“They are illusions, they are not the solutions they promised…”
This is one of the lines of the song “Don’t Cry For Me, Argentina” from the famous musical Evita by Andrew Lloyd Webber, which was a worldwide success from London to Broadway. Everyone is free to apply these words to the promises that are expressed from time to time by left-wing populists (Peronists) or neoliberalisms in Argentina. The nation that has become a symbol of economic mismanagement to the nth degree.
It is the tragedy of a country that was one of the richest in the world. Between the last quarter of the 19th century and the great crisis of 1929, Argentina had become one of the ten wealthiest countries, with a higher per capita income than France. Already in 1970, the country had an economy that was twice as rich as Chile, and today it significantly surpasses it.
It became an “avant-garde” political laboratory since 1946, when Juan Peròn launched the movement that mixed elements of socialism and fascism; a “judicialist” ideology, a mass consensus based on unions, clientelistic government spending, welfare policies and protectionism. Peronism despised by neoliberals but proving unable to overcome it. Before this round of elections that brought the libertarian-capitalist Javier Milei to the presidency, a more classic or “normal” experiment in liberalism had taken place from 2015 to 2019 with President Mauricio Macri.
Macri was the darling of the International Monetary Fund and yet he did not modernize the country or attempt to truly repair public finances. After him it was the turn of the Alberto Fernandez-Cristina Kirchner couple, the return of Peronism with its eternal promises of welfare: the obligation to protect the weakest, the declared fight against poverty and unemployment. In the background is the usual Argentine “landscape”: mountains of foreign debt to be repaid, emergency loans from the International Monetary Fund. The shocking contradictions between hyperinflation, ruined public finances and the wealth of resources: no longer just agricultural, but also energy such as “shale gas” and then the lithium for electric batteries that the rest of the world covets. In this sense, Argentina remains, as it was a hundred years ago, a kind of El Dorado, a land of inexhaustible gifts. Unlike a century ago, however, few Argentines are thriving from it.
I’ll go back to my travel reports from December 2019: I was in Buenos Aires at the time of the previous change. So from right to left. It happened in a Latin America even more unstable than today, plagued by protests, governments thrown off the streets or stalled, increasing violence from drug addicts and migrant exodus. Even back then, Argentina was a positive role model in at least one respect: its democracy of change works, the memory of the cruel dictatorships is now limited to ritual places, such as the Park of Remembrance as a homage to the disappeared. That December four years ago, before the pandemic, Buenos Aires celebrated the change in leadership from Macri to the Peronist duo Fernandez-Kirchner. Not really new: She, Cristina, has already been at the top of the country twice. The transfer of power was orderly. Although Buenos Aires is “the world capital of demonstrations” – there is rarely a day without parade marches in front of the Casa Rosada in the Plaza de Mayo – Macri’s downfall took place in the most orderly manner possible, at the end of his term and with universal electoral support. The same applies to Milei’s victory so far.
Without this important aspect of orderly and peaceful change, no one would think of using Argentina as a role model: in December 2019, it experienced its eighth national bankruptcy and had already “used up” 30 rescue operations from the fund in its turbulent history. international monetary system. One of the numerous foreign debt defaults in 2001 left deep scars and bitter memories even in the wallets of many Italian savers. Fight against poverty and inequality: a common goal united Pope Francis (who had a favorable influence on the return of the Peronists to power in 2019) and the first Minister of Economy appointed by the Fernandez-Kirchner couple: Martìn Guzmàn, former professor at Columbia University in New York York and student of Nobel Prize winner Joseph Stiglitz. Peronism returned to government in 2019 with recipes accepted by left-wing populists around the world: Stiglitz was then one of the masterminds of the 5 Star Movement in Italy.
In my 2019 travel reports, Argentina welcomed me “like a Weimar Republic, but without the shadows of lurking totalitarianism.” In common with early 1930s Germany – apart from the many immigrant German Jews – it has decadent charm, cultural vitality, high average education, bookstores, museums, art galleries and cultural centers everywhere. Also common to Weimar were hyperinflation and rampant devaluation. To curb capital flight, the government had to impose drastic currency restrictions: a maximum of two hundred dollars per person per month. The foreign exchange market offered me a small insight into the Argentine reality.
The business center of Buenos Aires, right around the presidential house Casa Rosada, houses the headquarters of all major banks. Monumental buildings, mausoleums of inefficiency, with overcrowded and useless staff, where they refuse to exchange dollars if you are not a customer, exactly when they should be providing relief to tourists bringing hard currencies; Instead, they themselves direct you to small street agencies where bootlegging is carried out. But the true severity of this crisis cannot be perceived if you are in the center of Buenos Aires: among the rich, who live in the beautiful districts such as Recoleta, La Isla Norte and Palermo with their Art Deco buildings or in the new skyscrapers from Puerto Madero, have technically well-proven cases of tax evasion in the bank accounts of the Uruguayan tax haven. The rich landowners of the Pampas, who export more wheat to the world than Australia and have also conquered the Chinese pig market, know how to park their earnings abroad in dollars, euros or renminbi. Even the lower middle class has age-old tricks: they buy apartments for cash or invest savings in foreign cars that sell used cars more expensively than new ones, “miracles” of hyperinflation à la Weimar.
