Hope

For some obscure reason, I want to be hopeful about Argentina. We have had our most recent crises in 1976, 1983, 1989, 1995 (mild) and 2001. Statistically speaking, we are far ahead in the pregnancy of our next crisis. I am really hoping for a miscarriage.

There are Reasons why Public does not equal Private

A few minutes ago I watched how Alberto Fernandez, Chief of Cabinet, informed the press how negotiations with the campo had gone. Sitting besides a speechless Lousteau (who looked a lot like Messi did when he did not get to play in the last World Cup game), he mentioned how everything had gone fine and how after fixing each parties position he had heard the campo's requests. Obviously there was no negotiation on the export taxes, which is what the campo unionists were there for in the first place ... Fernandez did mention a couple of things which will, IMHO, add to the already existing noise: He mentioned they would work on a plan to assure small ruralists a fair profit according to their activity.

I've just got 2 questions: (1). What happens with the mid and large ruralists? (2). How does the government get to determine how much profil any ruralist will make?

A countless amount of questions appear once you start thinking about the first two. Since it's very late and I am very tired, I will just say this: there is a reason why there is a clear separation between the private and the public. Argentinean politicians seem to believe there is no line in the sand, and trespassing is a mere attribution that the State has.

Dear sir, that is wrong. Not only should the State not determine profitability of any sector; it should not intervene at all, except to set clear rules for it not to have to meddle. Then we ask ourselves - how come we are losing ground in Foreign Investment? How come our business climate is far from optimal?

When the state starts taking care of the state - which means finding ways to run more efficiently and therefore need less taxes to run bigger - we will all be better off. Until then, we will continue to be a forever-emerging country run by simple-minded control freaks.

The Story Thus Far ...

I have spent quite some time reflecting upon the inminent socio-political conflict bubbling in Argentina. Needless to say, my findings are not so optimistic - tonight I'll explore recent causes for the turbulence (I leave for later some of the more philosophical reasoning behind it all).

The infamous campo did not start their complaint last night: Mme President's speech was just the drop which made the glass overflow. The relationship between the Argentinean commodity sector and the gov't has been strained since the devaluation. After several years of "thin cows" and suffering continuous losses, the sector suddenly faced devaluated costs and dollar-denominated prices. For some time, it seemed like heaven, and profitability sky-rocketed (however, that does not mean that it was enought to revert years of losses and unrecovered investments!).

The gov't of course quickly realized that the favorable conditions were not only the rising international commodity prices but the new peso-dollar parity of 3 to 1 assured the hacienda and ganado farmers high returns. Enter the export taxes, which effectively drive down the "real dollar" for commodity exports. More violent still, there was even a 6 month export ban on meat, for a similar conflict.

At the same time, an old arch-enemy also started to show her face: inflation. As nominal salaries rose, existing capacity was exhausted, employment rose and industrial capacity did not expand (due to investments), prices started to react. One after the other, internal prices and salaries started a race which is currently ongoing (I would say, at a "fast strolling" pace and not running or sprinting yet).

To conclude, if you inflate costs and reduce by 44% the exchange rate for exports, farmers are left with economic conditions similar or worse than the end of the 90's ... which is precisely where this protest has put us - hitting our pots & pans, when we should be banging our heads for having forgotten our past - and therefore reliving it.

PS -tongiht's and last night's pictures from the internet, not mine!

Pots & Pans have Awaken me from my Slumber

Yeah, yeah, I know: it's been a while. I took a "writing hiatus" mostly for personal reasons: I had a lovely daughter and, quite frankly, there was almost never any time to spare. But tonight, something awoke me from my long slumber.

It happened near 8pm, when I heard a neighbor (a couple of buildings away) hit her pots & pans in the balcony. A couple of moments before I was washed away by the excessive pride shown by Madame President in her speech, directed at the agribusiness who have halted activities since almost 2 weeks ago to protest gov't intromission into their value chain. Our diaper-carrying economy Minister announced 2 weeks ago the increase of export taxes to soybean (Argentina´s main cultive), to ~42%. Yes, you read right: 42 out of every 100 dollars would go to the gov't pocket (and trust me, this is not Sweden - people get nothing from that increase - no more hospitals, no more security, no better education).


So, people said enough: much like a 2001 flashback, people started banging (quite loudly, I must say) their pots and pans in the middle of the street, in their balconies, supporting the agro sector and asking the gov't to reflect on its mistakes. However, it is now almost midnight and we are as far as possible from a peaceful reconciliation: people have gathered at the historical Plaza de Mayo and so have some gov´t-supporting piqueteros. Nothing good can come out of that explosive cocktail.



In the middle of it all, the most important question is related to the Role of the State: ¿Will the gov't reserve the right to determine how much is "enough profit" in the private activities? ¿Is that not a very communist thing to do, and, if so, can they think of ever attracting Foreign Investment this way? (Argentina's economic model, of course, makes sense WITHOUT investment, which would otherwise force the gov't to buy more dollars to maintain the devaluation ...).

This type of thing never happened to Mr Kirchner; except for 2 or 3 occasions when Mr Blumberg - the father of an express kidnapping victim - filled the Plaza to ask for more security. People now gathered with a genuine request to the President: review the economic measures affecting the agribusiness (which suffered great losses during 1997-2002, and has been booming since 2003). The gov't response was, apparently, to send in the piqueteros and take back the Plaza.

These were ordinary people telling the gov't to listen. The gov't loves to speak and to give orders. Argentineans have, in the past and despite continuous episodes when the state appropriated their savings, been docile. Maybe that time is over. Maybe everyone is fed up with someone - be it a he or a she from the K dinasty - bossing them around. This was fine during a crisis, when a strong personality and leadership were needed to emerge as unscathed as possible. Now, the worst seems to be over and the world is giving us a chance to stand up: maybe, and just maybe, people are realizing that they do not want to be so docile or supportive of a President asking for too much and giving too little. Maybe, and just maybe, this opens an enormous door for the opposition to build upon. They have not been able to do so in the past; I trust they have learned from their mistakes and will do so in time for 2011.

If not, we run the risk of attention-grabbing, photolog-loving-teenager Florencia K (aka Florkey) to run for office ... God forbid!