For a while it seemed that the Kirchners’ unique brand of mathematics had miraculously enabled Argentina to sidestep and overcome all manner of seemingly insurmountable economic challenges. However, reality, it appears, has finally caught up with the country.
A heady cocktail of dire social and economic conditions — the breakneck depletion of international reserves, devaluation, inflation, unemployment, rising poverty and crime, and a gaping fuel deficit — continue to wreak havoc on the streets and in the financial markets.
History is once again repeating itself in Argentina, albeit under slightly different political and ideological banners.
The results, however, are always the same: with each new economic collapse, the government denounces a whole new herd of scapegoats. This time around, the blame belongs to “financial conspirators”, a heterogeneous group that in the fevered, paranoid minds of the Kirchneristas includes grain exporters, China, the right-wing opposition, multinational corporations, vulture funds and even dollar vendors on Calle Florida.
According to Finance Minister Axel Kicillof and his boss, President Cristina Kirchner, everyone is responsible for preventing the Peronist progressive economic model from working — everyone, of course, except themselves.
In a discussion of the immense challenges facing his ministry late last year, Kicillof stated that “reindustrialisation always brings tensions”. But how is it possible that Argentina, a country that already boasts an industrial fabric that is supposedly the envy of all Latin America, is now talking about the need to reindustrialise?
The reason is obvious: the government doesn’t want to admit that the massive program of state expansion embarked upon in 2003 by Cristina’s late husband, Néstor Kirchner, was a grave tactical error. Investments into the country all but dried up, capital fled and the imbalances in public spending began to grow inexorably.
While granted, overseas investors are not charity workers — they are in business to get rich and their contracts all too often tend to be tipped in their favour — didn’t it make more economic sense to renegotiate with investors, to create a more favourable business climate with sounder rules and regulations, rather than stigmatise investors and lenders as personas non grata?
In Argentina, almost all overseas investment has long gone — indeed, in many cases it was chased away. Now national investors are following suit, having had enough of the threats and restrictions imposed by Kirchner’s ministers. Meanwhile, the peso has lost almost all of its allure, as housewives and oil majors alike grow weary of Argentina’s perpetual monetary instability.
Predictably, the dollar has once again become the refuge of choice for Argentinians, but not due to cultural pressures as Kicillof recently claimed in the daily Página/12. It’s simply the result of the country’s disastrous economic malgovernance. The constant repetition of episodes of devaluation and hyperinflation has led many of the country’s savers to seek whatever means available to protect the value of their dwindling assets.
The problem now is that even many of Argentina’s dollars are fleeing the country. In the face of a desperate shortage of currency reserves, the president of Argentina’s state-owned oil company YPF, Miguel Galuccio, has embarked on a whistle-stop tour to attract foreign investment.
His first port of call was Malaysia, where he offered the state-owned oil giant Petronas participation in Vaca Muerta, South America’s largest natural gas deposit. He has even courted the world’s third biggest petrol major, Chevron, in a bid to convince its management of the potential riches Argentina has to offer.
Inevitably, the doors will soon open to a new coterie of overseas “partners” that will almost certainly be no less imperialistic than Shell and no less greedy than Repsol.
When will the populists realise that the current breed of capitalism is now the same the world over, from the U.S. to Russia and even China? More important still, when will they learn that the people of Argentina should no longer be condemned to live through one lost decade after another, as its government pulls off its last tempestuous tango between boom and bust? Spanish original on LatinoaméricaHoy. Translated by Don Quijones, Raging Bull-Shit.
Enjoy reading WOLF STREET and want to support it? Using ad blockers – I totally get why – but want to support the site? You can donate “beer money.” I appreciate it immensely. Click on the beer mug to find out how:
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.