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Editorial: Some Thoughts on Argentina’s Current ’Crisis’

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It’s no secret that these are testing times for Argentina. If you’re not in the country and have been reading some of the stories in mainstream global newspapers in recent days, you’d be forgiven for imagining a country in ruins. Again.

Economy Minister Axel Kiciloff faces the media (photo: Daniel Dabove/Télam)

Economy Minister Axel Kiciloff faces the media (photo: Daniel Dabove/Télam)

Peso collapse raises fears Argentina lurching towards decennial crisis‘, screamed the headline of an article about last week’s currency devaluation in The Guardian. In it, author Uki Goni quoted a pensioner in Almagro who has been without power for 40 days and ex-central bank president Martín Redrado (now working for opposition deputy Sergio Massa) on his way to concluding that the government’s “glow has definitely gone now, obscured by runaway inflation, an alarming growth in crime, and revelations of seemingly rampant corruption among the president’s top officials”.

The Guardian article perhaps stood out, coming as it did from one of the UK’s flagship liberal publications, but it was not alone. Headlines in the financial press were, unsurprisingly, loaded with doom: ‘Argentine Peso Fall Threatens Government‘ (Financial Times), ‘Argentina: Bad to Worse‘ (WSJ), and Bloomberg’s ‘Argentine Default Chaos Relived as Blackouts Follow Looting‘, which rolled in December’s police strikes and blackouts into its apocalyptic analysis of the country’s economic future.

This kind of international coverage of Argentina, particularly its economy, is not new – the country seems to have been on “the edge of the abyss” since around 2009 – and usually touches on real problems here. But it continues to disappoint in showing no real interest in presenting a balanced debate of a complex situation.

This is partly down to the government’s own communication problems, as pointed out in an interesting column by Marcelo J. Garcia in the Buenos Aires Herald this weekend: “With little access to official sources, the correspondents tend to rehash whatever gets published in the most-read local press, which is mostly anti-government.” To that you can add that local anti-government press then cites international media to validate its position.

Garcia concludes that it is “therefore no surprise that the headlines have been unequivocally negative for years”. It is true that the government hardly makes life easy for journalists, but then again, good quality journalism isn’t supposed to be easy. It is not hard in Argentina to find qualified economists, political scientists, and academics that have a different view from those that so frequently cited in these critical pieces. More likely, then, they are just not looking. (Whether this is primarily the fault of the correspondent or his/her editors in the US/Europe is another debate entirely).

The all-too-frequent result is an over-simplified, incomplete, and partial analysis of what is going on here, usually framed within the parameters and assumptions of “orthodox” economic theory that naturally clash with the government’s explicitly heterodox policy mix entirely.

The ‘Passive’ Market

The official dollar rate  (Photo: Tito La Penna/Télam)

The official dollar rate (Photo: Tito La Penna/Télam)

All this is not to say that the government is blameless – far from it. Its efforts to mould a different type of capitalist economy – lazy reporting of Argentina as “socialist” is another common mistake made by international media – have suffered from serious administrative and communicative deficiencies. Together, these frequently undermine the effectiveness of its policies, some of which were badly-thought out in the first place, and give the opposition parties and media plenty of ammunition. Economy Minister Axel Kicillof’s claim on Sunday that new regulations for buying dollars would be “biased towards those who have less”, when the day after it became clear that only the top 25% of earners would be entitled to exchange currency, is a fitting example.

It would also be short-sighted to ignore the impact of corruption, which is a far broader problem in Argentina than just the current executive, but nevertheless is a big problem when credibility is so important in the economic world of self-fulfilling prophecies.

But neither should we swallow the idea that the ‘market’ – often erroneously considered a synonym for ‘the people’ – is a passive bystander, struggling to make the best of whatever difficult hand it is dealt by an overbearing State. Any analysis built on this basic assumption is fundamentally flawed.

There are powerful forces at play, and if the global financial crisis has taught us anything it should be that they are not looking out for the interests of the majority. In Argentina, there is undoubtedly a minority that stands to benefit enormously from a full-blown economic crisis (complete with ‘mega-devaluation’), and the inevitable change in government that would follow. And an even smaller group that has the power to tilt the odds in favour of such an outcome. Whether they are conspiring to do so is harder to prove, though it would be naïve to rule that out as a possibility.

The year 2014 is set to be decisive for Argentina, one that will go a long way to defining the legacy of ‘Kirchnerism’ and will have a huge impact on the political course the country chooses at next year’s elections. It’s time for the media to step away from the proverbial abyss and concentrate on giving its coverage some real depth.

