Alberto’s modest proposal

Along with his boss, Cristina Fernández de Kirchner, and many others, Alberto Fernández likes to make out that Argentina’s economic problems can be blamed either on the wickedness of sinister individuals like Mauricio Macri or – when in a more thoughtful mood – on the way the international financial system works. In their view, one of its principal defects is that it allows creditors to demand their money back even when those responsible for borrowing some of it are no longer in office.

During his tour of cash-strapped southern Europe, Alberto banged on about the alleged need to change the financial rules in order to make things easier for countries which are deep in hock. Helping him in this endeavour is the Covid-19 pandemic which, as everybody knows, has made life even harder for the governments of underdeveloped countries, but although Messrs Antonio Costa, Pablo Sánchez, Emmanuel Macron, Mario Draghi and, in a spiritual manner, Jorge Bergoglio, did express their hope that Argentina would somehow manage to overcome the economic difficulties besetting her, they stopped short of offering Alberto what he wants most: lots of interest-free money to tide him over the next few months until election day finally arrives. 

For reasons that the people currently running the country may find hard to understand, letting Argentina redesign the international financial system does not appeal to the North Americans, Europeans, Japanese or, needless to say, the Chinese. Experience has taught foreign financial operators that, no matter how many billions of dollars, euros, yens or yuans they hand over, before too long most will have evaporated into thin air and whoever is economy minister would be back demanding much more, saying that unless he or she gets it millions of honest people will go hungry and that would be their fault. This ploy worked fairly well with the North Americans and Europeans, who are fond of blaming themselves for what happens in faraway places, but it does not cut much ice with the Chinese, who can respond by saying that tens of millions of people in their own country are still every bit as poor as the worst-off Argentines but that, thanks to discipline and hard work, in the last few years many more have left extreme poverty behind.

For well over half a century, the country’s political leaders have been sending out emissaries to the richer parts of the world where they tell the men and women they meet that all they need is a little help because, if they get it, Argentina would soon be able to repay whatever they were wise enough to lend her. Unfortunately, all attempts by those back home to fulfil such promises by putting the economy on an even keel have failed dismally, which is why, before the coronavirus went on its rampage, the country was already unable to meet its commitments. For the umpteenth time, default was rushing towards it.

Can anything be done to change this unhappy state of affairs? Would bankrolling Argentina for several years be enough to allow the people in power to do whatever it would take to enable the country to pay all its bills on time without making her inhabitants suffer greatly? The answer, unfortunately, is probably not. Given the political elite’s ability to squander huge amounts of money in return for nothing much, asking it to make a serious effort to reform the economy so at long last Argentina could join the ranks of the creditor nations would be a waste of time.

The willingness of the country’s leaders to flout basic economic rules, even though by now they should have realised that the “heterodoxy” they pride themselves on has impoverished much of the population, continues to cause much head-scratching in other parts of the world. They are unimpressed by the notion, which has its adherents in some Peronist and leftist circles, that in Washington, London, Frankfurt, Tokyo and other financial centres there are groups which, for geopolitical or ideological reasons, are doing their best to ensure Argentina goes under. All the denizens of such places want is to see Argentina stop making trouble and get rich.

Would a spot of tough love be of any use? On many occasions, the IMF has tried this by linking soft loans to good behaviour, but all it has got for its pains has been a great deal of abuse followed by yet another default. Forewarned, recently the organisation responsible for overseeing the world’s financial system has adopted a friendlier approach, but it would appear that efforts to coax the Kirchnerite wing of the government into doing what is almost universally seen as necessary have been counterproductive. Rumour has it that Cristina believes her supporters would win more votes in the upcoming parliamentary elections if she told Kristalina Georgieva to stop poking her nose into the country’s affairs. For the vice-president, keeping her share of the electorate on side for a few more months is a top priority; whatever happens after the votes are counted can be dealt with when the time comes. 

Does the rest of the world owe Argentina a living? For many years, the country’s most influential politicians have assumed that it does and have staunchly refused to give up supplementing whatever income farmers and the odd businessman hand over to them with large amounts of borrowed money they think is theirs for keeps, but there are signs that some at least are becoming aware that this cannot continue for much longer.

A former economy minister, Aldo Ferrer, made a splash in the early 1980s by insisting that Argentina had enough resources to be entirely self-sufficient and could therefore afford to tell the financial markets to get lost. The way things are going, the country could soon give the policy he recommended a try. And then? Unhappily for much of the population, having to rely solely on what is locally available could have truly disastrous consequences, what with public spending and inflation rising inexorably, the private sector getting thinner by the day after being starved of investments and reports coming in that hunger is already stalking the enormous slum belt adjacent to Buenos Aires City, which provides Cristina with a large proportion of the votes which have made her the most powerful politicians in the land.

Argentina’s economic strategy has long been based on Micawber’s belief that no matter what happens something will turn up to put things right. However, even though soybeans and other farm products are now fetching sky-high prices and the pandemic is making foreign governments more flexible about financial questions, it looks as though crunch time is fast approaching. Just what that could mean is hard to say, but it is unlikely to be pleasant.