It is a decade since Argentina defaulted on its debt and abandoned its peg to the dollar. The country was mired in a terrible economic crisis. Four governments fell in a matter of weeks and violent protests were seen on the streets. A decade later the country has enjoyed a remarkable period of growth, reducing poverty and inequality under a left-wing Peronist government. Now President Christina Kirchner (pictured), recently re-elected on a landslide, has caused a rift with the EU by renationalising its oil company YPF, which was owned by Spanish oil conglomerate Repsol.
As Mark Weisbrot wrote in The Guardian:
Of course this success story is rarely told, mostly because it involved reversing many of the failed neoliberal policies – that were backed by Washington and its International Monetary Fund – that brought the country to ruin in its worst recession of 1998-2002. Now the government is reversing another failed neoliberal policy of the 1990s: the privatisation of its oil and gas industry...
In response the EU cancelled a planned meeting with Argentina "in solidarity with Spain". Spanish Foreign Minister José Manuel García-Margallo warned that the takeover would hamper Argentina's access to international credit and export markets. "The damage to Argentina could be irreparable," he said. In Europe under EU treaties, nationalisation is effectively illegal - except in the case of bank bailouts. By contrast, Argentina has been taking back its sovereignty from international financial institutions where in Europe governments of all hues make it a point of honour to bow down to them and impose austerity.
Reading the news anyone would think Argentina is on the verge of collapse. In reality, the last decade has seen it enjoy a remarkable comeback. As reported by the Centre for Economic and Policy Research, the Argentine economy has grown 94 percent for the years 2002-2011. This is the fastest growth in the Western Hemisphere for this period, and among the highest growth rates in the world. It also compares favorably to neighboring economies that are commonly seen as quite successful, such as Brazil, which has had less than half as much growth over the same period.
During this period, Argentina has seen considerable progress on social indicators. Poverty has fallen by over two-thirds from its peak, from almost half of the population in 2001 to approximately one-seventh of the population in early 2010. Unemployment has fallen by over half from its peak, to 8.0 percent. And employment, by early 2010, had risen to 55.7 percent, the highest on record, as social spending nearly tripled in real terms. Income inequality has also fallen dramatically.
Argentina was trapped in a severe recession from mid-1998 to the end of 2001. Attempts to stabilize the economy and maintain the currency peg to the U.S. dollar, through monetary and fiscal tightening, led by the IMF and backed by tens of billions of dollars in lending, failed to arrest the economy’s downward spiral. In December of 2001, the government defaulted on its debt, and a few weeks later it abandoned the currency peg to the dollar. Recovery began after one quarter of contraction and continued until the world economic slowdown and recession of 2008-2009. Now it has rebounded, and the IMF projects growth of 8 percent for 2011. Critics claim the government has mangled economic statistics that it doesn't like and threatened economists who criticise it. But surely this progress is undeniable - certainly polls show Argentinians enthusiastically back Kirchner's government's policies.
Of course this does not mean that Argentina does not have all kinds of problems, including 20% inflation and a widening trade deficit. But it does again point to the fact that countries which have not followed the neoliberal orthodoxy of the last two plus decades have not suffered the economic disasters that their critics have predicted. Even now many are saying that Kirchner's nationalist stances on the Falklands and on oil nationalisation are some kind of deflection against growing problems at home. But the truth about the politics of Argentina and many other Latin American governments is that they have combined socially progressive policies and economic growth that have benefited the majority population. This has meant emphatic re-election of left of centre governments in Argentina, Uruguay, Venezuela, Brazil, Ecuador, Bolivia and Nicaragua. This is a striking lesson that proves politics can be done differently - not just serving the 1% as in Europe and North America, but concretely improving conditions for the majority. One can argue that starting from a much lower base makes this task easier in developing countries than in the rich West. But that ignores the fact that every one of the governments mentioned has faced fierce resistance from domestic and international elites.
The austerity programmes in Europe are currently pushing countries toward the situation faced by Argentina a decade ago, from which it had to escape through defaulting on its debt and a new economic policy. Europe may one day have to learn something from the successes of Latin America's populist tide.
Here are the comments of an actual Argentinian about the changes seen in his country. The revocation of fishing licenses to foreign fleets that he mentions is a powerful example of concretely favouring the interests of local people rather than multinationals:
As an Argentinian-born I am quite satisfied by the fact that Argentina is once again in a position to own its oil company. It will hopefully render some benefits with oil prices being so high and investment will hopefully be directed towards improving Argentina' s public services. Nonetheless I feel it was done in a very clumsy way and it is culturally hard to understand for other countries.
In the 1990s everything was privatised with the promise that would make Argentina a first world country. It happened exactly the opposite. Former state-run companies began downsizing and it became an employers market which produced awful working conditions (with complicit policy from President Menem's administration). As a young lad of 20 years old I had to leave the country because they were no prospects. In my city, Mar del Plata, unemployment surpassed the 50% mark. Poverty was rampant: there were abandoned kids everywhere, people begging everywhere. It was awful to see your friends, family and society breaking into pieces.
I would have liked the Argentinian government doing this different. For example, buy a portion of Repsol YPF so as to sit in the board and have a say in decision-making. However, Spain is now in bad shape an the promised investments in energy could not materialise. Argentina should help Spain in any possible way so they can get out of this terrible crisis. I assume this is the same fear the EU has, Spain has lost "extraterritorial" energy reserves. It is a blow.
Now Mar del Plata is a new city. Fishing contracts given to the Japanese and Taiwanese fleets (that forbade Argentinian fishermen to fish) have been revoked. The city now enjoys full employment back again and improved standards of living. It is once again clean and the public services work.
Argentina is a young nation that half of its history was governed by dictatorships and power tensions between rural landowners and urban commercial elites. English, Spanish and French had (and have?) interests in it. These are still an issue today. It is a country of contrasts and very passionate where sometimes people fail to see all the shades of grey. Privatisations were not done right in the 1990s and re-nationalisation now also fall short of being well done.
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