Beautiful Horizons

Afro-Argentineans

In one of my first posts on the Blogspot version of Beautiful Horizons I commented on the fact that the Afro-Argentinean which was about 25% of Buenos Aires' population in 1838 was down to 2% of the population in 1887. I asked "What happened to the Afro-Argentinean population?"

Apparently the rumors of its demise have been greatly exaggerated:

The results are only partially compiled, but they suggest that many of the black Argentines did not vanish; they just faded into the mixed-race populace and became lost to demography. According to some researchers, as many as 10 percent of Buenos Aires residents are partly descended from black Argentines but have no idea.

''People for years have accepted the idea that there are no black people in Argentina,'' said Miriam Gomes, a professor of literature at the University of Buenos Aires who is part black and considers herself Afro-Argentine. "Even the schoolbooks here accepted this as a fact. But where did that leave me?''

This is a fascinating article. I urge you to read it. If the study is borne out by the empirical data, then this could shatter the old cliche that "Argentineans are Italians who speak Spanish and think they’re British."

So, Leandro Desabato, not only did your comments shame your country and team, but you may have insulted 10% of your fellow porteños.

Or Maybe It's Not Time to Cry For Argentina

Probably one of the best reasons to keep Carlos Menem out of  Argentina's political life is revealed in this article in today's New York Times. It certainly appears that Argentina is turning the corner:

But three years after Argentina declared a record debt default of more than $100 billion, the largest in history, the apocalypse has not arrived. Instead, the economy has grown by 8 percent for two consecutive years, exports have zoomed, the currency is stable, investors are gradually returning and unemployment has eased from record highs - all without a debt settlement or the standard measures required by the International Monetary Fund for its approval.

Argentina's recovery has been undeniable, and it has been achieved at least in part by ignoring and even defying economic and political orthodoxy. Rather than moving to immediately satisfy bondholders, private banks and the I.M.F., as other developing countries have done in less severe crises, the Peronist-led government chose to stimulate internal consumption first and told creditors to get in line with everyone else.

Good for them.  This is also a key point for those beholden to the Washington Consensus to keep in mind:

"The peak of investment in the 1990's was 19.9 percent" of gross domestic product annually "and today it is at 19.1 percent, having risen from a low of 10 percent," Mr. Lavagna said. The Kirchner administration continues to seek an accord on the $167 billion in debt that is still outstanding, and plans to make what it calls its final offer early next month. But the turnabout here has inspired such a sense of confidence that the government is not only talking about cutting its last ties to the I.M.F. but also insisting that any payback to bondholders be linked to Argentina's continued good economic health.

"It's very simple," Mr. Lavagna said. "Nobody can collect from a country that is not growing."

They certainly can't. Nor should bondholders, who have assumed an element of risk in their investment, be made whole at the expense of the nation's economic survival.

I Think It's Time to Start Crying for Argentina

Especially if Carlos Menem has his way:

Former Argentine President Carlos Menem ended 10 months of self-exile on Wednesday, aiming to stage a political comeback in his home province after assurances he would not be arrested on arrival.

[...]

Hundreds gathered later at a political rally, where Menem quoted everyone from Argentina's late populist leader Gen. Juan Domingo Peron to 16th century political philosopher Machiavelli and called for a return to the "glory days" of the 1990s.    

"That was the most brilliant decade in Argentine history," Menem told the chanting, flag-waving crowd.

Of course what Menem fails to mention is that most Argentineans are now paying for this "brilliant decade", while Menem has been enjoying political exile with his trophy wife, Cecilia Bolocco. He hasn't had to give much thought to the 60% of the population who were living below the poverty line nor has he had to answer any of the questions regarding allegations surrounding him concerning the bombing of the AMIA Center in 1994 that include accepting a bribe to downplay a link between Iran and the bombing.

The only saving grace for Argentina in this matter right now is that Menem is incredibly unpopular, a fact which led to his craven withdrawal from the presidential election in 2003. He is the last thing that Argentina needs now. Let's hope the citizens put a quick end to his renewed political aspirations. It's time for him to be ignored. He's irrelevant to Argentina's future.

Diego Maradona as a Symbol of Argentina Gone Wrong?

If you read this blog religiously (and if you do I thank you) then you know I am a big fan of football, what is commonly referred to as soccer here in the US. Being married to a Brazilian and living in a community with four major Latin American immigrant communities, I understand fully the link between national pride and the beautiful game. I have to disagree with Andrés Oppenheimer (an Argentinean by birth) in this column, however, as I think that he's reading way too much into Argentina's love for Maradona:

So what's wrong with the cult for Maradona? A lot. He embodies Argentina's age-old habit of celebrating individual talent over hard discipline and teamwork, and sneakiness over respect for the rule of law.

