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Argentine Economy Shows Promising Growth

Less then two years after suffering a disastrous financial collapse, Argentina's economy is growing once again. But many Argentines say their personal fortunes remain bleak and that they see little, if any, improvement in their country's economic performance.

Near the end of 2001 Argentina took drastic measures in a desperate attempt to remain financially solvent. The government froze bank accounts, slashed pensions, and cut public-sector salaries and spending.

Nothing seemed to help. In December 2001, Argentina defaulted on its massive $132 billion foreign debt. Two presidents resigned in as many weeks.

A new president, Eduardo Duhalde, abandoned a 10-year program that had kept the peso pegged one-to-one to the U.S. dollar. Argentina's currency promptly lost more than 70 percent of its value.

Then-President Duhalde compared Argentina's woes to the September 11 terrorist attacks in the United States.

"You saw what happened in the United States on September 11th, a tremendous tragedy," he said. "Here in Argentina, we are suffering something equally horrific, but something that is happening every day and consuming us bit by bit, like a slow-motion explosion."

Today, Argentina has another president, Nestor Kirchner, and an economy that is currently growing at a 5.5 percent annual rate. But for millions of unemployed Argentines, life remains excruciatingly difficult. Among them is 25-year-old Alejandro Gomez, who lost his job as a telemarketer in 2001.

"I have been without work for more than a year and a half," Mr. Gomez said, "and cannot find anything. He says he has been able to survive thanks to his parents, who have helped him. Otherwise, I would be picking through garbage to eat.:

Nearly one in four Argentines is without work. Many who do have jobs have been forced to accept low-paying positions they would never have considered just a few years ago. Sociologist Graciela Romer says, in less than two years, Argentina has witnessed the near-complete disappearance of its middle class.

"Argentina, a country once known for its vibrant middle class, has seen the emergence of a new class of poor people: former-middle class citizens whose incomes have fallen so far as to leave them impoverished," she said. "Today there is an inverse social mobility in which young people are finding themselves worse off then their parents."

Ms. Romer says the crisis has been accompanied by a surge in crime and suicide.

"The rate of teenage suicide in Argentina has increased by 80 percent since 1994," she said. "This is indicative of a country where young people have no future."

President Kirchner has launched modest programs to help struggling families pay for groceries and to spark employment at the micro-economic level. But he is constrained by a treasury that is all but bankrupt, and international creditors who demand tough austerity measures as a condition for renegotiating Argentina's debt.

President Kirchner's spokesman, Miguel Nunez, says Argentina wants to satisfy its creditors. But he adds that, in the short term, the country must focus on immediate needs.

Mr. Nunez says Argentina must think about its own people and reconstruct its economy according to three principles: reviving its exports, import substitution, and boosting domestic consumption.

Andrew Powell, who served as chief economist at Argentina's Central Bank from 1996 to 2001, says, for the time being, President Kirchner has some breathing room.

"There is a strong trade surplus, so Argentina has been earning dollars, and reserves are stable or actually slightly increasing," he said. "But there is no new borrowing and very little investment from outside of the country. Going forward, I do not think that situation is going to change until the debt is renegotiated and the local financial system is put on a sure footing. At the same time, it is not obvious to me that Argentina needs credit, at this stage, to be able to grow."

But Mr. Powell says Argentina cannot delay painful decisions forever, and that a day of reckoning with its creditors will one day be at hand.