South America’s New Pariah
Yes, Argentina should be kicked out of the G-20.
8:30 AM, May 8, 2012 • By JAIME DAREMBLUM
Then there’s the matter of Argentine debt obligations. More than a decade after suffering the largest sovereign default in history, the South American country still owes roughly $16 billion to private creditors, plus an additional $9 billion to Paris Club member nations. It has spent several years wrangling over these obligations and refusing to accept a fair settlement. Of all the cases pending against G-20 countries at the World Bank’s International Center for Settlement of Investment Disputes, the overwhelming majority are cases that were brought against Argentina.
To be sure, the story of Argentine decline starts long before Cristina Kirchner or her late husband Néstor (who preceded her as president from 2003 to 2007) ever took power. As Harvard economist Edward Glaeser has noted, Argentina was the world’s eighth-richest country in 1909, with a per capita income that was 50 percent greater than Italy’s and 180 percent greater than Japan’s. But the era of populism, dictatorship, and periodic hyperinflation that followed World War II took a devastating toll on Argentine prosperity. Historian Niall Ferguson points out that Argentina’s per capita GDP was no higher in 1988 than it had been in 1959. For that matter, it was equivalent to just 34 percent of U.S. per capita GDP in 1998, versus 72 percent in 1913. “The economic history of Argentina in the twentieth century is an object lesson that all the resources in the world can be set at nought by financial mismanagement,” Ferguson writes in his book The Ascent of Money.
Unfortunately, the brief economic history of Argentina in the 21st century conveys that same lesson. While the resource-rich economy has temporarily been boosted by high global soybean prices, galloping inflation has eroded purchasing power and exacerbated poverty. President Kirchner has shown herself to be an autocratic and deeply ideological leftist who is willing to lie about inflation, expropriate private assets, harass opposition journalists, and tolerate (or promote) rampant corruption.
Florida International University political scientist Jerry Haar puts it this way: Argentina “has once more slid back into an imbecilic morass of demagoguery, authoritarianism, mindless statism and self-destructiveness.” Relief may not arrive until the country’s next presidential election, in 2015. An economic crisis may arrive sooner.
Jaime Daremblum is director of the Center for Latin American Studies at the Hudson Institute.