Argentina: Where Failure Is A Choice, Not A Caprice
Published on: March 23, 2012
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  • Maid Abusing Socialist

    And, to top it all off, Argentines tend towards the most boastful displays of racism one is likely to regularly come across in this day and age…

    Such good looking people in such a good looking country–But, pretty is as pretty does.

  • Anthony

    “…rich Argentines recognize the signs faster than anybody else; they have mastered the art of moving money out of the country for crashes, buying again at the new bottom, riding the cycle up to the peak and bailing once again….” Your piece WRM reads as though Argentines (Government and players) are practiced arbitrageurs…

  • George W Bang

    Argentina is the country of the future. And always will be!

  • Kris

    If Argentina is so determined to follow this cycle, we indeed might as well derive some amusement from it.

  • I doubt WRM wrote this one.

    A century ago Argentina was a first world country, then it went off the rails and basically consumed its own capital (and a lot of other people’s too apparently). But why Argentina? I’ve never heard a good theory. Is it an Italian thing?

    “In fairness, many countries have grown rich by fleecing silly foreigners: the United States is one of them.”

    That’s a new one on me. Any documentation to back it up?

  • Three cheers for the Anglosphere, chaps. Compare similarly endowed Australia and you can see that as corrupt and badly managed Anglo countries are, they don’t have that Latin flair for economic farce. Heck, compare Italy and Germany and well…you get the idea.

  • techy3

    In response to Luke Lea’s question: In the railroad boom of the 19th century Jay Gould and several others made fortunes by buying enough of publicly traded railroads to get control and then stripping the assets. Railroads required huge amounts of capital to build an almost all of it came from British investors who lost their shirts to Gould et. al.

    The eventual result was that major British bankers refused to purchase bonds of US railroads unless someone they trusted absolutely was named the Chairman of the Board. That someone was J.P. Morgan. He and his junior partners would up controlling the boards of virtually every large, capital-intensive business in the US because foreign investors could not otherwise trust American managers. (Cornelius Vanderbilt also controlled a lot of railroads, but he did it through direct ownership and management, he had the money to buy whole industries not just bonds)

    If you’d like to refer to original sources or learn more about his phase of American economic development I recommend Ron Chernow’s House of Morgan (the bibliography will give you all the references to original sources you might like).

  • Jacksonian Libertarian

    A culture which fails to learn from its mistakes (nationalization) will justly face ridicule for its stupidity.

  • Richard Treitel and scroll near the bottom of the main article:

    … there are always going to be Argentinas. (If nothing else, there will always be Argentina.)

  • notChavez

    I believe the “dagger” was Chile, not Argentina. No, guerro, they’re not all the same!

  • Brett

    I’m not sure I would call it a “cycle”, since it’s mostly been after the devaluation and default in the early 2000s. Before that, Argentina had a brief period in the 1990s of sane economic policy, preceded by fifty years of terribly managed ISI, nationalization, inflation, and arbitrary regulation. It would be more accurate to say that Argentina is falling back into its old ways, except that China’s resource demands kept the impact of them from being obvious for a couple of years in the 2000s.

    That also explains why the potential oil and gas off the Falklands has made them even more antagonistic about the issue than usual. You can just tell that the populist government of Argentina is smelling the potential for a new revenue stream that will let them evade unpopular reforms for a few more years.

  • Brett

    Foreign investors (and a new one moves in every minute) forget that for generations foreign investors have been losing money in the periodic meltdowns and serial repudiations that mark Argentine financial history. Argentine assets are undervalued; growth looks good. And there is all that wheat, beef, wine, fruit, oil and gas. They plunge back in, and the cycle gets another kick forward.

    My guess is that the numbers for short-term growth and profitability looked good on a spreadsheet, and so they went ahead and invested despite the bad history. The whole global financial market was desperate for profitable investment opportunities over the past two decades anyways.

  • Richard Treitel

    … anything that looked like an 8% yield so the city/county/state pension fund didn’t have to be topped up. The Blue model bites us in unexpected ways.

  • @techy 3 – ““In fairness, many countries have grown rich by fleecing silly foreigners: the United States is one of them.”

    I’m aware there were scandals. I just doubt our country “grew rich” on them. Some individuals did but in the overall scheme of our industrial development they played a minor role. Do you disagree?

  • WhiteyC

    Can’t pay your bills, Argentina?
    The truth is, we never meant to…
    We know we told you
    We’d pay with dollars
    If you believed it,
    We’re really sorry…

  • Edgar

    Love the Argentinean comic relief! Bravo, bravo!

  • techy3

    In response to Luke Lea’s question above:

    I agree that these events were not the exclusive or primary causes of America becoming a rich nation. Mr. Mead’s statement to that effect was a very simplistic aside. That being said, simplistic is not the same as baseless. Your first post asked for documentation and I just meant to point toward some history that qualified as such. To wit-

    A) The building of the railroads connected America’s fertile plains with ports and markets and made a substantial contribution to the explosive economic growth of that time.

