Walking down the tree-lined boulevards in Buenos Aires for the last time after three years as South Africa’s ambassador to Argentina, I noticed the empty display windows in one of its upmarket emporiums. The fashion retailer Louis Vuitton – a favourite of Cristina Fernández de Kirchner, the handbag-wielding president – had just announced it was closing its doors. Its exit from the country, following fast on the departure of other locally esteemed international luxury brands, was the latest scene in a long-playing melodrama: the Crisis of Cristinanomics.
Argentina is heading, and not for the first time, over an economic cliff as the population races to dump pesos for dollars and a zealous government fights back through draconian currency controls, manipulating economic data and import-suppression measures.
Viewing the situation of your host country through the lens and history of your own can be distorting and dangerous. Still, elements of Argentina today eerily resemble aspects of the apartheid government at its nadir in the 1980s, a dark era of civil unrest, dual currencies, international sanctions, currency round tripping and sky-high interest rates. I detect a direct connection between the besieged administrations of P.W. Botha, the former South African president, and Ms Kirchner. South Africa was isolated because of its racial policies. Argentina is increasingly detached from the world because of its eccentric economic course. Both share a determination to defy the world for as long as possible by repudiating either sound economics or sensible politics.
At the UN Ms Kirchner hit back at Christine Lagarde, IMF managing director, who had threatened to “red card” Argentina because of its fudged national statistics. Invoking “sovereign independence” to justify Argentina’s outlier behaviour, Ms Kirchner sounded like the vanquished white president of yesteryear whose UN representative encouraged the world “to do its damnedest”, which it duly obliged to do.
A crucial difference is that Ms Kirchner received an emphatic democratic mandate in October last year, something no pre-1994 South African government ever won. And Argentina’s president is hardly alone among political leaders in displaying symptoms of political hamfistedness.
A few weeks ago, though, it was impossible in downtown Buenos Aires to ignore the noise from the cacerolazo (banging of pots and pans) that signalled the rising discontent of the middle class. An estimated 60,000 demonstrators demanded an end to the dollar restrictions, a return of security to crime-ravaged suburbs and, most evident of all in the placards, opposition to the mooted amendment of the constitution to allow Ms Kirchner unlimited terms in office. The return of the cacerolazo frightened the country. For this was the sound and method which, during Argentina’s financial meltdown in 2001, forced President Fernando de la Rúa from office. That was when the country posted the biggest sovereign debt default in history and saw the appointment of five presidents in a nightmarish three-week period from which the country took five or more years to recover and stabilise.
Argentina today has far less international debt and controls its own currency. But medium-sized sovereigns that thumb their noses at the world and heavy-handedly intervene in the markets pay the price. In September Argentina discovered this anew; Moody’s downgraded from “stable” to “negative” 30 of the country’s banks in response to a government decree imposing new lending requirements on financial institutions.
South Africa, whose $400bn resource-dependent economy almost exactly matches Argentina’s, also received its own yellow card from Moody’s in September when its government bond rating was downgraded one notch. The rating agency cited concerns about political stability amid labour unrest and socioeconomic stresses. In South Africa there is much talk about nationalisation. In April, Ms Kirchner seized control of the oil company YPF from Spain’s Repsol. In both cases, the effect on foreign investment is chilling.
Argentina and South Africa are significant powers of the south and members of the Group of 20. To remain in the world’s premier division, though, both need to heed the siren voices and read the market signals.
The writer is the former South African ambassador to Argentina
Copyright The Financial Times Limited 2012. You may share using our article tools.
Please don’t cut articles from FT.com and redistribute by email or post to the web.
Argentina is heading, and not for the first time, over an economic cliff as the population races to dump pesos for dollars and a zealous government fights back through draconian currency controls, manipulating economic data and import-suppression measures.
Viewing the situation of your host country through the lens and history of your own can be distorting and dangerous. Still, elements of Argentina today eerily resemble aspects of the apartheid government at its nadir in the 1980s, a dark era of civil unrest, dual currencies, international sanctions, currency round tripping and sky-high interest rates. I detect a direct connection between the besieged administrations of P.W. Botha, the former South African president, and Ms Kirchner. South Africa was isolated because of its racial policies. Argentina is increasingly detached from the world because of its eccentric economic course. Both share a determination to defy the world for as long as possible by repudiating either sound economics or sensible politics.
At the UN Ms Kirchner hit back at Christine Lagarde, IMF managing director, who had threatened to “red card” Argentina because of its fudged national statistics. Invoking “sovereign independence” to justify Argentina’s outlier behaviour, Ms Kirchner sounded like the vanquished white president of yesteryear whose UN representative encouraged the world “to do its damnedest”, which it duly obliged to do.
A crucial difference is that Ms Kirchner received an emphatic democratic mandate in October last year, something no pre-1994 South African government ever won. And Argentina’s president is hardly alone among political leaders in displaying symptoms of political hamfistedness.
A few weeks ago, though, it was impossible in downtown Buenos Aires to ignore the noise from the cacerolazo (banging of pots and pans) that signalled the rising discontent of the middle class. An estimated 60,000 demonstrators demanded an end to the dollar restrictions, a return of security to crime-ravaged suburbs and, most evident of all in the placards, opposition to the mooted amendment of the constitution to allow Ms Kirchner unlimited terms in office. The return of the cacerolazo frightened the country. For this was the sound and method which, during Argentina’s financial meltdown in 2001, forced President Fernando de la Rúa from office. That was when the country posted the biggest sovereign debt default in history and saw the appointment of five presidents in a nightmarish three-week period from which the country took five or more years to recover and stabilise.
Argentina today has far less international debt and controls its own currency. But medium-sized sovereigns that thumb their noses at the world and heavy-handedly intervene in the markets pay the price. In September Argentina discovered this anew; Moody’s downgraded from “stable” to “negative” 30 of the country’s banks in response to a government decree imposing new lending requirements on financial institutions.
South Africa, whose $400bn resource-dependent economy almost exactly matches Argentina’s, also received its own yellow card from Moody’s in September when its government bond rating was downgraded one notch. The rating agency cited concerns about political stability amid labour unrest and socioeconomic stresses. In South Africa there is much talk about nationalisation. In April, Ms Kirchner seized control of the oil company YPF from Spain’s Repsol. In both cases, the effect on foreign investment is chilling.
Argentina and South Africa are significant powers of the south and members of the Group of 20. To remain in the world’s premier division, though, both need to heed the siren voices and read the market signals.
The writer is the former South African ambassador to Argentina
Copyright The Financial Times Limited 2012. You may share using our article tools.
Please don’t cut articles from FT.com and redistribute by email or post to the web.
