Weekly Standard Online
May 8, 2012
by Jaime Daremblum
Today in Washington, Argentine vice president Amado Boudou will be addressing a Council of the Americas conference on the global economic recovery. I have no idea what Boudou will say in his remarks, and I have no idea how the attendees will receive it. But I do know this: Having a senior member of the Kirchner government speak about responsible economic policy is like having a senior member of the Iranian government speak about religious tolerance.
It's been less than a month since President Cristina Kirchner announced that she was nationalizing a majority stake in Argentina's biggest oil company (YPF), a stake that had previously been owned by the Spanish firm Repsol. Her decision triggered outrage in Madrid, and the Spanish government immediately retaliated, saying it would curb imports of Argentine biodiesel fuel. (Meanwhile, the Spanish technology company N2Scanceled plans to establish an office in Argentina.) For its part, Repsol vowed to challenge Kirchner's expropriation in the international court system.
The Wall Street Journal urged Western officials to go a step further: "A better way to send a message to Buenos Aires would be for the world's civilized countries to expel Argentina from the G-20. When its president wants to behave like a real head of state and not a thug, the country can be invited back into the club of serious nations." The Washington Post echoed this call for Argentina to be removed from the elite club of major economies (it suggested Chile as a replacement), and a British member of the European Parliament said the EU should at least discuss the idea. The Economist argued that if Western countries booted Argentina from the G-20, terminated its borrowing privileges from multilateral organizations, and stopped allowing its citizens to enjoy visa-free travel in Europe, "Argentines might see the true cost of their president's antics."
Those antics have made Argentina a global pariah. Apart from Cuba, Venezuela, and perhaps Bolivia, it is hard to think of another Latin American nation with worse economic management. (Even autocratic Sandinista leader Daniel Ortega is trying to maintain a relatively attractive business climate in Nicaragua.) At a time when most of the region is modernizing and seeking to lure foreign investment, Kirchner has embraced policies worthy of Hugo Chávez. The result? Massive capital flight, soaring inflation, and "the largest number of protectionist measures worldwide," according to the Latin Business Chronicle.
Not only has the Kirchner government adopted a series of disastrous economic policies; it has also been lying about the consequences. Indeed, for several years now, Buenos Aires has systemically doctored its official inflation data, and it has bullied those journalists and consultants who dared to report the truth. Back in February, the Economist declared that it would no longer be publishing inflation figures supplied by the Kirchner government: "We are tired of being an unwilling party to what appears to be a deliberate attempt to deceive voters and swindle investors."
Then there's the matter of Argentine debt obligations. More than a decade after suffering the largest sovereign default in history, the South American country still owes roughly $16 billion to private creditors, plus an additional $9 billion to Paris Club member nations. It has spent several years wrangling over these obligations and refusing to accept a fair settlement. Of all the cases pending against G-20 countries at the World Bank's International Center for Settlement of Investment Disputes, the overwhelming majority are cases that were brought against Argentina.
To be sure, the story of Argentine decline starts long before Cristina Kirchner or her late husband Néstor (who preceded her as president from 2003 to 2007) ever took power. As Harvard economist Edward Glaeser hasnoted, Argentina was the world's eighth-richest country in 1909, with a per capita income that was 50 percent greater than Italy's and 180 percent greater than Japan's. But the era of populism, dictatorship, and periodic hyperinflation that followed World War II took a devastating toll on Argentine prosperity. Historian Niall Ferguson points out that Argentina's per capita GDP was no higher in 1988 than it had been in 1959. For that matter, it was equivalent to just 34 percent of U.S. per capita GDP in 1998, versus 72 percent in 1913. "The economic history of Argentina in the twentieth century is an object lesson that all the resources in the world can be set at nought by financial mismanagement," Ferguson writes in his book The Ascent of Money.
Unfortunately, the brief economic history of Argentina in the 21st century conveys that same lesson. While the resource-rich economy has temporarily been boosted by high global soybean prices, galloping inflation has eroded purchasing power and exacerbated poverty. President Kirchner has shown herself to be an autocratic and deeply ideological leftist who is willing to lie about inflation, expropriate private assets, harass opposition journalists, and tolerate (or promote) rampant corruption.
Florida International University political scientist Jerry Haar puts it this way: Argentina "has once more slid back into an imbecilic morass of demagoguery, authoritarianism, mindless statism and self-destructiveness." Relief may not arrive until the country's next presidential election, in 2015. An economic crisis may arrive sooner.
Ambassador Jaime Daremblum is a Hudson Institute Senior Fellow and directs the Center for Latin American Studies.
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