The Nobel prize-winning economist Simon Kuznets once remarked, “There are four types of countries. The developed, the underdeveloped, Japan and Argentina.”
Argentina is often described as an economic basket case. Having once been one of the wealthiest nations in the world, the past few decades have seen the country oscillate between periods of strong growth followed by economic turmoil.
These crises are normally of varying severity, with the issue of stagnant growth and soaring debt plaguing the country throughout most of the 20th century as it transformed from a global economic power to a second (or arguably third) world country.
What seemed like the breaking point was the 2002 debt crisis, which threatened to bankrupt the country until the late President Néstor Kirchner struck a deal with the International Monetary Fund (IMF) that allowed Argentina to return to a period of sustained growth.
So why is this different?
Even before the pandemic, Argentina was facing rampant inflation and soaring unemployment, a trend that began in 2014 after the country defaulted on a debt payment to bondholders. In 2018, former President Mauricio Macri was forced to request another loan from the IMF for $53.6 billion, the largest in the organization’s history.
However, Macri’s refusal to enact the necessary austerity measures in the run-up to his re-election campaign meant the loan only worked as a temporary plaster as the country’s purchasing power continued to plummet while debt and unemployment continued to rise.
In a decision that was likely made with the heart but not the head, the Argentinian public booted Macri from office in 2019 and returned the Peronist candidate, Alberto Fernández, presumably in the hope that he would ease the pain of Macri’s relatively modest austerity measures. But as is the case with any socialist administration, they can only ever delay crises, before eventually making them worse.
The country’s economic difficulties have only been wildly exacerbated over the last year. Argentina’s lockdown measures have been described as some of the most stringent in the world, accelerating this economic decline. The peso has now lost more than 90 percent of its value against the dollar since its 2014 default, while unemployment has reached as high as 13.1 percent. Meanwhile, foreign companies are leaving at an alarming rate.
The question recently asked by the English-language Buenos Aires Times is whether Argentina could end up in a similar predicament to Venezuela. The conclusion of that analysis was that its institutions are too strong to be corrupted in such a manner.
“The suggestion that we are turning into Venezuela is part of a cultural war that has pitted Kirchnerites and anti-Peronists against each other at least since 2008,” noted journalist Agustino Fontevecchia in a column for the English-language website last September.
“I personally do not believe the conditions are in place for Argentina to descend into a Venezuelan state of chaos, as I feel society, and our institutions, will not permit it,” he added. “But it is by no means impossible.”
Yet given Venezuela is a failed state, whose decline has led to one of the world’s most serious humanitarian and migratory crises, even a mere comparison to the results of Hugo Chavez’s “Bolivarian Revolution” should send shudders down the spine of the average Argentine.
This prospect must seem all too real given the enduring influence of former President and now Vice-President Cristina Fernandez de Kirchner, who has aligned the country far closer to rogue states such as Cuba, Venezuela, and Iran than say Europe or the United States.
Hector Schamis, a Professor at Georgetown University’s Center for Latin American Studies and Democracy & Governance Program, told El American that although he previously thought that Argentina could never become a failed state, his opinion has shifted in recent years.
“Argentina always seemed unlikely to follow the demise of Venezuela as wealth was in private hands and the labor movements were explicitly anti-Marxist,” said Schamis. “However, many Argentines now fear the worst as Kirchner aggressively consolidates power.”
“During her presidency, Kirchner failed in three specific objectives: heavily taxing (not expropriating) agriculture, nationalizing the media, and taking over the judicial system,” he explained. “Having failed the first time around, she is now back with a vengeance.”
“She and Alberto Fernandez are using aggressive rhetoric regarding supposed landowning oligarchies, attacking property rights, discouraging foreign direct investment with policies such as freezing phone and internet rates, while also continuing their assault on the judicial system. Their platform is now largely indistinguishable from that of Castro or Chávez.”
Given its strong institutions, sizeable tourist industry, celebrated culture, legendary cuisine, and the status of Buenos Aires as a world capital, the idea of millions of starving, penniless Argentines crossing the border into Chile and Brazil may seem farfetched. But if there is one thing the Venezuelan tragedy should teach us, it is that the true descent into anarchy often takes place when no one is watching. And when it does, it is likely that even when the storm has passed, that country will never be the same again.
Ben Kew is English Editor at El American