Argentina's Unusual Approach Leads to Big Gains
Argentina is back from the economic brink of 2001 that drove half the population into poverty and ruined the country's credit.
President Nestor Kirchner, who could seek re-election this fall, is widely acknowledged as having guided South America's economic sick man back to health.
The president's dose of orthodox medicine and not-so-orthodox intervention has also deepened his reputation as a maverick.
Nine million people in Argentina still live below the poverty line, Kirchner tells his countrymen — but that's half the number who lived in misery five years ago.
And there are definite signs that the economy is sizzling in this land of steak: Trendy restaurants attract global-trotting gourmands. Elegant hotels hum with smartly dressed guests and harp concertos. Locals and foreign tourists alike flood the outdoor markets on a sun-drenched Sunday.
Analysts say Kirchner's button-down fiscal conservatism has built a $40 billion surplus. A cheap peso has made Argentine goods attractive overseas, and high taxes on soaring exports have filled the country's coffers. Inflation is creeping into the double digits, but subsidies on utilities have tapped down the price of power.
The formula borrows from the Left and the Right, and makes the Argentine President difficult to politically peg.
Pollster and political analyst Enrique Zuleta Puceiro chuckles, "When you ask him 'are you from the Left or from the Right?' [Kirchner] says, "No, I'm a Peronist!," referring to the party started by Argentina's fabled President Juan Domingo Peron.
A "Peronist," Puceiro says is synonymous with ambiguity: "Neither the right, nor the left, always trying to preserve the center. And the Argentinians always play that kind of game."
But there is nothing middle-of-the-road in Kirchner's attitude toward international lending institutions. His decision to repay the IMF debt in a single ten-billion dollar payment fixed him in the public mind as a bold man of action. Economist Pablo Rojo says poking the much-loathed lending institution in the eye was just shrewd politics.
"That was essentially a political coup for him to gain popularity ... An expensive one but Argentina could afford that because it was in a moment when the international prices of our products were up and the government was collecting a lot of money from our tax exports," Rojo says.
The IMF episode also established Kirchner as a scrappy combatant willing to make the hard decisions to secure Argentina's economic independence. Political scientist Sergio Berensztein says Argentines find in Kirchner a classic Latin American "caudillo" or strongman capable of walking the country back from the economic abyss.
"Because democracy is too noisy, too messy, it takes a lot of time to get things done. So in the middle of the crisis—that's what you want — you want a strong hand, quote, unquote 'solving problems.'"
Kirchner has also used a strategic alliance with Hugo Chavez to relieve his country's burdens. The Venezuelan leader has provided oil and bought some 3-billion dollars of Argentine debt.
But Kirchner has also sided with the United States on Iran. Argentina's prosecutors recently fingered Iranian officials for the bombing of a Jewish Cultural Center in Buenos Aires in 1994.
Political analyst Felipe Noguera says when Kirchner gives Chavez space to assail President Bush, as he did at an Argentine stadium in March ... it's mostly political theater.
"President Kirchner allows President Chavez to play the anti-Bush card in rhetoric. But in practice," Noguera says, "the real relationship between Argentina and the US in many business relationships and so on is on a pretty strong sort of footing – so I think it's a bit of an act."
Pollster Enrique Zuleta Puceiro says that President Kirchner wants to occupy the middle ground knowing that while both presidents Bush and Chavez carry baggage in the region, their respective countries get high marks –
"We don't want to cut the relations with the United States: They want to have relations despite the fact that Bush is there. They want to have relations with Venezuela – a very rich country – despite the fact that Chavez is there," Puceiro concludes.
Whether navigating the arch-enemies of the Americas, or battling inflation at home, Kirchner governs as if the specter of economic doom were at the door. But Former Economic Minister Roberto Lavagna says it carries the seeds of creeping autocratic rule.
"The dynamic of the situation pushed the government to be more and more intrusive, more and more dedicated to control, sustaining the idea of only one way to think and only one way to analyze the situation and if you don't accept this way you become an enemy," Lavagna says.
Lavagna is widely regarded as the architect of Argentina's recovery early on. He was ousted by Kirchner, according to some reports, over inflation. Lavagna opposes government price controls on such things as beef, contending they create distortions in a free market.
The country's cattlemen agree. Some analysts even suggest that price controls on beef have created shortages because producers have elected to leave their cattle in the field, waiting for better prices.
Rancher Carlos Brown says government quotas have also cut in half the amount of beef that can be sold for export.
"We should be exporting over a billion dollars [worth of beef] but that amount has fallen sharply," Brown says, adding "Argentine beef which is known for its quality is losing export opportunities."
Economist Pablo Rojo says a ban on beef exports over the long term would be disastrous. "Because a lot of people invested in that industry believing that the international prices would increase and Argentina would take profit of this situation, etc, and they are under-performing now," Rojo says.
But President Kirchner insists on telling his countrymen, "We're not out of hell yet." For the 27-percent of the population living below the poverty line, his words ring true.
However, the grace period granted Nestor Kirchner to cure the country's economic ills, while growing shorter, does not seem to have expired yet.
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