@marcdrogers

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8 Responses to “Editorial: Some Thoughts on Argentina’s Current ’Crisis’”

  1. Werner Almesberger says:

    Nice write-up. Would be good if this was also linked in “Argentina News” on the front page. It’s easy to miss things in the slideshow.

    The press situation is indeed quite dissatisfying. You basically get to choose between extremely pro-government and extremely anti-government, then are left to try to guess the truth that ought to be somewhere between the two. (Note: when I say “government” here I mean the national government. Attitudes are different with respect to, say, the government of the city of Buenos Aires.)

    Unfortunately, with the government’s propensity of blatantly lying, media close to it are often nearly useless except when it comes to finding an exact quote. The opposition media tend to reproduce the government’s statements as well, although they’re usually very selective about what they reproduce, and then add an unfriendly interpretation. What’s most useful is when they provide some context to support that interpretation.

    I wonder what you’d say about my approach to trying to find the truth ?

    I tend to turn to La Nacion [1] as a first source for current events. They generally cover all the main topics and have a pleasantly organized site. They’re also rabidly anti-government, only to be outdone by most of their reader comments. If you’re looking for a healthy lynch mob attitude towards the government, 3rd Reich grade racism, and hardcore conservationism, look no further than those reader comments.

    I value reader comments in general, because they can add interesting angles or facts missing in the original article, but the usefulness of comments on La Nacion is rapidly declining lately. Maybe it’s a sign of people getting increasingly nervous about what’s going on.

    La Nacion has also pretty good and much less venom-spouting editorials and analyses, but they’re hidden at the bottom of their from page and rarely linked from above.

    After a look at La Nacion, I have the worst case scenario. For pure facts this is enough as they rarely misreport them, though they sometimes do. With anything that needs more interpretation I then go to INFOBAE [2], which, while still anti-government, tends to be more accurate and a bit more honest. Their site is also a bit less pleasantly organized and their comment function is messy, especially if you’re not a fan of facebook. They tend to be very good at multimedia, often having video footage on some event long before others do.

    If the news is about something in economy, I sometimes cross-check with Cronista [3], which is a bit more balanced and even has guest columns with articles from government-friendly sources. Their site obsessively auto-reloads all the time which makes it a pain to read. Else I’d do that more often.

    By that time, I usually think I can make sense of what’s been reported. Connecting the dots between related news snippets can also help to weed out inconsistencies.

    Sometimes, when I want to hear the government’s side, I turn to Pagina 12 [4], which are nominally independent but generally quite government-friendly while still maintaining a rational style. Their coverage is not as broad as that of La Nacion and INFOBAE and they don’t have reader comments.

    One flaw of my approach is that news not covered by La Nacion or INFOBAE may escape my notice, which means that the news I get will generally be biased against the government.

    Every once in a while there’s also an article on the Indy. I treasure those because they often provide a balanced view and background sorely lacking in the other media while still maintaining a compact format. I just wish there were more of them and also that the comments system was more agile.

    - Werner

    [1] http://www.lanacion.com.ar/
    [2] http://www.infobae.com/
    [3] http://www.cronista.com/
    [4] http://www.pagina12.com.ar/diario/ultimas/index.html

  2. Guido says:

    For Werner Almesberger, i recommend INFONEWS. It’s a government-friendly press and has more news than Pagina 12, so you can know about other news that are not in La Nacion and Infobae. Even if you want to know about another position of what are you reading in other press, i recommend it

    http://www.infonews.com/

  3. Werner Almesberger says:

    Guido: thanks ! That one looks useful indeed.

  4. Joey says:

    Nice writeup by Werner. Really good breakdown of the news outlets.

    No doubt the foreign press treatment of Argentina is unfavorable, perhaps unfairly. But I think more than anything else this is a direct result from the Kirchner’s stated hostility toward “neoliberalism” and the government’s ongoing intransigence in the paying back of debt related to the 2002 bailouts (real or perceived).

    Of course, it is also market driven. Readers are probably not that interested in digging into the incredibly complicated and multilayered nuance that is Argentine politics. To know the real truth is to invest a lot of mindshare into understanding something that, as most of us foreigners who lived in Argentina had to learn firsthand, is often completely counterintuitive.

    It’s like asking the average Porteno on the street for directions. He will probably get you there, but the way he does it is going to take you for a hell of a ride.

  5. Werner Almesberger says:

    Joey: thanks :) I think there are mainly three effects at play here:

    1) Good news usually don’t sell. A day on which everything goes well and everyone (but the newspaper folks) is happy would be pretty much the definition of hell for most of these newspaper folks.