Carlos Malamud, a Latin American expert with Spain's Real Instituto Elcano, wrote earlier this week in the daily El Correo Español that Maradona also represents Argentina's age-old habit of blaming others for its own problems.

It happened during the 1982 invasion of the Malvinas/Falkland islands, in the 1978 world soccer championship -- when many Argentines backed the military dictatorship's line that it was ''us against the world'' -- and most recently in the 2001 suspension of the country's foreign debt, when the Congress celebrated the default with defiant chants of "Argentina! Argentina!''

''The image of Maradona against the world is equivalent to that of Argentina against the world. It's an image that is strongly embedded in the Argentine mind-set,'' Malamud wrote. ``Maradona has become a permanent transgressor, which has led him to blame others for a good part of his actions. . . . But if Maradona . . . can allow himself the luxury of not maturing, the Argentine people cannot, and should not, pursue that road.''

Let's compare Maradona to another famous Argentine footballer, Gabriel Batistuta. Batistuta is a class act. He played for the former Italian team Fiorentina for several years and stayed with them when they were relegated from Serie A to Serie B. He has played for Argentina's National Team in the 1994, 1998 and 2002 World Cups and is a skilled attacker. He has also led an admirable personal life. He's a loyal husband and devoted father. He refused to get Italian citizenship even though it would facilitate his playing in Europe. Yet he has not brought Argentina a World Cup Championship, and as I don't see him playing in the 2006 World Cup, he probably won't. Maradona despite all his problems, did bring Argentina a World Cup (albeit with a helping hand). I'm not convinced, however, that his personal problems and his bad behavior are necessarily indicative of Argentina's problems.

Perhaps a better example would be to compare the lives of Pelé and Mané Garrincha. They were teammates on the Brazilian National Team through several World Cups, but led radically different lives off the pitch. Pelé planned (and has thus far executed) a terrific post-football career. Today I saw him in an ad for Sierra Mist with 14 year old soccer phenom, Freddy Adu. Garrincha, who came up with Pelé was just the opposite. He became an alcoholic, beat his wife (singer Elza Soares) and died in 1983 at the age of 49. Yet Brazilians love both of them for what they did for the nation's football tradition.

I am not a great fan of Maradona. I admire his talent, I hope he gets well soon, but I think that what he has done with his life is a disgrace, especially his admiration for Fidel Castro, someone who has much more in common with Argentina's Junta that brutally ruled the country in the late 1970's and early 1980's than Maradona would care to admit. I think that despite their veneration of Maradona's football career, most Argentineans would not want to emulate the life he led.

The IMF Owns Up - Sort Of

Well, at least it's a start:

The International Monetary Fund said on Wednesday long-standing weaknesses in Argentina's economy led to its collapse in 2001, while the global lender acknowledged that its own shortcomings had prevented it from detecting the looming crisis.

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In the evaluation, the IMF said Argentina's deteriorating public debt dynamics, driven mainly by off-budget spending, was central to the crash, as well as constraints on monetary policy imposed by a currency board; and structural and institutional weaknesses.

The fund also pointed to the role of the private financial community, saying investors continued to finance Argentina's growing borrowing needs even as problems -- and a recession in 1998 -- were evident.

The IMF acknowledged that its growth projections for Argentina during the 1990s were wrong, which led to complacency about the country's fiscal performance.

"These projections in turn reflected an overly sanguine reading of the impact of reforms undertaken in the early part of the decade as well as of the prospects for future reform," the fund said.

Perhaps the IMF's obsession with its rigid view of markets and spending also contributed to Argentina's collapse. Don't take my word for it. here's what Nobel Prize-Winning economist Joseph Stiglitz said two years ago:

If budget profligacy or corruption was not the problem, what was? To understand what happened in Argentina, we need to look to the economic reforms that nearly all of Latin America undertook in the '80s. Countries emerging from years of poverty and dictatorship were told that democracy and the markets would bring unprecedented prosperity. And in some countries, such as Mexico, the rich few have benefited.

More broadly, though, economic performance has been dismal, with growth little more than half of what it was in the 1950s, '60s and '70s. Disillusionment with "reform" -- neo-liberal style -- has set in. Argentina's experience is being read: This is what happens to the A-plus student of the IMF. The disaster comes not from not listening to the IMF, but rather from listening.

That Argentina has moved to the bottom of the class has much to do with the exchange rate system. A decade ago, it had hyperinflation, which is always disastrous. Pegging the currency to the dollar -- one peso equaled $1, no matter what the rate of inflation or the economic conditions -- acted, almost miraculously, to cure this problem. The IMF supported the policy. It stabilized the currency and was supposed to discipline to the government, which couldn't spend beyond its means by printing money without breaking the peg. It could only spend beyond its means by borrowing. And to borrow, presumably, it would have to follow good economic policies. A magic formula seemed to have been found to tame the seemingly incorrigible politicians.

