Argentina is yet again breaking promises, the WTO said last Friday. In a 170-page report, the international body ruled that Argentina’s import-export rules ran contrary to its treaty obligations. The Financial Times reports:
The focus of the case brought by the EU, US and Japan in 2012 was a series of strict rules on imports and the flow of capital that Buenos Aires introduced in an effort to balance its trade with the outside world.The measures, which drew the ire of foreign investors, included requirements that all imports are balanced by exports and accompanied by investments into the country. Argentina imposed limits on the volume and price of imports and bans on foreign companies repatriating funds to their home countries as well. […]Argentina’s main problem will remain its shortage of dollars. Unable to borrow on the international capital markets because of the dispute with its so-called “holdout” creditors, which triggered last month’s default, Argentina relies on exports to finance its imports. But faced with a growing energy deficit and falling prices of soya, Argentina’s principal export, the government is restricting imports, which is aggravating a recession.
This news underscores the reality that the current Argentine government has pursued a recklessly illegal course in dealing with its obligations under international agreements that the country voluntarily signed. It has had exactly the same approach to domestic savers and investors, but since it can change the domestic laws at will it can avoid the indignity of losing court cases even as it dishonors solemn obligations.
We continue to hope that at some point the Argentine people, who have freely chosen a succession of populist political leaders on the basis of false promises and demagogic claims, will one day wake up. When that happens, the enormous natural resources of Argentina, favorable climate and skills of the people will ensure an enviable long-term future of growing wealth. Until that time, however, Argentina will continue to flounder and flail, offering a textbook case of how bad political culture and endemic social corruption can negate natural wealth.