South America ́s second largest country is in the international spotlight once more. Is collision imminent or is there light at the end of the tunnel?
If you ́re a millennial, there ́s a chance you might not have seen or be aware of 1993 ́s Groundhog Day, a comedy movie starring Bill Murray. This great little film tells the story of a weatherman who after covering the annual Groundhog Day – an American and Canadian tradition involving a groundhog legend – ends up getting caught in a time loop, reliving the same day repeatedly. Although the film did well upon release, it wasn’t until many years later it came to be considered a cult classic, giving itself to a myriad of interpretations, from self-improvement to reincarnation hypotheses.
What ́s more interesting, however, is that it originated the term “Groundhog Day”, which refers to situations that happen over and over.
Real life is not like the movies, but for Argentina, Groundhog Day seems like a national pastime. “What ́s going on in Argentina this time?”, asks the foreigner, incredulous that this South American country could have got itself into another mess – again. “Another crisis as usual”, is likely the answer. There ́s a common statement in the land of steak and football: Argentina experiences an economic crisis every 10 years.
In a world ridden with hyperboles and doomsday-like predictions, it is prudent to be skeptical of anything and everyone. Unfortunately, in Argentina ́s case, she happens to be an outlier.
Simon Kuznets, an American economist and Nobel Laureate, once coined the now famous phrase: There are developed countries, underdeveloped countries, Japan, and then there is Argentina. Sadly, for Argentina, it shares its place with Japan for the wrong reasons. Japan, today one of the richest nations in the world, is an island country with barely any natural resources. This country, seven times smaller than Argentina, once laid in ruins – it notoriously surrendered in World War II after being devastated by two atomic bombs. Not long after experiencing such destruction and a horrific loss of human lives, its economy took off and expanded so fast this period came to be known as the “Japanese economic miracle”. Japan had become the second largest economy in the world, trailing only the United States. Argentina, a country blessed with abundant natural resources such as vast fertile plains and minerals from petroleum to lithium, was once not only one of the richest countries on earth but for a while was the richest. You didn’t misread it. According to recent data from the Maddison Project, in 1895 and 1896, Argentina ranked number one in wealth per capita, ahead of Denmark, Switzerland, Australia and the United States, and oscillated between the 10 richest countries in the world until the first half of the 20th century. In 2018, Argentina had fallen to 59th, barely ahead of Mexico, and behind Romania, Hungary and Latin American nations such as Costa Rica, Panama and its neighbors Uruguay and Chile.
What does this mean for the average citizen in Argentina? In other words, do these numbers really reflect quality of life in the country?
Argentina might be the kid gone astray, but economic crises are detrimental to everyone, anywhere, anytime. Period. Therefore, the pernicious effect of a rough economic downturn is, predictably, perceptible in the streets and in daily life. Of course, personal accounts always carry the risk of not being representative of a whole country’s population, and as a tourist you are unlikely to notice the deterioration – you will still have a blast here – unless you venture outside of the touristic path, but for locals there comes a point it becomes evident things are taking a turn for the worse.
In Buenos Aires, Argentina ́s richest city, the crisis materializes in more homelessness, less purchasing power, a rise in poverty levels – Argentina has had a third of its population living in poverty for decades – and many closed businesses. In fact, January of 2019 experienced a scandalous average of 82 businesses closing each day. These are small and medium enterprises including family-owned businesses like grocery shops and bakeries that are forced to bear the burden of Argentina ́s bloated public sector. In addition, in the first quarter of the same year, there were 19.757 dismissals and suspensions in the private sector. In April, the prestigious English newspaper Financial Times ran an ominous piece titled “Argentina is on the brink”.
If Argentina is often named along with Japan for shameful reasons, it shares a list with countries like Zimbabwe and South Sudan: it boasts one of the highest inflation rates in the world. In laymen ́s terms, prices of goods and services – everything from a pound of beef to a haircut – go up by the month. To put things in perspective, Argentina ́s inflation rate in 2018 was 47%; in Japan, it was less than 1%. To cope with this and a major fall in revenues, supermarket chains and businesses of all kind offer many discounts to weather the crisis. Buy 1 get 2; 80% off on the second item; a discount if paid with a credit and/or debit card; a discount if paid with a certain bank card on a certain day; the list goes on. I recently saw a restaurant chalkboard in one of the trendiest neighborhoods in the city offering 4 pints of craft beer for 150 pesos – that ́s $3.33USD.
With such a depressing outlook and prospects, is there light at the end of the tunnel for Argentina?
In the short run the answer is no. In the medium run, no. In the long run, maybe. This year ́s presidential elections hint there might be a revolution underway. Fortunately, for such a battered country that has gone through countless crises, ousting of Presidents – it infamously had five in eleven days in 2001, on the verge of its worst crisis in its history – and a bloody dictatorship, it is not a violent, but a cultural one. A silent revolution. More and more people seem to be getting fed up with the status quo and seeing their beloved country boom for a few years only to eventually bust and go bankrupt.
Mr. José Luis Espert is emblematic of this new phenomenon. A prominent economist and recently turned-politician to run for President this year, he considers himself an outsider and vows to “put an end to 70 years of Argentine decadence” and claims there is “a system that destroys the argentine people and benefits corrupt politicians, crony businessmen and Union leader crooks”. He spares no criticism for his opponents, either, asserting that both Mr. Mauricio Macri – Argentina ́s incumbent President – and Mrs. Cristina Kirchner – Macri ́s predecessor, the two candidates most likely to face a run-off, are “part of the problem, not the solution”. To revert Argentina ́s path, he proposes to open up the economy – Argentina ranks 148th in economic freedom, behind Ukraine and Ethiopia; lower taxes – Argentine workers work 7 months of the year just to pay taxes; and overhaul labor laws- 34% of workers are paid under the table.
When all is said and done, predicting the future is a difficult task, let alone in Argentina. Nonetheless, one thing is certain. It is way past the time Argentina gets its act to together and reform itself. It can choose not to, but it will continue a downward spiral watching as its once forlorn Latin American pars prosper, close the gap and eventually surpass their once prosperous neighbor. After all, it was no other than the
French, who a century ago coined the phrase “as rich as an Argentine”. In 1972, Chile shared many of Argentina ́s economic woes. It had a closed economy, alarming poverty levels and an inflation rate of 150% – three times that of Argentina. Less than 50 years and a “Chilean miracle” later, it is the highest ranked Latin American country in the United Nation ́s Human Development Index, has the highest social mobility in the region and has been shrinking its income inequality. There are two types of deviant countries: Chile and Japan, and then there is Argentina. Will Argentina ever experience a miracle?
By: Bruno Picanzo