There was only one problem: It was a systemdoomed to failure. Fixed exchange rates have never worked. Even the United States couldn't live with a fixed exchange rate, going off the peg to gold in the midst of the Great Depression. Typically, failures do not appear overnight. They are not usually the result of mistakes made by the country, but of shocks from beyond their borders about which they can do little.

Had most of Argentina's trade been with the United States, pegging the peso to the dollar might have made sense. But much of Argentina's trade was with Europe and Brazil. The strong (most would say, overvalued) dollar has meant enormous American trade deficits. But with the Argentine peso pegged to the dollar, an overvalued dollar means an overvalued peso. And while the United States has been able to sustain trade deficits, Argentina could not. Whenever you have a massive trade deficit, you have to borrow from abroad to finance it. Although the United States is now the world's largest debtor country, outsiders are still willing to lend us money. They were willing to lend to Argentina, too, when it had the IMF stamp of approval. But eventuallythey realized the risk.

It's worth noting that in the 1990's Argentina was an incredibly expensive travel destination and, although I'm not an economist, one woud think that the overvalued peso would have to be one of the prime reasons.

In any event, Stiglitz really underscores what is probably my biggest issue with the IMF which I cited above: their obsession with orthodoxy and their slavish reliance on markets as the solution for all problems which seems to result in a cookie cutter approach to remedying all economic problems. If life were only that simple.

Argentina Paid the IMF

Argentina avoided default on its debt today by making the required 3.15 billion payment to the IMF.

The issue that remains the big sticking point is what will satisfy the bondholders:

Argentina has yet to convince angry bondholders to accept its proposal to repay just 25 percent of the $88 billion it defaulted on and many are clamoring for their respective governments to protect their investments.

Italian Prime Minister Silvio Berlusconi said on Tuesday Italy was working through diplomatic channels to try and convince Argentina to sweeten its debt offer. Bondholders want to recover at least 65 percent of their investments.

Italy -- like Japan and Germany -- has legions of individual investors including pensioners who have been stuck with bad Argentine debt.

Argentina argues it cannot repay more than 25 percent of the defaulted debt without endangering its faster-than-expected recovery from economic crisis and inflicting more pain on the 50 percent of the population living in poverty.

If you want a clear and cogent analysis of why Argentina and many other Latin American countries are less than sanguine about the IMF, read this article by Nobel Prize Winner Joseph Stiglitz.

The Economist is Bullish on Argentina

Or at least they are relatively optimistic, but not without caution:

As the southern summer begins, Argentina's economy is showing signs of life after the battering it received in 2001-02. Shops are looking forward to their best Christmas in three years and tourism is booming. Even in the less glamorous neighbourhoods of Buenos Aires long-shuttered businesses are starting to re-open. Out in the pampas, farmers are buying new tractors and trucks, and market towns are buzzing with life.

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Three things have helped the appearance of recovery along. One is simply the depth of the hole into which the economy fell. Even if growth continues at its current brisk rate, GDP will not return to its 1998 level until 2005. Unemployment is down from its peak of 21.5% last year, but is still at 15.6%. One Argentine in two now lives in poverty. Every week, militant groups of unemployed stage street protests.

Second, macroeconomic policy has been more effective than critics admit. Booming tax revenues have enabled the government to hit fiscal targets agreed with the IMF in September, though these do not allow Argentina to resume servicing most of its debts. Monetary policy has provided enough liquidity while keeping inflation at bay. Devaluation, plus the adoption of a floating exchange rate, combined with strong world demand, have stimulated exports.

Third, the government has focused on boosting domestic consumption at the expense of the demands of foreign creditors, banks, and privatised utilities. This is controversial, but has arguably made economic sense.

The level of public debt is a major problem down the road, although the country has been given a bit of a reprieve. Encouraging investors to invest in Argentina again will also play a major role in the continued recovery.

Though agreement is not impossible, it is not likely to be swift. Some Argentine economists argue that the government should anyway be looking elsewhere for new investment, rather than tapping the international markets again. Argentines are thought to hold at least $100 billion abroad, and perhaps another $20 billion at home under the mattress. To coax that money back, the government needs to set out clear rules and incentives for investment, and reform the tax system, according to Aldo Ferrer, an economist at the University of Buenos Aires.

One hopeful sign is that bank deposits are rising again. But the banks will not resume lending until they are surer that they can trust the government and its paper. To break this stalemate, the central bank has issued new rules under which banks can write off their losses from the devaluation over five years, but which also oblige them to recapitalise, or close.

By the way, does this sound familiar?

Until now, the recovery has been driven by cash and consumption (though a trickle of new investment has begun).

They still have a long way to go, but one thing that the article fails to mention is the positive impact that president Kirchner's fight against corruption and impunity can have on investor confidence. It could certainly go a long way toward distinguishing his administration from the cronyism and corruption of the Menem years.