The dollarization of the Argentine economy is not a recipe invented by Milei, but rather a daily practice: whoever can protect themselves from the destruction of purchasing power and savings with a hard currency. Four years ago, real poverty began to appear in discreet forms in central Buenos Aires: a few homeless people, Bolivian and Venezuelan immigrants, children asking for emeosin. But it is “big” Buenos Aires (12 million in the outer metropolitan area, compared to 3 million in the city) that harbors so much poverty; In the countryside it is even worse. Nothing has improved in the four years of left-wing populism. While a third of Argentines lived below the poverty line in 2019, today almost half of the poor are (according to official statistics, for what they’re worth). Back then inflation was 55% per year, today it is 143%.
The failure of another Peronist experiment was accompanied by another national bankruptcy, which became official in May 2020 when the government of President Fernandez defaulted on a tranche of interest payments due on a total debt of (then) 65 billion. If you’ve lost track of Argentina’s bankruptcies, you’re in good company.
This financial catastrophe has not stopped the Peronists from joining forces with other forces on the Latin American populist left to launch an unlikely “attack on the dollar.” It happened in January of this year. Ten months ago the summit of Latin American and Caribbean countries took place in Buenos Aires. It marked the culmination of a new hegemony of the populist left in the government of the three largest countries (Brazil, Mexico, Argentina) and many others.
The summit strongly reaffirmed the goal of emancipation from the United States. In this context, an old common currency project between Brazil and Argentina has been revived: a way to reduce dependence on the dollar. Even if the new master of the continent is now China. The summit in Buenos Aires in January brought together the countries of Celac, which stands for Comunidad de Estados Latinoamericanos y Caraibenos. Lula da Silva’s Brazil and Fernandez’s Argentina dominated the action at the Celac summit. The idea of a single currency was presented as an experiment started by two people and eventually proposed as the currency of the entire Mercosur, the economic community of South American countries. The motivations for this project – not new – are reminiscent of those that inspired the euro: to facilitate trade between neighboring and similar countries; Reduce costs; finally and above all, eliminate the dependence on a third currency such as the dollar. The criticism of this project came primarily from the Brazilian side in January. Fabio Ostermann, a centrist politician close to the Brazilian business community, called the project “pointless, the equivalent of opening a joint bank account with an unemployed friend who owes everyone” (a not-so-friendly reference to Argentina). At the very least, the single currency project could be seen as a distraction. It did not address the causes of economic disruption that have nothing to do with the influence of the United States or the dollar. Argentina’s inflation, for example, is due to populist policies of Peronist inspiration: simple public spending, social donations, financed by a central bank that prints money.
However, the idea of reducing dependence on the dollar was well received by Beijing – which is seeking “sdollarization” in trade with Russia, for example – and in this sense the Lula-Fernandez project was in line with the interests of the new dominant superpower this part of the world. That’s why there was a sequel: In South Africa, Argentina was welcomed among the six enlargement candidates at the BRICS summit in August. In South Africa there was renewed talk of “Sdollarization”.
Now the pendulum of change is swinging in the other direction. Milei’s victory is the inevitable consequence of the economic disasters caused by Peronism. The turnaround is spectacular: Argentina is taking the opposite path to Mexico and Brazil and is once again dreaming of a liberal experiment, this time in more radical forms than Macrì. For this reason, comparisons with Donald Trump are risky. Trump was a libertarian in his proclamations, but his economic policies during the pandemic were characterized by protectionism (tariffs) and massive aid for families and businesses. The U.S. federal deficit and national debt have increased, not decreased, under Trump. Milei’s language seems to be inspired more by the theoretical father of neoliberalism, the (late) Nobel Prize winner Milton Friedman, than by Trump. His rise to power has been greeted with caution abroad, including by the North’s large neighbor, the United States. Immediately (Pope Francis called Milei to congratulate him on his election victory), financial markets welcomed his victory and some Argentine stocks rose. His proposal to “dollarize” Argentina, abolish the peso and have the central bank adopt U.S. currency, faces a significant obstacle: How to buy the necessary dollars? By some estimates, Milei would have to convince the rest of the world to lend him another $30 billion since government coffers are empty – or worse, in the red.
The skepticism is understandable, especially since Milei does not have a parliamentary majority. The Argentines who voted for him seem to be moved by desperation: after so many failed experiments, some of them really want a leader capable of “turning the country around like a sock.” Since the time of Evita, the real one, Argentina has lost touch with economic reality, the rules of the market and the constraints of the public budget.
November 21, 2023, 7:03 p.m. – modified on November 21, 2023 | 9:48 p.m
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