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Mendoza, the Prototype Province

Mendoza, the Prototype Province

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MENDOZA, Argentina – Talk to the people in power here, in an Argentine province that has global name recognition courtesy of wine, and you start to remember a memorable moment from Charles Dickens:

“‘Annual income 20 pounds, annual expenditure 19 pounds and six pence, result happiness,’” says Mr. Micawber in “David Copperfield.” “‘Annual income 20 pounds, annual expenditure 20 pounds and six pence, result misery.’”

Such has been the agenda of Mendoza Governor Alfredo Cornejo since his election in 2015. In a country where heavily indebted provinces have too often drained central government resources and provoked financial instability, Mr. Cornejo’s Mendoza is instead a provincial prototype for the kind of fiscal responsibility and cultural change Argentine President Mauricio Macri preaches.

“From day one, our governor told us we had to set an example, cutting our own salaries, reducing staff, cutting the number of ministries, and most importantly, getting to a balanced budget,” Lisandro Nieri, the province’s finance minister, told me in an interview. “We have to make every peso work for this province.”

The numbers tell the story. In 2015, Mendoza inherited an annual budget seven percent overspent. In Mr. Cornejo’s first year, the deficit fell to two percent. Last year, he balanced the budget. This year, despite the country’s recent financial turmoil, Mendoza expects a small surplus, which will help boost spending on critical infrastructure needs.

To achieve the reductions, Mendoza confronted a bloated state sector, cutting thousands of jobs, cracking down on absenteeism by public employees and negotiating sustainable pay rises, despite legitimate fears of inflation among labor unions.

The Mendoza model, however, is not easily transferable, as even the governor acknowledges.

In an interview, Mr. Cornejo told me that Argentines were unwilling to absorb the short-term costs of lower spending. “The world at large looks at Argentina in the medium-to-long term and sees the opportunity we represent,“ he said. “Our people see a transition that is painful, short-term, much higher bills for electricity, gas, water, having to adjust to reality, life after decades of populism.”

Mr. Cornejo, the leader of Argentina’s Radical party, is part of the president’s Cambiemos coalition. He has urged a more gradual reduction to public subsidies nationwide. Nevertheless, Mr. Cornejo has been a stand-out supporter of Mr. Macri’s agenda, advising the national government –  and setting a powerful example.

Going forward, Mendoza hopes to harness substantial private sector investment to expand and diversify the province’s economy, while containing the growth of the local government.

“We believe strongly in public-private partnership,” Mr. Nieri, the finance minister, said. “Whether it’s the wine industry, or the energy sector, or construction, or our mineral wealth, we have to recognize that the government cannot change the lives of ordinary people without the private sector at our side, maybe leading in many areas.”

That kind of thinking is new to Argentina. But Mendoza is an export-oriented region aware of its global competitors. In the Uco Valley, south of Mendoza City, communities have flourished in recent years because of the expanding wine industry, and the success of Malbec, Argentina’s signature varietal.

Mr. Cornejo, who grew up in a far poorer Uco Valley, recalls riding his bicycle as a child through empty land that now houses some of the world’s best vineyards.

“We can change our province, and our country, I’m convinced of it,” Mr. Cornejo told me. But it won’t happen overnight, he added. “It may take two decades, even three. And we will all have to be patient, so much more patient than we have ever been.”

David Smith, a former foreign correspondent and UN diplomat, is a special contributor to the Latin American Program’s Argentina Project  at the Woodrow Wilson International Center for Scholars.

About the Author

David Smith

Team Leader, UNDP-UNEP Poverty and Environment Initiative, UN Environment Programme
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