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Friday, February 18, 2005

Argentina's Inexorable Habit of Dissapointing

Argentina's economy has grown at nearly 9% for the past two years with additional growth forecast for this year... Meanwhile, the Government's "canje" or trade forced upon bond holders (holders of argentine govt debt) with the rather unseemly ultimatum "we've defaulted and if you want anything back accept getting a lot less" has largely met with reluctant acceptance on the part of bondholders...Argentina-watchers are tempted to declare a victory for the Government in its armwrestling with creditors.. even the Wall Street Journal which has made a habit these past few years of berating Argentina is turning a gentler eye on argentina as of late.

however the inescapable fact remains: argentina a country that in the 1920s was one of the ten largest economies in the world barely scrapes the top 100... poverty pervades argentina...although declining with respect to its peak in 2001-2002 i estimate half of argentina's population is poor... analyzing argentina's economic "development" we observe it is nothing but underdevelopment since the end of World War I.. there are peaks and troughs but overall argentina's economy has been on a fairly consistent downward spiral for about 85 years!.. a little economic growth now and then offsets large contractions much as the current growh compensates for some of the huge contraction the economy experienced during the 2001 devaluation (where in dollar terms the economy shrunk something insane like 200%).. but the triumphalism both by some argentine officials and in the foreign media is irresponsible..

the foreign media in particular fails to comprehend argentina and is largely made up of the same "journalists" that during the Menem administration's heyday in the 1990s applauded a by all accounts corrupt government that indebted the country heedlessly with IMF/United States and international financial sector complicity; in essence the same governtment that failed to take the necessary steps to preserve the wellbeing of its people.. the foreign press at the time,led by the usual free-capitalist loving stalwarts the Economist and Wall Street Journal, raved and gushed about Argentina until it was far too late.. they failed to raise timely warning bells about the country's huge indebtedness and unemployment which soared from 10% to nearly 20%!.. when Argentina inevitably collapsed the foreign press was quick to point fingers anywhere but inwards... my point, and i'm sad to make it, is be very cautious and don't believe the hype...

none of this is to imply that Argentina cannot get its house in order and build a more solid economy for the benefit of all its people... the potential for solid economic gains exists.. however, given the lack of acumen displayed by most of its political class and the entrenched corruption permeating the society one must be extremely cautious....certain attitudes and practices, cultural and social, anathemic to the development of capitalism are now engrained within argentine society... furthermore, the weakness and lack of autonomy inherent in its democratic institutions (for example the judiciary) act as drags on progress...even the harsh events of 2001-2002, unbelievably, have not shaken society's ill foundations.. these foundations, in existence for about 100 years, must be changed before stable progress can become a reality for Argentina..

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