An Italian car of a country, Argentina looks great but just doesn’t work

 Like a grand dame fallen on hard times, Buenos Aires was dimmed by economic collapse. In between its Paris-like cafes and wrought-iron balconies stood the blight of boarded storefronts. On its great boulevards, scavengers sifted through dumpsters for anything they could resell.

That was 2002, when I covered the debt default and currency devaluation that had devastated this nation. But it’s the fate of the Argentines to live in a vicious loop.

People demonstrate outside Argentina’s Congress while senators begin to discuss n unpopular austerity budget in November 2018. (Eitan Abramovich/AFP/Getty Images)

Back this month for the first time in 16 years, I saw a country stuck in what has now become its natural state: crisis. As if living a deja vu, I flipped on the TV to once again hear Argentine newscasters fretting about bailouts, the diving peso and fears of default. Beggars — even more than before — panhandled on the same corner by an imposing church on Santa Fe Avenue. As others had done years before, stores advertised going-out-of-business sales.

Yet around them, the jacaranda trees bloomed in the Argentine spring. The urban gentry kept up appearances, well-coiffed despite their private struggles as they strolled down streets lined with Belle Époque buildings. Young hipsters aired out their beards in the continent’s most glorious urban parks.

This is the rub of Argentina. It’s an Italian car of a country; on its surface, graceful and sleek. But under the hood, it keeps breaking down. In short, Argentina looks great but just doesn’t work.

Consider the recent Group of 20 summit that drew global leaders to Buenos Aires, including President Trump. The Argentines erected a glamorous media center for an army of press. They outfitted it with avant-garde art and offered unlimited wine on tap, craft beers, fresh pastas and rare cuts of Argentine beef. They staged edgy performances — a sort of tango show, as if produced by Andy Warhol — as waitresses hovered by natural wood tables, constantly refilling reporters’ champagne glasses.

Yet for the vast majority of the summit, the WiFi — the most fundamental necessity for working journalists — was offline. Broken. Did not work.

Buenos Aires’ Constitucion train station and empty bus stops during a 24-hours general strike, on September 25, 2018. The strike was called to reject an austerity budget that Argentine President Mauricio Macri says was needed to secure IMF funds. (Eitan Abramovich/AFP/Getty Images)

As if trapped in Bill Murray’s “Groundhog Day,” Argentina is doomed to a repeating history of financial emergencies. You can almost set your watch to it, and, worryingly, the intervals between implosions are growing ever shorter.

It did not start this way. In the 19th century, history books questioned whether Argentina or the United States would emerge as the New World’s great power. Buoyed by vast European migration and fertile land that made it a global breadbasket, Argentina had more cars than France and was richer than Japan.

Jolted by the Great Depression, Argentina emerged from it relatively rapidly, only to run into a brick wall named Juan Perón.

Jonathan Brown, author of “A Brief History of Argentina,” argues that Perón’s rise marked the start of the country’s long, slow slide. Right-wing big-government populism squandered Argentine’s fortunes on nationalized railroads and ports. Perón’s pro-labor policies cultivated devout working-class followers but also laid the groundwork for the conversion of his party into an entity that would mirror a corrupt union. By the early 1950s, a crisis of confidence led to investor flight and soaring inflation.

Later military governments oversaw the repression of the 1970s Dirty War but also ever more haphazard economic mismanagement. The country battled bouts of damaging inflation in 1955, 1962, 1966 and 1974.

After the restoration of democracy in the 1980s, Argentina saw a bonanza of public-sector hiring, bloated budgets and extreme tax evasion — a toxic combination that fueled one of the globe’s worst periods of hyperinflation. In the 1990s, Argentina seemed to be back. But it was only an illusion, as a new class of free-spending rich — pumped up by borrowed money, including from the International Monetary Fund — ate and drank their way through what became known as “the era of pizza and champagne.”

They were almost indistinguishable from a fat-cat political class that bilked the nation out of billions and turned Argentina’s economy into a ticking time bomb. The ensuing collapse of 2002 would rank among the worst financial implosions of modern history. Overnight, savings in pesos lost two-thirds of their value. Unemployment shot above 20 percent. Malnutrition, unheard of in a nation that once fed the world, took root in the devastated interior.

Cristina Fernández de Kirchner, the Perónist ex-president, took the helm a decade ago, ushering in a new era of fudged financial data and populism. Thus, the year 2014 brought another recession and debt crisis. Four years later — and now under President Mauricio Macri — Argentina sought the largest bailout in IMF history to try to stay afloat.

Argentina’s peso is worth just a fraction of its value just six years ago. (Eitan Abramovich/AFP/Getty Images)

But inflation is again soaring. The peso is worth nearly a tenth what it was six years ago against the U.S. dollar. As Marci tries to undo Fernández’s populism — stripping away, for instance, heavy subsidies for electricity — the Argentines are feeling the pain.

On a drive just beyond the city limits, Buenos Aires seems a Potemkin village. The landscape gives way to sprawling slums — or misery villages, as they’re known here — just as hardscrabble as any you’d find in Lima, Bogota or Sao Paulo.

Just beyond the city limits, Ariel Aguilar sat inside a mostly idle factory, talking about booms and busts. Co-owner of Luen SRL, a leather goods maker and retailer, he’s trying to make a go of it in a sector that has shed 16,000 jobs in three years.

Argentina has relatively high labor costs. In an era of rising economic inequality around the world, the traditionally large middle class here has fought bitterly to hold on to a living wage. But Aguilar has a far bigger problem.

The products he makes may be beautiful, but his business model just doesn’t work.

He produces shoes and belts and bags using buttery Argentine leather. But the chemicals he needs for processing are priced in dollars. Local leather, meanwhile, is now a global commodity, so its unit price is also dollarized.

He sells, meanwhile, to increasingly cash-strapped Argentine customers, who are paying in pesos worth less and less.

In the past three years, he’s gone from 71 to 30 employees, from 13 retail stores to six.

After a series of crises, at least he knows the drill.

“We sell our cars, our houses; we do whatever it takes to keep going,” he said. “You do everything to keep your company. Because you know you’re back in the cycle.”

Bureau chief

December 27, 2018