    B) The building of the railroads required huge amounts of capital large amounts of which were subsequently expropriated by corrupt individuals taking advantage of an undeveloped economic and legal system.

    We were never Argentina; but we weren’t Denmark either.

  • Enrique Sipowicz

    Not even one person has mentiones the fact that Aerolineas Argentinas was sold to a span spabish capitalist that had to be rebought by Argentina to maintain it and pay four billion dollars to cober the debt and keep 400 employes that were unnecessary.
    YPF has done nothing to encrease production

  • WBBsAs

    Under its politicized control, thanks to the president’s son and his lackies, Aerolíneas Argentinas is losing millions of dollars daily.

  • Gordon Pasha

    This article was picked up by the Buenos Aires Herald

  • nicco

    I’m argentine. I’ll do my best with english speach, ok? I’ll try not to “ruin my own happiness” either, ok? Wich also means not to let Walty do the same on me. Ok!
    Not that there is no truth in many sayings, but Walty doesn’t understand why. He goes like: it’s impossible to understand women. And shows satisfaction about his certainty. Still, that remains a confession of his own ignorance.
    If only failure was the clue, Argentina would have dissapeared long ago, indeed. The fact is we’ve had ups and downs: glorious and disastrous ones.
    The big mistake, though, is to take for granted this is now our ruin we’re up to, just because we’re not fiting his national idea of international market fiting…
    This is a virtuous cycle we’re on right now, moreover because there’s political continuity to it, despite both internal and external confrontation: the one clue lacking other cycles.
    As Mr. Cox agrees, you can’t tell crisis in Argentina today -far from external story tellings (and from external drastic realities).
    It is the main countries who actually are in deep crisis, if you happen to realize. Argentina, instead, came out of 2001 disaster on it’s own basis, effort and politics -contrary to international advise- and we’re doing well now. Just come and see.
    YPF was ours anyway. Only given over in concession, it’s now given back to it’s righteus purpose Repsol betraided.
    Investors have great opportunity in Argentina today and nothing to fear about.
    (-rather fear banker’s predictions!)

  • Lualpa

    Nicco, being an Argentine myself I have to disagree with you. Of course the country is in better shape than what it was in 2001/2 but is like a train going full blast ahead towards the abyss. The competitive production edge completely eroded by inflation that was not accompanied by devaluation, the state and the provinces with a combined deficit of over 10 billion dollars, shrinking reserves, corruption at every corner, an ineffective Congress, subsidies killing the economy (Aerolineas, energy imports, TV, etc …) to the tune of 12 billion this year alone …
    Yes, there were significant items that progressed in the social agenda but that is not enough to show that Argentina is now a land of bliss. I really hope someone will stop the train … because I doubt the abyss will vanish.

  • nicco

    LUKE: it’s quite an italian thing, probably, yes!
    But that about “basically consume its own capital and a lot of other people’s too apparently” sounds rather like NOWADAYS advanced capitalistic countries thing, don’t you think?
    And that’s more than “a good theory”.
    A new one on you? Documentation to back it up is all around Europe…

  • nicco

    LUALPA: Hi. Do you live currently in Argentina?
    Most of your “opposition newspaper facts” don’t match reality.
    In example, that about “shrinking reserves” isn’t exact. Only slightly would they diminish because of large 2012 bonds payments -those given off in the worst of 2002 crisis.
    As to “competitive production” issue, anyway, it actually becomes eroded all over the world because of recession’s effect in international trade.
    Still we have, and will have, positive trade balance. Also, national peso may move to correct things, wich Euro-zone countries may not.
    “Corruption” did you say? Please, leave that up to premier league champs: Mr.Cameron’s News of the World affaire, Barclay’s falsification of Libor, Bernie Madoff’s U$, finantial “bubbles” every where. Let’s be frank on this.
    Are you likely to think 54% people re-elected CFK, 9 months ago, on the edge of abyss? Take a good look around the world: how does people everywhere react to abyss..??

  • MichaelM

    Nothing is new in Argentina, these cycles were initiated by Peron in the 50’s and continue to this date. For some reason, governments of all persuasion, peronism in particular, think that discipline in economic management is something that everyone else must be practiced, not for Argentina. Examples abound, REPSOL expropriation, caps on exports of certain products, violation of agreements signed with WTO, etc, tec. Of course, all this is assisted by an ineffectual justice system in which judges are political appointments and cases are never resolved, or resolved politically. The current government of course, takes the top price for all the worst possible economic measures which only drive the economy down and hence increase poverty. If only Argentina take a good look at its neighbours Chile and Brasil, would solve most of its problems!!!!

  • RTD

    I am Argentine too, and realize most of the things mentioned by the author are true.
    I know where this “train” is headed, and strongly disagree with most of the things Nicco mentions, which are based on nationalist propaganda published on pro-government (ironically paid for by tax payers) media.
    It all comes down to Argentina spending more than it receives becuse of populist policies, and this difference is compensated by printing money, seizing foreign assets and doing everything mentioned by the author.
    The problem is it doesn´t work out, because we cannot print dollars like the US is doing right now to finance it´s monstruous trade deficit…

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