An impossible conundrum

Is Argentina about to be sent straight back to the debtors’ prison from which she escaped four years ago? Or will her rulers be given yet another chance to mend their profligate ways?

On this question, as on a great many others, the jury remains out. Some, among them economists attached to the International Monetary Fund, say it would be better to avoid a default by “restructuring” future payments, not just for Argentina’s sake but also because of the harmful impact a refusal to cough up would surely have on a world economy which has already been stricken by the rampaging coronavirus. Others are less forgiving; they would prefer to leave Argentina’s financial fate in the hands of the markets which, they assume, would soon do whatever it takes to knock her economic set-up into shape.

There is nothing new about such dilemmas. For a great many years, Argentina’s political elite has worked on the assumption that the rest of the world owes it and the rapidly growing number of people who depend on its generosity a decent living. It has managed to get away with this without scaring all investors away because, as everybody knows, the country has more than enough material and human resources which, if properly managed, would enable it to prosper and pay back what it owes on time, as others routinely do. The idea is that it should be relatively easy for a country as well-endowed as Argentina to overcome its current difficulties – unfortunately, this is far from being the case; the rot has gone too far.

With default staring them in the face, all recent governments have blamed the shortage of available cash on the fecklessness of their predecessors and solemnly promised that they, being staffed by responsible people, would behave in a very different manner. On occasion, this ploy works: Mauricio Macri convinced outsiders that, unlike Cristina Fernández de Kirchner, he was a trustworthy character with an up-to-date mentality who would not hesitate to ram through the drastic reforms Argentina evidently needed. For a time, investors took him at his word, but, unluckily for everyone apart from Mrs Kirchner and her friends, one day they suddenly changed their mind and the peso immediately collapsed.

Unlike Macri until everything went south, Alberto Fernández is not widely regarded as a sensible bloke who genuinely wants Argentina to become an upstanding fee-paying member of the globalised international community. In most other parts of the world, where many still assume Peronism is a toxic variant of populism derived from Benito Mussolini’s fascist movement, what he represents has always had a bad press. This has made things that much harder for him. As for Cristina, she is widely seen as a troublesome crank who, given a chance, would be only too happy to have Argentina rush down the road that took Venezuela to where that unhappy country is today. All this may be most unfair, but it does put Alberto’s government at a disadvantage when it comes to hammering out a deal with financiers who dispose of more money that Argentina can generate in an entire year.

When negotiating, Argentine spokespeople make much of the suffering a tough approach to the debt imbroglio would undoubtedly bring to the third of the population which is mired in deep poverty. By tugging at the heartstrings of IMF officials who desperately want to be seen as human, they have induced the world’s top financial institution to join the chorus begging creditors to take seriously the deal proposed by the debt minister, Martín Guzmán.

Of course, it can be argued that the plight of the many millions of families living in the malodorous shantytowns that surround most cities or in backward rural areas is the natural result of policies that have long been enthusiastically endorsed by people much like Alberto, Cristina and the rest of them (including plenty of Radicals), so agreeing to let them “restructure” or “reschedule” the relatively small debt repayments that are currently being discussed would merely encourage them to carry on impoverishing their compatriots. From the point of view of the many who have come to the conclusion that, as Argentina’s political masters are entirely responsible for what has happened to her, any attempt to help them get her out of the hole they pushed her into would be certain to be counterproductive. They would like to put the country in financial quarantine and have done with it.

By now many politicians, including Alberto when Cristina is out of earshot, know full well that no country, even their own, can expect to live beyond its means forever. What they cannot agree on is what should be done when the money from either the printing press or gullible investors finally stops coming in. It is all very well to say they would then have to slash government spending, fire a huge number of superfluous public employees, cut taxes by at least half, eliminate bureaucratic red tape, stop inflation in its tracks by squeezing the money supply and other such distasteful measures, but doing all this would entail letting unemployment go through the roof and, by depriving the many who need them of the handouts they have grown used to receiving, it could lead to mass starvation.

It would also, needless to say, mean plenty of blood on the streets; bellicose organisations which have made a practice of forcing the government of the day to pay them Danegeld would immediately go on the offensive, as would leftists waging a war with capitalism, Kirchnerites who dream of their own kind of revolution and many others who would feel they had no choice but to rise in rebellion.

With this kind of prospect looming, it is understandable that Alberto’s government is even less willing than was Macri’s to embark on the “structural reforms” most economists consider necessary. All its leaders want to do is keep the show on the road in the hope that somehow or other nothing really terrible happens which could deprive them of the power they have always craved and to which they will continue to cling. Optimists seem to think that, thanks to the great coronavirus crisis, the financial powers that be will go easy on all debtor countries, which, if nothing else, would give them a bit more time in which to work out what to do. Whether or not the people in office would be able to use the respite they hope is coming their way for anything positive is something most would rather not think about. After all, they have other priorities.