I am writing from Buenos Aires.
Argentina is an incredible country. The northern area is a rich agricultural region and toward the west there’s Mendoza, which rivals Napa for quality wines and natural ambience. The Andes stream across the western border and places like Bariloche offer world class skiing. The furthest southern city at the tip of South America is Ushuaia, which has become a launching port for cruises to the nearby Antarctic. The Patagonia occupies the middle of the country and El Calafate, the only glacier in the world that is still growing, is a few hours by air from the capitol. Add to this several thousand miles of coastline along the southern Atlantic, a culture rich in European heritage and phenomenal cuisine.
At the turn of the 20th century, Argentina was one of the five richest countries in the world. Unfortunately, past and recent policies and politics have put Argentina in danger of becoming a Third World nation.
The most radical change began when Juan Peron (Evita’s husband) became president in 1946. Many believe he was the most progressive leader in South America and his social policies changed the face of the country. He was an outright supporter of trade unions, which sprang up in every industry. Social security became universal. Education was provided free to all who qualified. Vast low-income housing projects were built. Paid vacations became standard. All workers were guaranteed free medical care. Worker recreation centers were constructed all over Argentina and were available to people for 15 days a year, at the cost of 15 cents per day, all services included.
By 1954 Peron initiated more than 45 hydroelectric plants and scores of infrastructure projects. Many new domestic industries were started with the assistance of government subsidies. Women were given the right to vote.
These programs were a major leap forward for a South American country during that era, but they faltered because there was no long-term plan to financially sustain these grandiose schemes. Additionally, the government became the sole exporting agency for agricultural products, historically the backbone of the Argentine economy; when farm wages were arbitrarily increased, production fell a staggering 25 percent.
In 1955, the government ran out of money to fund its social revolution and the military, in conjunction with the heavily taxed public, took control of the country. Peron was exiled for 18 years. (In the 1970s, he made a brief comeback as President until his death a year later.)
A democratically elected president, Carlos Menem, ascended to power in 1989 and reversed the nationalization process. Once again Argentina became in vogue and foreign investment poured in to the country. The peso was artificially pegged to the dollar and on paper the country looked financially sound. After the end of Menem’s presidency, the peso was allowed to float and lost 75 percent of its value almost immediately. Domestic bank accounts were frozen and Argentina repudiated more than $100 billion of foreign debt.
The current government under the reigns of Christina Kirchner is described as populist. Agricultural price controls are enacted regularly often resulting in shortages. Some agricultural exports are taxed almost 50 percent while neighboring countries can compete free of export penalties. Gasoline prices are regulated by the government and exploration has virtually halted because foreign investors fear future punitive policies.
Strikes are the norm in Argentina and President Kirchner’s version of income redistribution has been a complete failure. Production in every industry has fallen and the government is fostering a program to keep workers employed with more government subsidies. Recently, private pension funds were nationalized and last week the president announced a series of protectionist tariffs. (The president is also part of an FBI investigation after an airport worker in Buenos Aires accidentally discovered $800,000 in cash smuggled from Venezuela allegedly for her election campaign.)
Fifty years ago, Rogelio Frigerio, paradoxically a former Communist and Argentine millionaire industrialist, defined democracy as “that system where money speaks louder than principles.” This is a fair assessment about the existing situation in many South American countries, but it’s impossible not to be seduced by Argentina.
If Argentina is a template, it should teach us that social change is beneficial provided it is measured and affordable. It also demonstrates that unless the powerful national elite and politicians have a personal stake in change, it is likely to come at the expense of others. Until those in power see themselves as threatened, they will continue to espouse populist programs that often promise much but deliver little. Improvements in people’s lives are essential but they can only be lasting if they are done with structured and intelligent long-term planning.
Tags: Argentina economy
February 21, 2009 at 5:52 pm |
We have developed a political aristocracy in Washington that talk about our pain over their nice lunches in great restaurants. We are told we must sacrifice for the greater good, but that sacrifice is for us the little people and not the political aristocracy. It is only going to change when the little people vote the issues and not just the “D” or “R” behind the candidates name. Populist speakers makes us feel good, but history shows that it is destructive and harmful to the very people they claim to want to help. Peron said wonderful things, but had no plan. Planning is hard work. The same is true today. We are going to help everyone who needs help. That will make some feel good about themselves, but it will, in the end, hurt those it claims to help.