The Corner

Weimargentina: Looking for Someone to Blame

A Guardian report from Buenos Aires, which is now sweltering its way through the summer humidity, gives a good flavor of how things are unraveling there:

[F]or those who can’t afford to escape to the exclusive summer resort of Punta del Este, across the river in Uruguay, or make the longer trip to the golden beaches of Brazil, there is only one solution: air conditioning. But a combination of global warming and an abrupt economic collapse scuppered even that consolation for shopper Graciela Fernández last week. When the temperature insisted on staying at around 40C and humidity levels rose to a drenching 90%, Fernández rushed to buy an air-conditioning unit she had seen on sale a week before.

“When I went to buy it, the price had gone up 25% since when I checked prices last week,” she complained outside the Alto Palermo shopping mall. “The same thing just happened to me at the pharmacy where I went to buy the medicine my husband takes: the price was up 20%.”

The economic panic leading to price mark-ups of this kind began in mid-January, when Argentina’s central bank reserves dipped below $30bn, forcing the government of President Cristina Fernández de Kirchner to drop its policy of injecting large quantities of dollars into the exchange market to shore up the overvalued peso.

The sudden dollar scarcity on Argentina’s exchange market sent the peso’s official value crashing to eight pesos to the dollar, while the “blue” illegal rate shot up to nearly 13 pesos. Retailers immediately marked up their prices to reflect the new reality. In some cases, items were pulled en masse from the shelves, as retailers pondered how much to mark up their goods.

It says something that La Nacion, the country’s leading newspaper (admittedly no friend of the Kirchner government) has a page on its website giving both the official and unofficial (“blue”) rates for the peso. It says more that the blue rate moved down from its peak of 13 or so in the immediate aftermath of the announcement loosening the exchange-rate rules, but is now drifting up again (La Nacion gives a spread of 11.00–12.55, as I write), suggesting that confidence is still ebbing.

Totally unsurprisingly, the government is looking for scapegoats.

The Guardian:

 But the government has been quicker at naming culprits than finding solutions. Every morning around 8am, the stern-faced cabinet chief Jorge Capitanich stands behind a podium at the Casa Rosada presidential palace for a televised verbal blast at the perceived enemies of the “victorious decade” presided over by the current president and her husband, the late Nestor Kirchner. Without naming them, Capitanich lashes out against the “visible and invisible” politicians, labour representatives, businessmen and journalists he blames for the sudden collapse of the peso and the explosive price increases that followed the forced devaluation. . . .

In the past week, Capitanich has attempted to pin the price lurch on faceless foreign speculators, whom he accuses of a “strategy of domination” to gain control of Argentina’s oil and freshwater reserves, pandering to the widespread belief here, often underlined by the president in her speeches, that “vultures” of the leading industrial countries harbour secret plans to siphon off natural reserves from this resource-rich South American nation.

That’s something that will be read with interest in Spain, home of Repsol, the oil company that saw most of its stake in Argentina’s YPF re-nationalized in 2012. There’s a good reason that Argentina has failed to make the most of its oil reserves.

Blaming the foreigner (particularly of the Anglo-Saxon variety) has a long pedigree in Argentina. It can be seen in Juan Peron’s drive for something approaching economic autarky, and in the long-standing suspicion of globalization that can be heard in the comments of many Argentines today, including, not least, the current pope (“we don’t want this globalized economic system which does us so much harm”). And this distrust of abroad frequently tips over into paranoia. I remember going to the Museum of Foreign Debt in Buenos Aires a couple of years back. Among the many surprises there was the comment by the docent that Paul Volcker had pushed up U.S. interest rates in 1979–81 at least partly as an attempt to do Argentina down, a bizarre, and characteristically narcissistic, misreading of economic history.  

But back to the Guardian:

Capitanich has also blamed “anti-patriotic” farmers and large retailers, allegedly in league with independent, corruption-probing journalists, of fuelling price rises by “generating psychological action of permanent destabilisation” against Fernández de Kirchner.

Ah yes, that’ll be it.


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