Argentina

An example of how great geography and economic opportunities can still fail

In the current zeitgeist Argentina is associated with Evita, rampant inflation and tango. (And the Falkland / Malvinas War if you’re British.) For over 5 decades Argentina’s growth has been low, drug down by frequent government direction changes, an overvalued currency and then a collapsed currency. But why?

Geographic Advantages

The great pampas of Argentina are like the great plains of America. The soil and climate make for excellent crop growth. Argentina rates in the top four countries in production and export of maize, soybeans, sunflower oil, lemon, pear and wine. This great aera of natural farmland is well suited for a variety of plants. Argentina is also a major exporter of beef.

The Andes rise in the west, but the mountains don’t hold an abundance of minerals. The Andes do act as a natural demarcation between Argentina and Chole. The Andes also provide water for farmlands and cities.

Economic Advantages

Argentina benefitted early from trade and liberal governance. Starting in 1880 a string of liberal governments opened the economy and nation flourished. Growth for the next 50 years was outstanding. The growth of the economy coincided with the growing international trade movement of the time. This growth lead to the largest number of European immigrants except for the United States.

With a high literacy rate and eager migrants, often with education and a necessary skill set, economic growth in this period took off.

Economic success of a country is defined by many measures. One of the most used is the per capita wealth, which is the Gross National Product (GNP) divided by the country’s population. By this measurement Argentina was the 7^th richest in the world by 1920. Greater than the per capita wealth of Denmark, Canada, Italy, Spain and Germany.

Limits to Growth

Many countries tend to fall behind economically is they are dependent on one resource, and a collapse in that market spells national problem. Chile is an example of this, it’s economic outlook is dependent of the price of copper. Peru went through two major export booms, first gold and silver and then later bird guano. Many oil producing countries are fully dependent on that export. Norway has riches in oil from the North Sea. Norway is also an excellent example of a countries using the profits to diversify the country.

Argentina, with a diverse economy, did not fail from external sources or the collapse of a single export good. Instead, Argentina’s economic success rises and falls with the different governments through most of its history. The government has rocked between civilian and military rule since 1930.The military governments tend to close the economy off from international trade and international monetary systems. The later causing massive fluctuations in the strength of the Argentine Peso. Argentina has also dealt with high inflation over the years. For a period in the 1990s the Argentine Peso was pegged as a set percentage conversion rate to the US Dollar. When an economic crisis occurred, the government was forced to abandon the US Dollar rate. ATMs were closed, US Dollars could no longer been withdrawn from the bank. And Argentina Peso accounts were devalued overnight. Argentines fell victim to riots and demonstrations during this period

The unpredictable monetary issues caused a domino effect has foreign investment froze until the economy settled down. The people voted in populists that promised to get inflation under control but then never could.

The Future

Argentine elections have focused on inflation, a weak economy and very high public debt. Despite these very real issues, personality and dynasties seem to rule the electorate. Juan Peron and his wife were leaders of the government 3 separate times, twice brought back by voters. More recently it is the husband and wife team of Néstor Kirchner and his wife Cristina Kirchner which have, as candidates and then Presidents, benefitted from personality politics of Argentina.

The most recent elections have once again changed the direction of the country, this time to a more liberal government.

Most governments in the past 40 years have failed to turn around the Argentine economy and were voted or pressured out of office.

Argentina has had to suffer with corruption, payouts, bribes and indecision from governments. Prosperity is going to depend on legal norms being upheld and an established rule of law established. It is easily possible for Argentina to once again become a wealthy nation and people based on economic potential. However, the country is crippled by bad governance. (To me) It seems the only way forward right now is integration with the global trading system and focusing on growth. Otherwise brain drain and possible emigration back to European countries will result.