NEW YORK — After returning from Argentina, my native country, I am deeply puzzled. It is difficult to reconcile the image of the proud country I left more than 30 years ago with the one I saw again recently. How can I explain the hundreds — or thousands — of people who go scavenging every day as soon as the sun sets? Or the retired workers with pitiful salaries and a look of desperation on their faces banging on the doors of banks that refuse to give them their hard-earned savings? Is this really happening in the country once considered the “breadbasket of the world”? Or is it a nightmare from which I am unable to wake up?
After World War I, Argentina was one of the most rapidly developing countries in the world. How then to explain that a resource-rich nation, with a highly educated middle class, oil, minerals and fertile land is in the present situation?
True, in the past few years, Argentina has faced some difficult external circumstances. Falling global prices for grain undercut export earnings; Brazil’s currency devaluation cut Argentina’s exports to its largest customer; amid a global economic downturn Argentina faced increased reluctance by foreign firms to invest in the country.
To these circumstances should be added irresponsible bank loans by international financial institutions to notoriously corrupt governments and bad loans to private companies that were assumed by the government as part of the public debt. The loans only served to increase the corruption and inefficiency of Argentine politicians.
To avoid the collapse of the banking system President Eduardo Duhalde drastically curtailed all banking operations and foreign-exchange transactions. People are unable to withdraw money from banks except minimal amounts. The resulting paralysis of commercial transactions has deepened the depression.
Foreign banks, which had profited handsomely from operations in the country, took their assets out of Argentina and refused to pay back people their savings in dollars, the currency in which the savings were denominated. Whatever amount they are willing to pay is in depreciated Argentine pesos. Since only a few merchants accept payment in debit or credit cards, consumers limit their spending to bare necessities. The effect on the economy and people’s health has been devastating.
Recent statistics show that in Buenos Aires and suburban areas 53.1 percent of children under age 15 live in poverty, a record rate since 1990. In some areas of the country, such as in the north, this percentage is close to 70 percent. Many children are born malnourished with serious consequences for future development. In Tucuman province, the number of children with malnutrition increased by 637 percent in the first five months of 2002.
Will Argentina ever regain the rate of development it had at the beginning of the last century? Duhalde has not yet developed a coherent economic plan, and the economic crisis becomes deeper every day. Several measures are now necessary to overcome the almost total economic and political chaos in the country. Critical among these is the need to control rampant corruption, to ensure that the country is again under the rule of law, to curtail tax evasion and to encourage private saving. These are difficult measures for a government severely tainted by corruption to undertake.
In this climate, further loans to the government will not solve Argentina’s problems. Loans not used for repaying foreign debt would probably find their way into the pockets of the politicians ruling the country. Perhaps the best remedy for Argentina is to enable it to increase trade with private groups as a way of revitalizing the economy. Therefore, industrialized countries to curtail their protectionist policies, which seriously hinder that possibility.
As the 2001 Nobel laureate for economics Joseph Stiglitz said, “It is trade with the United States that brought Mexico out of its crisis.” As things stand now, the only way to avoid total chaos in the country is to re-create a vibrant economy as the first step in Argentina’s recovery.