Argentina Down but not Out
By Margaret Piton
According to press reports, Argentina is
on the verge of economic collapse or violent revolution because of its
debt crisis. I returned from Buenos Aires in late November, and during
my brief stay I saw little sign of imminent catastrophe.
Unemployment is high (officially 16%) and
there are signs of economic malaise. One taxi driver said he now
has to work 20 hours to make as much as he used to make in 8 hours.
But the underground economy is large – it includes not just maids and taxi
drivers, but the army of psychotherapists who help portenos (the local
term for residents of Buenos Aires) deal with their angst, and some parts
of the economy seemed to be thriving. At the start of the vacation
period, planes serving the northern resort town of Puerto Iguassu
In some ways Argentina seemed more prosperous
than Canada – the roads that are paved (less than half the total) were
in better condition than many roads in Quebec, I saw fewer beggars in downtown
Buenos Aires than I do in downtown Montreal, and public washrooms
were cleaner than many are here. All the flights and tours I took
were on time, water and food were good not only in the federal capital
but in Misiones, one of the poorest provinces.
Harrods, formerly the largest store on
the famous pedestrian street Florida, is now boarded up, but Galeria Pacifico,
an upscale mall nearby, was crowded. The Buenos Aires Herald
(www.buenosairesherald.com) reported on a proposed tax on individual incomes
over $1 million U.S. a year. The newspaper opposed the
new tax, as well as declining standards in polo.
Argentina is on the verge of defaulting
on its massive ($132 billion U.S.) foreign debt, and last weekend enacted
severe banking and foreign exchange restrictions. Some credit
rating agencies consider that the rescheduling of some debt repayments
at lower interest rates is already an effective default. Original
interest rates on some of the debt were as high as 30%.
According to the highly readable book Bad
Times in Buenos Aires by British writer Miranda France published in 1998,
Argentine society operates on a complex system of favours and
personal connections . Political corruption is widely acknowledged,
and Peronist former president Carlos Menem was released only last month
after many months of house arrest for suspected corruption and arms dealing.
Menem was the president who in 1991 introduced the controversial policy
that linked the Argentine peso one for one to the U.S. dollar. The
policy put a stop to hyperinflation, but also led to a long recession that
shows no sign of ending.
Prices are high in Argentina but also negotiable
in many cases. By paying cash, I was able to get a 10 or 15
per cent discount on hotel bills. An East Indian sea
captain working in Buenos Aires said “Everything here is negotiable.
I was able to spend time on a ranch near San Carlos de Bariloche with riding
and all meals included for $30 U.S. a day.”
Howard Handelmann, a professor of political
science from the University of Wisconsin at Milwaukee who was travelling
in Misiones province, said “in all these Latin American countries it is
hard to see how people manage with prices as high as they are and salaries
relatively low , but somehow they do. I knew one pediatrician who
made most of her money by working as a bilingual translator .”
Salaries in the civil service are low –
the average teacher makes about $400 U.S. a month, and in some outlying
provinces civil servants have not been paid for months. Argentina’s
GDP per capita on a ourchasing power parity basis is estimated by the CIA
to be $12,900 U.S., but 37 per cent of the population is estimated
to live in poverty and earn far less than that.
Under Menem’s government Argentina liberalized
trade and privatized many public services. However, it is still one
of Latin America’s more closed economies. Imports and exports combined
account for less than 20 per cent of the Gross Domestic Product, which
is estimated to be $296 billion U.S. The country is very rich in
resources and has a highly literate population. Descendants of European
settlers account for 97 per cent of the population.
So, while Argentina is clearly in for even
harder times for a while, it would be foolish to count out this large (the
eighth largest in the world in area) and potentially very rich country.