Introduction
Governance in Argentina leaves a lot to be desired. The country reels from crisis to crisis. This is nothing new. It has been going on for decades. According toTransparency International, citizens perceive considerable corruption (Argentina ranks 106th out of 177 countries) but put up with it. And despite the foolishness of its leaders’ decisions, life goes on in-country with minor inconveniences.
At least it did until the January 60% currency devaluation and the resulting 20%+ inflation. Below, the future prospects of Argentina are considered. This is followed by comparing the Argentine debt default with what recently happened in Greece.
The Lady and Her Policies
In the past, I have defended at least some of President Kirchner’s actions. In particular, I understood why she took over Repsol (Repsol was sitting on Argentina’s energy sources, not developing them). I also sympathized with her taking over the pension funds (they were being poorly managed).
But recently, her approach and economic decisions remind me of how military leaders normally try to manage their economies: “command and it will happenâ€. I am thinking specifically of experiences I had recently in Myanmar and in Ghana 45 years ago. The same patterns:
- If the exchange rate is not satisfactory, order the money changers to use a different one;
- If you don’t like the inflation rate, order the government statisticians to change it;
- If you want smart phones to be produced in-country, ban their importation from other countries; and
- Strengthen the currency by requiring all real estate transactions to be done in the local currency.
Military leaders think that by ordering these things to happen, they will. That is not how things work. But in both Ghana and Myanmar, the leaders at least had a longer term plan of what they wanted to accomplish. It is not clear that Kirchner has such a plan.
Intimidation
For three years running, I spent a month teaching at the Business School of the University of Palermo in Buenos Aires. I can testify to the high caliber of Argentine economists. So where are the Argentine economists ridiculing her policies in public and calling for change? It appears the Lady does not like criticism and makes life pretty uncomfortable for anyone who criticizes her.   Â
The Argentine Economy
Argentina has done quite well, even with Kirchner in charge. Argentina recovered from the global recession as well or better than most other Latin American countries. But growth slowed dramatically in 2012, and the FocusEconomics consensus forecast of 18 banks and other financial institutions is that GDP will decline by 0.6% in 2014. What is happening and why?
