Monday, April 15, 2024

OPINION AND ANALYSIS | 08-05-2021 00:06

Is it time to leave or is Argentina worth it?

Even more dangerous than outdated economics is the constant trench warfare that is Argentine politics, which begets disillusionment and feeds the brain drain.

A growing sense of disillusionment appears to be consuming Argentina. Stuck in a global pandemic with extremely limited access to Covid-19 vaccines, those living here have the added value of suffering a deep stagflation that has taken real wages to their lowest levels in nineteen years. The conversation among those with the possibility of emigrating to the northern hemisphere in search of a better standard of living is about moving to Miami or Europe, particularly among college-educated millennials, while the price of flights to those destinations has skyrocketed. As the political class goes deeper and deeper into the election campaign, increasing the aggressiveness of the public discourse, Argentina’s dwindling middle class is desperately looking to sell the last few dollars they hid under the mattress in order to pay the bills, while the rich are flying to the United States in order to get vaccinated, and their kids mull whether to make that country their new home. This level of pessimism could be justified by figures such as the poverty rate, which topped 42 percent according to the latest figures from the INDEC national statistics bureau, nearly reaching 60 percent for those between 15 and 29 years of age, yet it clashes with the usual stance taken by politicians – from President Alberto Fernández down – who express optimism that Argentina’s structural problems can be overturned. Is their optimism unfounded?

In the Heritage Foundation’s 2021 Economic Freedom Index, Argentina ranks in 148th position out of 178 countries measured. Back 26 years ago when the conservative think-tank began crunching the numbers, Argentina ranked 21st and was well above the world average. The index is composed of 12 quantitative and qualitative indicators split among four main categories: rule of law, government size, regulatory efficiency, and market openness. Argentina used to rank well above the global average in the overall score, making its way into the second category, denominated as “mostly free” during the 1990s, until it came crashing down in the 2001 crisis, never to recover. Today, it has fallen well below the global and regional averages, with the exception of two variables: government integrity and financial freedom. According to the Heritage Foundation: “Argentina, once one of the world’s wealthiest nations, is South America’s second-largest country. It has vast agricultural and mineral resources and a highly educated population, but it also has a long history of political and economic instability. Peronist President Alberto Fernández and Vice-President Cristina Fernández de Kirchner, Fernández’s predecessor as president, began their four-year terms in December 2019 and control both chambers of Congress. In 2020, the government struck a preliminary deal with bondholders to resolve the most recent of its nine sovereign debt defaults. Popular disillusionment remains widespread because of Argentina’s weak economy and public debt crisis.”

The underlying conditions for Argentina to thrive and offer its population a good level of wellbeing appear to be there, according to the Heritage Foundation and optimistic politicians. The combination of vast natural resources and a highly skilled population in one of the world’s largest and least densely populated countries should combine to be a recipe for success. Yet, Argentina’s standing in the world has fallen since the 1950s, according to data compiled by British economist Angus Maddison. According to his figures, Argentina made it into the top 15 countries by GDP by the first decade of the 20th century, making its way up to 12th position by the 1950s, only to gradually slide — roughly at the rate of a position each decade — out of the list. Today, it is the 28th largest economy in the world, according to the International Monetary Fund, as measured by gross domestic product under purchasing power parity. On a per capita basis, Argentina stands 16th.

The standard argument as to Argentina’s decrepitude has to do with political instability. According to those who voted for the opposition, grouped under the Juntos por el Cambio banner, the problem is Peronism and Juan Domingo Perón, who became president for the first time in 1946 and pursued a series of reforms that empowered the working class and consolidated rights and a rigid labour system. According to the wide array of those who call themselves Peronists – most of whom voted for the ruling Frente de Todos coalition – the conservative classes always conspired against popular and progressive governments, generating the conditions for political and economic instability in order to protect their oligopolies. There’s probably truth in both sides of the argument, as Perón’s reforms allowed the working class to scale the social ladder, creating a huge middle classes in Argentina which led to the highest level of advanced education in the region. Yet, the “gained rights'' that were pushed forward by strong unions also created the conditions for a profound uncompetitiveness of the private sector, leading to the cartelisation of the economy with the consent of the state and even the illicit associations that make politicians and businessmen rich at the expense of the rest. The conservative upper-classes counted on the support of the military throughout the 20th century, backing coup after coup and an economic model that favoured imports and indebtedness. Both the vices of the Peronists and their antagonists — still representing the major political forces of the country — haunt us to this day.

An interesting debate has surfaced over the past few weeks as a response to US President Joe Biden’s first speech to Congress, 100 days on from his inauguration. Praised by Alberto Fernández and Cristina Fernández de Kirchner, many close to the Frente de Todos coalition proudly branded it a “Peronist speech.” Biden spoke of the value of labour unions as opposed to the vices of Wall Street, and proposed an ambitious infrastructure and jobs plan to match Franklin Delano Roosevelt's New Deal, paid for by higher taxes on corporations and the wealthy. As Biden tapped the legacy platform of the Democratic party, Argentina’s leaders had their egos massaged by what appeared as a validation of their rich tax and other policies. Biden, just like Germany’s Angela Merkel, appear to have become the role models that Alberto fashions himself after.

Unfortunately for us, and seemingly unacknowledged by Alberto and Cristina, our brand of Peronism hasn’t worked for the past 70 years. Neither has our anti-Peronism. Alas, once again we have an opportunity to try and unleash that potential that everyone believes in. But it will be impossible following the economic policies being hatched by Buenos Aires Province Governor Axel Kicillof and Mrs. Fernández de Kirchner, who remain stuck in the paradigms of the early 20th century. Even more dangerous than outdated economics is the constant trench warfare that is Argentine politics, which begets disillusionment and feeds the brain drain. Until the political model of antagonism espoused by Fernández de Kirchner and Mauricio Macri is put to rest, we can only expect to continue sliding in every index out there.

Agustino Fontevecchia

Agustino Fontevecchia


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