September 20, 2014
Crisis in perspective
As another post-devaluation week begins today in a new month with scant chance of being any less frantic, now might be an appropriate time to put the current atmosphere of crisis in perspective. If last week closed with reports of beef prices rising by up to 20 percent (possibly because of recent rainfall as much as the ongoing turmoil), it should be recalled that in mid-1989 monthly inflation was close to 200 percent — if Central Bank reserves closing last week on 28.1 billion dollars (as against 375 billion in neighbouring Brazil) sent many alarm-bells ringing, most people have doubtless forgotten that 25 years ago Raúl Alfonsín handed over the presidency to Carlos Menem with just 400 million dollars in Central Bank coffers. That crisis persisted for a couple of years but eventually gave way to a dynamic half-decade which did nothing to prevent (indeed quite the contrary) a much worse crisis in 2001-2. That was followed by an even bigger boom over much of the past decade which nevertheless has not spared us the current problems. In short, the entire past quarter-century can be seen as a cycle which will doubtless continue (at least until Argentine economic policy learns to be anti-cyclical).
The whole currency problem also needs to be seen in perspective — everybody seems obsessed with the perceived lack of dollars but there is also a real economy out there with its potential intact. And here we are not just talking about such obvious areas of abundance as soy (also a big factor in the currency tussle given the speculation of this eternally weepy sector) — with currency curbs in full force last year (before last month’s partial relaxation) and with the real estate market in this city at least undeniably crippled as a result, cement deliveries in Argentina still managed to reach a record 12 million tons.
None of this means that we should be indifferent to inflation or relative prices or various other problems which are probably more significant than the dollar but, like any major economic shift, a devaluation always brings opportunities as well as problems.