in the hip-pocket region, it’s hard to imagine the president, who is fast losing support among her previously disciplined Peronist party colleagues, visiting that kind of medicine on a fed-up public.

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