10 April 2008

Eye of the storm III: Powers that be

Still more about the campo crisis, farmers' strike, agricultural lockout, or whatever your choice of words.

Once I said that Cristina's first speech (the one I heard while I was held in Villa María, back from vacations, by a road block) was the worst piece of diplomacy I'd ever heard. I need to correct — Cristina's last speech at Plaza de Mayo, surrounded by the dreadful camarilla his husband assembled, and facing the crowd of vociferous supporters herded like cattle to applaud her, was the worst piece of diplomacy, the one thing anyone seeking to solve a conflict should never do. Intended as a show of strength, it enraged everyone and ended up having the opposite effect. Most analyzed it as a show of weakness and insecurity. I think it was a knee-jerk reaction, triggered by a mentality that equals adulation with approval.

Decisions in the national government are taken within a circle of four or five people, with occasional nods to a few more. Orders for the rest of the administration come from the top, from those few people. No experts are consulted. Past experience and history are ignored. Congress is bypassed. The press is informed by leaks or learns about new government measures when the president starts ranting about them in partisan meetings. So are the governors, even those that identify as Kirchnerist, and the public. That's what everybody saw these days, and what angered many, I think. Myself, I'm sick and tired of my representatives being silent.

Agustín Rossi, deputy for Santa Fe, has been verbally punishing or threatening dissidence and opposition, and no-one has approached him to tell him that he should be lobbying for his province's interests in Congress, instead of campaigning (unsurprisingly, there are already signs reading "A BETTER COUNTRY WITH CRISTINA & AGUSTIN" painted all over Rosario). Carlos Reutemann, senator for Santa Fe, a man I have no love for whatsoever, surprised many by signing a statement next to governor Hermes Binner, asking the national government to turn back the export tax increase and sit down to discuss properly. Rossi promptly notified Reutemann in public that his candidacy for the 2009 legislative elections "is no more". Reutemann's sin was putting the interests of his constituency (and his own political interests tied to them, of course) before the loyalty to this Kirchnerist "project" no-one can exactly describe, but which seems to reduce to "say yes to whatever Cristina woke up this morning thinking of".

This was just one example. Here's another: the governor of Chubut, Mario Das Neves, sharply criticized Chief of Cabinet Alberto Fernández for his rough handling of the crisis. Two Kirchnerist governors quickly and bitterly responded, and Néstor Kirchner ordered public works and fund grants for Chubut to be suspended as punishment. Das Neves is now a pariah, as is Juan Schiaretti, the governor of Córdoba who belatedly and half-heartedly aligned with some of the farmers' demands, and is now shunned by both the farmers and the national government.

The message is clear: one either accepts the Kirchners micromanaging our resources to achieve their goal of "income redistribution" (a goal that is as far today as it was in the 1990s), or opposes them and therefore turns into an enemy of the poor, or worse. This is how most people interpret the government discourse now, and that's why (regardless of what they said) the cacerolazos were not about the agricultural producers, but about government policies. And the reason why no-one wants to acknowledge that is, simply, that the pro-government folks were right in more than a few cases when they pointed out that people hate the Kirchners due to socioeconomic class issues. I know this — I've heard it said to my face — many people hate the fact that the police aren't sent to beat up those dirty piqueteros, and that the government spends a lot of tax money on welfare for the poor, while taxes and inflation eat away the money that the middle class deserves to have so as to spend it in SUVs and vacations abroad. Today it's not politically correct to demonstrate against a government for those reasons — so many people used the campo strike as an excuse.

The bad thing is, aside from that, why should it be wrong to admit that you don't like your government because it uses the poor as an excuse for their real plans? I don't like this government. I would like it to be straightened by a strong opposition in Congress, and by strong independent leaders of the same party who look after their constituents' interests, rather then the Kirchners'. But no-one wanted to say that. Most people restrained themselves; some, obliquely, attacked Cristina's stereotypically feminine spending habits; others reacted to Luis D'Elía's attack on the Plaza de Mayo demonstrators; many blamed the strike and the crisis on Cristina's arrogance. Yet what if the president wants to have a collection of expensive shoes? It's her money. It's not like she's spending millions. What about D'Elía? A more serious matter, no doubt: a hateful bigot with a band of thugs at his disposal, encouraged by the government. But then the Kirchners distanced themselves from him and can do it again at any time, and it only takes the police to do their work. The real cause of the urban cacelorazos is, by and large, the hate of the middle class for the emergence of this political model.

Argentina had more than enough of this sixty years ago. Back then it ended with a coup d'état — a few hundreds dead, a few hundred exiled, and then it was "back to business" and no trouble for anyone... except if you wanted to criticize the new powers. That kind of thing fortunately won't happen now. For good or bad, there's no easy way out.


  1. Pablo, someone I know in Argentina said she hopes that after (IF) the conflict with piqueteros is resolved in 30 days (now less) it will be better for Argentina's producers. What are your views on possible scenarios to be reached between the government and campesinos?

  2. Anonymous20:54

    I know this is a really naive question, but I will ask it anyway. Is there a division of power here like in the US (or at least like there SHOULD be in the US, according to the US Constitution)? Does the executive branch (ie, the President) control the purse strings, without any kind of Congressional oversight?

