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September 1, 2014
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Waiting for the cheque

Though in Chicago soybean prices keep climbing, Argentina will be hard put to chalk up another trade surplus.
By James Neilson
For the Herald
Soybeans almost saved Cristina’s government. Will shale gas and oil permit her successors to do a better job?

It takes a huge amount of talent to impoverish a country that is overflowing with natural resources and is inhabited by people whose relatives elsewhere tend to be well-off by international standards, but Argentina’s ruling elite has managed to do just that. For reasons many outsiders find unfathomable, since the Second World War most governments have contrived to leave the country even worse off than it was before cheering crowds gave them an enthusiastic welcome. Cristina’s is no exception. When she finally hands the presidential paraphernalia to her successor, the economy will be in a far nastier mess than it was back in May 2007, what with inflation roaring ahead, the Central Bank’s reserves running dry, energy costs soaring and, as seems more than likely, hungry mobs roaming the streets looting whatever supermarkets still have anything worth taking left on their shelves.

Argentina has long been a land of boom and bust. When things are going well, the political bosses decide that at long last their compatriot up there in heaven has decided to let them have what is theirs by right and gleefully set about spending whatever money comes their way. That is what Néstor and Cristina did. Thanks to China’s appetite for soybeans, they raked in billions of dollars but somehow there was never quite enough. Though in Chicago soybean prices keep climbing, Argentina will be hard put to chalk up another trade surplus.

Life would be easier for Cristina, Axel Kiciloff and the rest of them if the despised foreign financiers agreed to lend them some money, but they, and most businessmen apart from some adventurous oilmen, prefer to wait until another lot are in charge. A few days ago, Cristina said the “power centres” were reluctant to help her because they disliked her patriotism, but the truth is they suspect she and her friends would simply squander or steal most of the cash made available and then return to ask for more.

Soybeans almost saved Cristina’s government from what now looks certain to be its fate. Will shale gas and oil permit her immediate successors to do a better job? Experts in such matters tell us there are enormous deposits in Neuquén and, perhaps, Chubut and other parts of the country. If they are as large as is being reported, Argentina should be well placed to become the Norway of Latin America, getting enough money from Vaca Muerta and the rest of them to live in comfort for many years to come.

Were Argentina a developed country whose institutions worked well, finding yet another source of income could be a blessing, but in the light of its own experience and that of other badly governed countries that have plenty of oil, such as Venezuela and Saudi Arabia, scepticism is in order. Oil wealth is often a curse because it is wonderfully easy for the ruling clique or family to appropriate the proceeds in the name of the people or the ideology that happens to be in favour and then use it to feed herds of white elephants. The last thing Argentina needs is yet another corrupt and self-satisfied government with its hands on tens of billions of dollars a year to dole out as it sees fit.

There is also the danger that Argentina could suffer a severe case of the “Dutch disease”, an ailment that afflicts countries whose currency gets so strong thanks to the exports of a natural resource that local manufacturers or even farmers cannot compete with their foreign rivals. Though Venezuela has more than its fair share of prime farmland, it depends for food on imports from other parts of the world.

If shale gas and oil bring in as much money as some are predicting, many millions of Argentine could end up living on handouts that would be less meagre than the ones the present government gives the unemployable and functionally illiterate poor but would nonetheless fuel resentment. For many, that would be demeaning, to put it mildly. For people to feel good about themselves, they need to believe they are doing something useful and making an honest contribution to society.

That is the main reason large-scale permanent unemployment is so demoralizing even when generous welfare programmes keep real hardship at bay. Perhaps the greatest challenge facing relatively prosperous countries is the one posed by the sad fact that an increasing number of people are becoming surplus to requirements. In economic terms, they are not worth their hire, but they cannot be left to rot, as many in effect are.

Uruguay’s president José “Pepe” Mujica recently raised some hackles by attributing Argentina’s misfortunes to its natural riches. He is right. Like feckless heirs to a great fortune, for over a century generations of politicians have frittered away their time waiting for the family cheque to arrive, as it usually does thanks to a bountiful harvest or the opportune discovery of yet another resource foreign companies can exploit in exchange for a share, preferably a small one, of the profits. To keep themselves in business, political bosses promise the third or more of the population that barely scrapes by that it too will get some money without having to do anything to earn it. They treat their clientele much as potentates in ancient Rome treated theirs, with a mixture of affection and contempt. If crunching shale turns out to be as lucrative a business as many predict, they will continue to do so for many years to come.

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