Why Argentina’s Problems Have No Solution

PANAMPOST – Whenever there is a problem that requires a solution, there are two possible scenarios: the problem can be solved and left behind, or we face failure, and everything remains as it is. In an adverse situation, things may actually get worse. If we have to find a solution, it is essential to accurately diagnose the problem and establish the appropriate actions to help overcome the negative situation.

This is an indispensable condition. In other words, one can accurately diagnose the problem and do everything right to the best of one’s ability, and still fail to solve the problem. Some things are indispensable, but they do not become guarantees. Without these questions, any solution is absolutely unworkable. On an individual level especially, where luck is an essential factor, a country will not escape the mess it is in unless it understands how it got there and chalks out the appropriate roadmap to reverse the situation.

Argentina has serious problems that are visible to all: poverty, inflation, unemployment, fiscal deficit, and so many other issues. Although they form a central part of the political debate, there is no accurate diagnosis of the causes. This is why the solutions they seek to apply are lousy. They are at best innocuous, but unfortunately, they are often directly counterproductive.

The two bills discussed by the Chamber of Deputies in the last session of the year are a clear sign that Argentina is in a mess. Nothing can make you think that in the short or medium-term, there is a solution to the underlying problems. The deputies (whom all seem to be in the same populist and irresponsible party) are debating two ridiculous bills this afternoon: the one that regulates rents and the “gondola law.” Worst of all is that the initiatives have the support of Cambiemos, the political space that supposedly came to an end Kirchnerist populism. The stupid idea of the state organizing the supermarket aisles even came from Elisa Carrio, the person in charge of the official assembly that united Mauricio Macri with the Radical Civic Union.

You don’t have to be a fortune-teller to anticipate that the two measures are doomed to total failure. The regulation of rental contracts will not make people who cannot buy their apartment able to live in a house, nor will the gondola law make supermarkets display more affordable options for Argentines.

To begin solving things, we must take a step back and recognize that the problem is not prices, but the deterioration of the national currency. And if we are lucky enough to reach that point, we must be aware of the disaster of uncontrolled issuing of currency, the purpose of which is to cover the dangers of a fiscal deficit. We need to look at the state’s liabilities very carefully so that we can begin to solve the problem of people who don’t make it to the end of the month and people who can’t rent an apartment.

When the government passes rent control laws, it should consider that when it impedes transactions between free contractors, access to housing gets more complicated for people who need to rent apartments. The prohibition of indexation, fixed-term contracts, the denial of the possibility of contracting in foreign currency, and the impossibility of evicting debtors, instead of helping the neediest, subjects them to crowded accommodation in unhealthy hotels. Many families cannot access an apartment even if they can pay the market price for decent housing because of the obstacles placed by the state.

A similar thing happens with the delirium of gondola regulation. If legislators are concerned that Argentines may not have access to basic necessities, instead of rigging how the supermarket shelves are arranged, they should solve the currency problem and encourage competition from large companies. This cannot be done by forcing the placement of a secondary brand over a leading product. The parliamentarians should be debating something else today: opening up the market to imported products (like any civilized country) and the elimination of obstacles for new SMEs to start operating. The impossibility of access to credit, labor regulations, and excessive taxes favors the status quo where the game is limited to a couple of large companies. No one enters, and the business is between a few.

The country will continue to deteriorate unless the political class recognizes the nature of the problems and proposes adequate solutions. Today’s parliamentary debate is the sad sign and corroboration that Argentina is closer to sinking deeper into the well than it is to find a way out.


By Marcelo Duclos