    In Argentina’s popular mythology the government and especially the president is all-seeing and omnipotent. Therefore, if something goes wrong, it MUST be their fault. Of course, the government often acting as if it did indeed exist on a plane well above the toils and tribulations of mere mortals doesn’t provide them with much plausible deniability.

    2) Newspapers are mainly read by the middle class. The middle class has many reasons to hate Kirchnerism. Lately, many have had the opportunity to personally experience the immediate consequences of its failings, but many have anticipated issues for a good while already. Planning ahead is one of the attributes and capabilities of the middle class, so this doesn’t come at a surprise.

    Furthermore, many of the government’s verbal sorties and concrete actions were also targeted at the middle class. Particularly the destruction of its ability to have long-term savings attacked another one of its pillars. All too transparent lies in government statements left their marks as well. Let’s not forget that Anibal Fernandez nearly unleashed a revolution when he accidentally confirmed the hypocrisy of the government’s discourse. [1, 2]

    News outlets are of course only moderately interested in challenging the opinions of their readers.

    3) The government basically produced a media show with a large number of puppets that rotate through the role of the government’s spokesperson (usually blaming others for things that didn’t go well), to be replaced with the next puppet once their credibility is ruined. Meanwhile, the president maintains a lofty distance and only says nice-sounding things – which means that she often gets very silent and/or disappears on extended medical leave when things aren’t going so well.

    The result was that the government has no credible voice. And we all know, if you don’t speak for yourself, then others will do it on your behalf. If you’ve made enough enemies then those word will hardly be particularly flattering.

    - Werner

    P.S. Note that [1] happened in the morning of the first cacerolazo of [2] and was its direct trigger. A bit more context can be found in [3] (which unfortunately doesn’t have a date.)

    P.P.S. I was torn between using the present or past tense for 3). In recent weeks, there have been somewhat encouraging changes in the government’s communication with the public, but also some regressions. It’s still too early to tell whether there will be any real improvement.

    [1] http://www.ambito.com/noticia.asp?id=639302
    [2] http://en.wikipedia.org/wiki/Cacerolazo#2012
    [3] http://www.lanacion.com.ar/1477947-anibal-recomienda-pensar-en-pesos-pero-sus-dolares-no-los-vende

  6. Pablo says:

    A breeze of fresh air. Thank you for your perspective.

  7. Werner Almesberger says:

    Epal: indeed, an appraisal of the latest economical developments would be quite welcome.

    My non-expert opinion is that we don’t have a clear overall trend for this year yet. There have been some improvements regarding currency purchase restrictions, with government officials even admitting that the “cepo” was a mistake, combined with a moderate devaluation of the peso.

    Although opposition let off a surprising and surprisingly ardent barrage of criticism when the restrictions were partially lifted, the effects were nearly immediate and very positive. Particularly, the central bank no longer needs to pump a hundred million USD per day into maintaining the “official” exchange rate but now only has to spend what is in comparison pocket money on dollars purchased by individuals. This also returned the black market to near insignificance, much like things were in 2011. There are more wounds from that that will take longer to heal, though.

    There doesn’t seem to be much of a change with regard to more direct means to stop inflation. The government has now released much more credible statistics but is still wasting time on trying to enforce price controls, which we already know never works in the long run. They’re also talking about removing the subsidies, which would make prices more honest, but we’ll have to see if this makes much of a different to public spending, which I’d consider one of the principal motors of inflation.

    Things have gotten much worse when it comes to customs. Argentine customs were nasty with a strong isolationist undertone in the past, and small imports are almost completely closed with the new regulations.

    The customs restrictions also parallel incentive-based measures that increase the de facto tax on credit card purchases. The latter are a reasonably healthy approach to steering people’s habits in the right direction while the former produce ruptures, hurt legit activities and may fuel illegal ones, much like the “cepo” did.

    The government also slapped an insane luxury tax on cars that is likely to cause some devastation in the local industry. That industry encountered friendly conditions for a while because people, deprived of other means for having savings and with the real estate market defunct, bought new cars as investment. Of course, even a market driven by despair eventually saturates and now, with moderate quantities of inflation-safe dollars being available again and interest rates improving, people do have better choices.

    So while I think the economy is now in considerably more capable hands, I still don’t see a departure from most of the policies that caused the present decline, let alone a plan that would allow Argentina to thrive again in the modern economical environment.

    - Werner

  8. latine says:

    Je peux dire que ce n’est pas inexact !

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