President
Mauricio Macri has put the country back on the neoliberal path with
policies that favor big agricultural producers inside the country,
and investors both inside and outside of Argentina.
by
Jon Jeter
Part
2 - Snatching poverty from the jaws of prosperity
For most
of the 20th century, Argentina’s was the most prosperous and
industrialized economy in Latin America, and virtually everyone who
wanted a job could find one. Israeli agents managed to kidnap the
fugitive Nazi Adolf Eichmann in 1960 simply by waiting for him to
finish his shift at a Buenos Aires water plant.
Then in
1991 — with the encouragement of the world’s two most powerful
financial institutions, the World Bank and the International Monetary
Fund — Argentina’s investor-friendly government decided to root
out inflation by fixing the exchange rate of the local currency: one
peso for one U.S. dollar.
Within
two years, the peg had sharply curbed inflation, from an annual rate
of 84 percent to one of 7.4 percent. But it also raised prices on
locally produced goods, making Argentina’s products too expensive
to sell abroad and goods shipped into the country artificially cheap.
Brands made in Spain and the U.S. began to fly off the shelves and —
much like the disillusioned, bankrupt protagonist of Ernest
Hemingway’s The Sun Also Rises — Argentina went broke, “gradually
at first, and then suddenly.”
In the
postwar period, the country had never seen its unemployment rate rise
above 4 percent; by the time of Albino’s self-immolation, it was 22
percent. The percentage of Argentines living in poverty soared to 56
percent, more than the previous peak by a factor of 10.
But,
beginning with the 2002 devaluation of the peso and President Nestor
Kirchner’s default on nearly $100 billion in government loans the
following year, Argentina’s economy began to recover. With less
money leaving the country to buy foreign-made goods and pay foreign
bondholders, more was available for investment and poverty relief;
Argentina’s economy grew by an average of 8 percent a year for the
next five years, and continued even after Kirchner died unexpectedly
and was succeeded as head-of-state by his widow, Cristina, in 2010.
As a result of its default, Argentina was a pariah in the capital
markets but a quarter of the population put poverty in their rearview
mirror.
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