Is Argentina back up and running?

Article published on July 29, 2003
From the magazine
Article published on July 29, 2003

It is an unpredictable country. As an Argentinian residing in Spain I thought long and hard before agreeing to write this piece. Four months ago I published another Babel article, A story of dependency, in which it pained me greatly to explain how the dominant Argentine class and its political appendages had co-operated in the countrys pillaging by foreign States and companies. Now, although the situation is still critical, things appear to have changed for the better with the emergence of new power relations and a common will helping to build solid institutions and redistribute wealth. In just one month, an unexpected President has gained the support of progressives - which probably amounts to the tacit approval of political associates - but better still, he has won the support of those citizens who had turned scepticism into a cult. Analysing what is going on in Argentina is never an easy task and trying to predict anything that will happen there is just plain fanciful. The country is living proof of what no political science text states but what realpolitik thinkers often say in café debates: in politics, one plus one practically never comes to two. And that is what is so fascinating. It is well worth analysing the social, political and economic aspects one by one, looking at how things stand at the moment and at the ways things can develop in the future.

Suicide Argentine style

So lets start with the social aspects. Argentina hit the headlines all over the world from around December 2001 when the recession emasculated the government which, under pressure from the IMF and its fiscal policies, decided to fall on its sword to save the bankers and financiers. International public opinion was astounded to see impoverished middle classes protesting in the street in a supposedly wealthy country as the private media discussed anomia and chaos but not how the country had got into this mess. In the last decade marked by privatisation and indebtedness, Argentine civil society, which used to be so dynamic, has collapsed. Temptation proved too much as a strong currency led many Argentines to go on buying sprees as they neglected matters of public interest and allowed the social fabric to unravel. Even in the early stages of the crisis, there were citizens who believed in individual success in the midst of the storm. December 2001 was the moment of collapse. The transfer of wealth was so blatant that everyone was affected. Of course this did not mean a pre-revolutionary Argentina as some people believed but it did mean that civil society began to recover its admirable dynamism of yesteryear. Some stopped demonstrating when it became clear where their savings would end up or when they discovered that to organise yourself and make yourself be heard in politics you need to take much bigger steps than going out onto the street. But many others created local assemblies, committees of the unemployed, associations, canteens, local newspapers or put factories that had been closed down back to work. And they began to voice their opinions aloud on public matters and to exercise their rights. Since then every elected governmenthas become aware that governing behind peoples backs is a risky business.

Kirchner effect

Moving onto the political aspects so much and yet so little. The president of Argentina was elected by taking advantage of a spat between the two chiefs of the Peronist party, Menem and Duhalde, who spent a decade at daggers drawn. The support of one of them for the campaign and the fear the other had of an electoral beating (he withdrew his candidacy because polls announced an electoral beating similar to that of Le Pen in the French presidentials) was not the best start. But further back, their paths had been more than dignified so we should not be so surprised by these first steps. Retiring military leaders with human rights actions pending, not renewing the privatisation contracts of companies that failed to fulfil part of their investments, demanding that the International Monetary Fund (IMF) director criticise the IMFs role in Argentina, going all out to combat corruption within the state and speeding up the construction of Mercosur are examples of things that would be logical and to be expected in other countries. But after such malpractice in government, the idea that the state apparatus is really in the service of the national interest and the Argentine people, is more like a nice surprise. Nor should it be forgotten that the government is tackling very powerful interests, which could try to mount some kind of counteroffensive. That will be the time to test the maturity of the Argentine people. Meanwhile let us celebrate these first steps towards the rebuilding of the social contract and the links between citizens and government.

The lifejacket paradox

Now to the economic aspects. This is an open case. Since devaluation eighteen months ago, there has been a slow and cumbersome period encouraging import substitution which destroyed millions of jobs in the previous stage -, especially in the sectors where no large investment is required. And Argentine exports, mainly farm exports, have become more competitive although they still clash with EU subsidies to its producers. Tourism is another industry that has flourished but there is a clearly defined limit to its expansion. These activities create jobs over a long period of time. At this rate it would take a decade to return to the employment and growth rates enjoyed before the crash

And starvation spares no-one. The country needs an industry which can create added value and compete in the world. But to do so it needs credit, which Argentina doesnt have because the financial system has collapsed precisely because it followed the prescriptions of the IMF. The IMF insists on putting forward fiscal adjustments, the same ones that led to the Asian crises in 1997 and 1998, that then spread to Russia, the same ones that blew apart the Argentine model in 2001, as a condition for the release of more credit just when the country was showing signs of recovery. Just imagine, as the boat is sinking,, the captain saying: Ill give you a lifejacket only if you promise not to use it and drown. Would they listen to him again when they have just reached the beach and are only beginning to get their breath back.

South America in a multipolar world

Aware of this difficulty, the president of Argentina is trying to build a strategic alliance with Brazil and Venezuela which is negotiating accession to Mercosur -, whilst it hopes that Tabaré Vázquez, the centre left candidate from the Frente Amplio, will be elected in Uruguay. The specific weight that such a bloc could have in negotiations, even as against organisations such as the IMF, is much greater for the two countries in bilateral negotiations. The good news for Europe is that, if this initiative goes forward, the inhabitants of the White House will have to definitively put to the bed the Americas Area of Free Trade project and trade between the EU and Mercosur could benefit considerably. For that to happen, Europe would need to decide if it wants a multipolar world or not, and if it is prepared to take on the responsibilities which that implies. Although there are reasons to be optimistic it is difficult to imagine how things will pan out in Argentina in the future. Its as difficult as stopping myself looking at my plane ticket, the one which will deliver me home in a few weeks. We all know how infectious enthusiasm can be. One plus one doesnt make two.