    What I am really asking is, what are the checks on the power of the Argentine president?

  3. Tomas - Cristina is supposed to have a meeting with the farmers' leaders today. I really don't see an intelligent compromise coming out of those brilliant minds, but let's wait.

    The government needs money - lots of money. It has to pay debt, it doesn't know how long it will be able to keep inflation on check, and it'll have to buy a lot of local support for next year's legislative election. So they'll grab money from wherever they can.

    Their best bet is to go for the big business, but the state has never managed to make big business pay their dues.

  4. Barbara - There are fairly good checks and balances in Argentina... in the Constitution. You may not know, but ours was modelled on the US Constitution, so many of the basics are the same. Among other things, the major layout of the budget and the taxes are reserved for the Legislative Branch. But Congress simply voted to let the Executive decide (those are the famed "superpoderes" or superpowers) on many occasions. It's easy to justify that kind of measure in an emergency, but we're clearly not in an emergency now.

    All political parties that have been in power have done this at one time or another, but the Peronists are the worst. The legislators practically compete to see who bends over the most for Cristina. At this point you could close down Congress and you wouldn't notice the difference.

  5. Anonymous17:23

    I came back to the States from Argentina last week. I go there every year. WHAT A MESS!
    I cannot believe how much prices went up. Almost double from last year.

    So you don’t think I am exagerating:
    I take my family out to eat every time I go there, I am from Rosario. I used to pay about 120 pesos for a nice dinner for 6 people. Last week I did the same, took them to the same steak house in Rosario and paid 300 pesos.
    I couldn’t believe it.

    The same applies to property taxes, services, clothing, etc.
    A shirt that my wife bought last year for 40 pesos, now costs 75.

    It is a matter of time until something bad happens again. What a shame…

  6. Anonymous13:33


    The fact that prices have gone up does not necessarily imply that things are a disaster here. You have to ask whether disposable income has also increased, to offset the price increases. However, in general, yes, Argentine is certainly suffering from inflation.

    But I have to object a little to your analysis. Had you chosen to take your vacation in western Europe instead of in Argentina, you might have found that the cost of the vacation had gone up quite a bit over the cost of a comparable vacation last year, although the prices expressed in Euros (or pounds) might have been about the same. The expense of the vacation would have come from the collapse of the dollar. In your words, WHAT A MESS! (and the mess continues to grow worldwide, triggered by the financial meltdown in the US, no? Bush's destruction has long-reaching consequences --- "something bad" has ALREADY happened!)

    It is interesting to me that the peso is still so closely aligned with the dollar. Even though the dollar has crashed against major currencies, the dollar:peso exchange rate remains very favorable to Americans (and VERY VERY favorable to Europeans). Is the peso being kept artificially low? I wonder what a fair exchange rate would be?

  7. Barbara - In response to your last two questions, yes, the dollar is being kept artificially high here in Argentina. On an average day the Central Bank might buy $100 million to increase its reserves and prevent the peso from revaluating. They have to emit pesos to buy those dollars. Then, to avoid flooding the market with pesos, they retrieve them by issuing debt letters that the market buys. The net result is (yes, you guessed right) we're buying dollars with peso-denominated debt. However, those dollars are invested elsewhere and the financial returns of that more-or-less offset the returns the Central Bank has to pay for the debt it issued. I think.

  8. Palbo - That’s also my understanding of the way the Central Bank is exchanging dollars for pesos. There however are some problems and risks with this strategy.

    Argentina has some 30 billion (in US$) of indexed (or should that be IndeKed) bond debt. The government is coming under increasing pressure from outside foreign financial institutions to explain the discrepancies of the official inflation rate and the actual rate.

    According to published figures, If inflation were understated by 1 percentage point a year, Argentina’s index-linked bondholders would lose $300 million annually in interest and principal.

    It was expected that official inflation figures would be rise to more accurately reflect the real numbers. But that hasn’t happened, and every month there is widespread condemnation in the local press of the disparity between official figures and what people are experiencing.

    The government may be expecting that sooner rather than latter it will be called to account of the manipulations at Indec, had have to pay the bond holders their rightful returns. To some extent however, the price of the bonds has been headed downward since the government started manipulating the inflation figures.

    To give some more examples in the non-food sector, this weekend I checked out price increases I’ve been keeping track of in the construction sector. I’ve averaged out the increases of several items in each category. In the last six months the following goods have gone up by the following amount:

    Wood (pine molding) 72%
    Copper pipe 30%
    Sheet glass 22%
    Molded plastic 35%
    Foam insulation 23%

    These are all products that are from Industria Argentina, and made with unskilled labor.

    Even goods that were produced several years ago and been held in inventory have increased in the past 6 months such as wine which has increased about 11%.

    Most governments worry about rapidly increasing inflation because of the temporal disparities that arise between income (even if it is increasing) and fixed costs that families face. Since wages are normally only increased annually, if the expenditures exceed income, families without any financial reserve face an impossible situation.

    These price/income pressures can easily spiral out of control during times of high inflation and give rise to hyperinflation. Argentina had hyperinflation during the 80s and early 90s, so it’s relatively recent memory and a constant worry for many.



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