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James Skinner
Buenos Aires is Rome, Paris and London all built into one.
September 2001
Written by James before Argentina hit the skinds in December 2001

Tango Romeos

Such is the translated description by an obscure twentieth century journalist of one of Latin America’s richest and most advanced countries in the southern hemisphere. Blessed with decades of European immigration, ‘Buenos Aires is Rome, Paris and London all built into one. This is a land of immeasurable wealth, spiced by a populous with a high level of education and intellect,’ he went on to say. For more than a century Argentina had enjoyed the harvest of it's ‘Pampas’ and the fruits of its industrial development.

Since declaring itself independent from Spain in 1825 Argentina had grown from strength to strength. For many years, it has been one of the most developed manufacturing sectors of Latin America. Coupled with fertile lands producing a high level of agricultural products as well as rich in oil deposits, the Republic seemed to prosper in a self-sufficient manner, unique in the modern world. So what has gone wrong?

At this moment in time the country owes its soul to the financial devil. Successive governments over the last few decades have allowed the country to reach, at one stage, absurd figures of inflation (2000% in the 70’s) as well as fall into an external debt that now stands at billions none other than 44% of its GDP! Any modern corporation in today’s capitalist environment would have placed its staff on the dole, sold off what ever remained of its fixed capital and declared bankruptcy years ago. But a nation is not a company.

‘Argentina has been in financial trouble, on and off, for 70 years’ said Paul O’Neill, secretary of the US Treasury. ‘We’ve tried to act as their Chief Firemen when we should have been getting rid of the Fire Department,'he added. His statements came at the height of negotiations with the International Monetary Fund as Argentina tried to reach agreement to bail out of yet another economic mess. The recent announcement of 8000M dollars of aid by the IMF on the condition that the ‘zero deficit’ law is enforced over the next few months is a step in the right direction.

But Argentines are famous for accepting loans and then reverting back to the ‘happy go lucky’ lifestyle until the money runs out. ‘It’s a very rich country’ says Walter Martinez, a forty-year old immigrant hairdresser from Buenos Aires who has now returned to Spain. ‘But suffers from a long history of mismanagement and corruption,’ he added. Despite a plethora of economic dissertations and thesis written the world over, the fundamental problem probably stared the day the Peronists took over just after World War II.

When Juan Domingo Peron and his wife Evita came to power in 1946, and entered the ‘Casa Rosada (Argentina’s Presidential Palace) they inherited an overflowing national bank balance. Years of administering a warring Europe with vital food supplies had filled the country’s coffers with hard foreign currency. Instead of continuing the economic successes of the past, the new Peronista movement known as the ‘Descamisados’ embarked on a catastrophic series of industrial and social developments that continue to haunt the country to this present day. Indiscriminate nationalisation, rapid industrial growth and lavish social benefits for the workers have resulted in lasting economic and social problems.

The following twenty years were marked with runaway inflation, strikes and high unemployment. Added to these problems have been a series of political upheavals. These have ranged from military coups and sporadic democratic elections to two wars, the so-called ‘dirty war’ against Marxist guerrilla movements and the infamous battle of the Falklands Islands. Since the early eighties, democratically elected presidents have run the country. Each in turn has tried to induce economic stability including privatisation of national industries wage and price controls, cuts in public spending and restriction of money supply. But the financial malaise persists. On the other hand, why are the world financial markets concerned?

Argentina’s main trading partners are Brazil, Mexico and the USA. Building up huge debts with these giants without any signs of relief would have a knock on effect, especially Brazil whose own foreign debt is far from healthy. The cumulative result from a large number of Latino bank balances in the red were bound to ring the alarm bells the world over. The whole network of Latin American stock exchanges would go into turmoil with the obvious consequences north of the Equator. So? Is there light at the end of the tunnel?

The IMF with its loan package, has given Argentina a ‘last chance’ - whatever that means, to put its house in order. This means draconian measures over the next few months that equate to: ‘Not a penny spent without a penny income’. In other words, ‘Zero deficit’ accounting. This is all very well on paper but in practical terms it is easier said than done. To start with, trade unions who control the working forces and provincial governors who manage the regional budgets still have to come to terms with the new measures. To cut wages, pensions, public spending and all other peripheral expenditures in one fell swoop are a hard task for any government. Add to it the ‘machista’ attitude of most ‘Portenos’ (Buenos Aires residents) – ‘these measures do not concern me’ – and you have a formula for further trouble. And what about overall corruption itself? How will this unfortunate virus that has prevailed within the system for decades be eradicated overnight?

Nevertheless, there is no other alternative. If Argentina, on the other hand, manages to survive the diet over the next six months, as stipulated by the IMF, further world assistance would come forward. The World Bank, the Inter-American Bank of Development ,as well as the G7, have all pledged some sort of aid for the future. The mere hint that these latter institutions would be involved at one stage is indicative of the world preoccupation on Argentina’s economic future.
It would be interesting to know what the anti-globalisation organisations that persist in creating havoc for the economic gurus think about all this mess.
© James Skinner. 2001 - our Spanish correspondent

Capt James himself

See the latest editorial on Argentina here

ETA's Woes by James Skinner

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