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Black Markets Spread, Kirchner's Power Wanes in Failing Argentina


It didn’t take long for Cristina de Kirchner’s foreign exchange controls and phony inflation numbers to make black markets a staple of life in Argentina. The FT reports that Buenos Aires today is littered with “caves”—shady offices where dollars can be bought and sold for double the official rate:

In the heart of downtown Buenos Aires, it is hard to walk more than 20 paces without being accosted by hawkers buying and selling dollars. Interested customers will be led into an inconspicuous office in a nearby building.

“They’re called ‘caves’, because they’re supposed to be secret. Of course everyone knows they’re there,” said a hawker who called himself Raul. “Illegal? Of course they are! But don’t worry, the police are paid off, nothing will happen to you.”

All signs point to Argentina’s spin-cycle of failure continuing:

That problem will only deepen if Argentina slips into a technical default, which some observers believe is all but inevitable after a US appeals court last month ruled in favour of the holdouts demanding that Ms Fernández’s government pay the $1.3bn it owes them in full, in the latest chapter in a long-running saga that began when Argentina defaulted on almost $100bn in debt in 2001.

Already shut out of international credit markets and sapped completely of investment, a second default in ten years might inaugurate Argentina into the unenviable club of global pariah states. A government that believes honest economic reporting is a crime and having to repay its debts is an injustice is about as attractive to outside investors as Venezuela, Cuba, or Iran.

The only good news is that trade unions and low-wage workers are turning against Kirchner’s Peronist party, which tanked in primary elections this summer, depriving Kirchner of the legislative majority she needed to change the constitutional limit on her two consecutive terms. Not much in Argentina’s history suggests that the next government will be much better, but for now, it’s hard to imagine how things could be going much worse.

[Image of Cristina de Kirchner courtesy of Wikimedia]

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  • Anthony

    Maybe this should be re posted under via meadia’s “jobs of the future” category. Maybe unemployed Americans can get in on the action by smuggling dollars into Argentina! Smells like innovation to me!

    • Jim__L

      See a need, fill a need…

    • bigfire

      But what will you get in return? Worthless Peso? Metric tons of grain that’s hard to ship out (and nevermind the export control mechanism that’s currently in place)?

      • Anthony

        Hahaha… good points!

  • Jacksonian_Libertarian

    The Argentineans are one of the stupidest peoples on earth, they should have learned by now that they need solid management in charge, instead they keep electing this socialist claptrap. I wonder how many times they are going to do this to themselves, the joke got old long ago, and now it’s just pitiful.

  • Loader2000

    Argentineans are not stupid. The desire to collectively share wealth, especially when times are hard, is an ideal that is built into our DNA from tribal hunter/gatherer times. That doesn’t mean it works in an enormous, non-tribal technological society with dramatic divisions of labor. The real fools are the ones who continue to buy bonds from countries with socialist leadership. I can’t tell if they are blinded by ideology are just looking for short term gain, with the plan to pull out just before the inevitable default. However, if I were an investor, and I found out that my hedge fund manager had money in Argentinean (or Venezuelan) bonds, or had invested in any large resource extraction ventures in those countries, I would sue him for mismanagement.

    • ljgude

      I agree. Our instincts evolved during our long history as hunter gatherers. The last 5000 years or so of agriculture and 250 years of industrialization haven’t changed that DNA. Hunter gatherers share and share alike. The minute humans try to recreate the egalitarianism of hunter gatherers things go bad fast because hunter gatherer equality is enforced by nature, not by a nomenclatura. It took the French revolution three years to go from universal brotherhood to The Terror. Marx was bitterly disappointed by the revolutions of 1830 and 1848. God should have been granted 200 years of life so he could have experienced the 20th century in full. To me the primary reason that Marxism in all its form remains so attractive to so many people is simply because it appeals to our human instincts. It doesn’t matter how many times it fails, people who are unaware of the role played by instinct, emotions and other regrettable bits of human nature get taken in over and over again. It feels so right – to intellectuals particularly, that they still argue that it hasn’t been given a fair trial.

  • B-Sabre

    “Not much in Argentina’s history suggests that the next government will be much better, but for now, it’s hard to imagine how things could be going much worse.”

    I dunno. Somebody could float the idea of trying to liberate the Malvinas again, to distract the populace from the impending economic doom.

    • bigfire

      I can one up you on that stupidity. When was the last time Argentina had war against Chile?

  • bigfire

    At this junction, anyone dumb enough to lend to Argentina deserve to get defaulted on.

  • Tom Servo

    Argentina has passed a law calling this the Totally Unpredictable Tragedy that No One Could have Foreseen or Predicted. Oh, and Racism!!!!

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