The approaching storm

Argentina about to realize that limits really do exist

The Di Tella University number-crunchers say there is a “98 per cent” chance of Argentina going into recession well before the year is out. Their counterparts in Tucumán U say the recession started last November, soon after Cristina won over half the votes because people assumed that thanks to her the economy would keep barrelling along for a long time to come. Such gloom is understandable. Industrial output is faltering. The tiny foreign exchange market is in turmoil; in an effort to calm down irate compatriots who think the government’s campaign against the US dollar is not merely malignant but also hypocritical, Cristina says that she will be more than happy to swap the three million or so greenbacks she admits to having tucked away in a bank for pesos.

The former economy minister Roberto Lavagna is even more pessimistic than the Di Tella people: yesterday, in an article in Clarín in which he decried the government’s economic incompetence in scathing terms, the man who is credited with doing more than anyone else to get the country out of the hole into which it fell when the currency board broke apart raised the spectre of a new “rodrigazo”, the word coined to describe the shock treatment that was applied by one of his predecessors, Celestino Rodrigo, back in 1975, who tried to restore order to a wildly chaotic situation in one fell swoop. From a mathematician’s point of view, the drastic measures Rodrigo took made sense: from everybody else’s, they could hardly have been crazier. As a result, Argentina ran headlong into a brick wall.

Cristina is not an economist. But then neither are Barack Obama, David Cameron, Angela Merkel, François Hollande and most other presidents or prime ministers. However, while Cristina’s equivalents elsewhere are surrounded by people who presumably understand more or less how modern economies work, she has to rely on the advice of a bunch of amateurs, individuals like Guillermo Moreno, an ironmonger by trade, and the relatively young Marxist academic Axel Kiciloff, a man who has made it clear that he has nothing but contempt for such antiquated and reactionary bourgeois notions as “legal certainty”, in other words, the rule of law.

Encouraged by such people, Cristina seems to have come to the conclusion that, given the circumstances, she should continue on her present course, keeping her foot on the accelerator, and pay no attention to the warning signs that are flashing all around her. That was what Isabel Perón did until she took it into her head that it would be better to slam on the brakes and attempt a U-turn, but by then it was already far too late. Unless we are very lucky, Cristina is about to give us a repetition of Isabel’s performance. Failing that, she will just press on regardless, a choice that could prove equally disastrous.

It should not have come to this. Well-managed, Argentina’s economy, rich as it is raw material resources coveted by China, India and other “emerging” players and blessed with a population whose expectations could hardly be lower, would be comfortably placed to ride out the storm that is brewing in other parts of the world. But instead of taking full advantage of the remarkable window of opportunity that opened thanks to sky-high commodity prices and the huge amounts of investment capital available in the international money markets, the Kirchnerite government preferred to “build power” by going on a frantic spending spree, grabbing whatever was in reach, such as farmers’ income from exporting soybeans, private pension funds, the Central Bank reserves and Repsol’s share of YPF — in order to fuel its increasingly expensive political machine. The upshot is that Argentina, far from standing aloof while much of the rest of the world slides into a recession that could be far deeper and longer lasting than even the gloomiest prophets predict, is in danger of plunging into an even worse one of her own making.

Like most of her counterparts abroad, Cristina has taken to blaming others for the country’s economic woes. Though what has happened elsewhere in recent months may have had an unhelpful impact, Argentina would be in trouble even if the global economy continued to enjoy excellent health. That is not to say that Cristina’s government has nothing in common with those in the now crestfallen “rich world”. They all contrived to kid themselves that the good times would last forever, that thanks to the latest in a long line of “new paradigms” there was no need to worry about rainy days to come.

Cristina has her “model”, a slightly modified version of the ones most populist governments have favoured, and the North Americans and Europeans have theirs which, like Argentina’s, are based on the optimistic belief that growth is normal and recessions, even mild ones, are anything but, so all politicians needed to do was ensure that more and more people got what they were allegedly entitled to. Unfortunately, as millions of North Americans and Europeans are currently finding out, limits really do exist. A large number of Argentines are in the same boat: inflation is eating into their purchasing power, with prices going up faster than anywhere else apart from Venezuela and Zimbabwe, farmers are rebelling, trade unions are getting ready for a winter offensive, and middle-class city dwellers have begun to stage pot-bashing demos that could soon acquire alarming proportions.