December 23, 2001|By Marcelo Ballve | Marcelo Ballve,PACIFIC NEWS SERVICE
THE ONCE-ELEGANT El Molino coffee shop in Buenos Aires, now a bankrupt ruin filled with cobwebs, is an apt symbol for Argentina, a proud country that has gone from enjoying some of the highest standards of living in Latin America to becoming the world's economic basket case.
Most analysts blame the decline on rampant government overspending in the 1980s and '90s. But Argentina's graceless plunge into the poorhouse goes far deeper than economics or politics. It may be that the nation's history and cultural stumbling blocks weigh as heavily as the crushing $132 billion public-sector debt that has pushed it to the edge of default.
Last week, all of these conditions conspired to force the resignation of President Fernando de la Rua after Argentina's economic catastrophe sparked riots and looting that left at least 27 people dead.
The resignation left Argentina's Peronist party, which has the majority in the legislature, to decide what to do next. But the debt didn't go away with de la Rua, and monumental changes will be required to make Argentina solvent again.
With a wealthy past and background of Spanish and Italian immigration, Argentina has always haughtily looked down on its poorer Latin American neighbors of mixed Indian and European ethnicity, a self-concept and nationalist streak that now undermines South America's integration efforts. Motivated partly by anti-communist paranoia, undemocratic governments long sought to isolate the country economically, so industry never learned to compete in a world arena.
Four years ago the windows of the El Molino cafe were shuttered. No longer could Argentines afford to pay nearly $2 for a cortado, an espresso with milk. A few months later, Argentina slipped into the recession that has led to an 18 percent unemployment rate. The crime rate has soared. The walls of the cafe are spray-painted with anti-government invective.
Argentines prone to nostalgic reveries about past greatness often remark that things weren't always this bad. When the coffee shop opened in 1905 across from the National Congress, its chandelier-hung ceilings, brass fixtures and tuxedoed waiters were evidence of Argentina's booming export economy in farm goods.
Until the 1930s, Argentina was to become another Canada or Australia. But after World War II, Argentina began to turn inward. Farm exports continued, but Gen. Juan Domingo Peron's dictatorship in the 1940s and 1950s coddled workers and unions, developing the industrial sector by protecting it with sky-high tariffs that ensured its future lack of competitiveness.
"Basically, Argentina closed its economy with respect to industry," says Carlos H. Waisman, a University of California sociologist. "The state took control of the society and isolated it from the rest of the world. Policy-makers believed this would isolate Argentina from the communist threat."
Peron also ushered in an era of institutionalized violence in Argentine politics. Outside El Molino's windows in December 1946, police opened fire on an anti-Peron rally, killing four and injuring 35 people.
By the 1970s, a military junta was killing thousands of presumed leftists - often kidnapping them in public. The junta's nationalistic vision of Argentina led it to play power politics: there was a ballistic missile program, a nuclear weapons program and near-war over a Patagonian border dispute with Chile.
Democracy and trade liberalization came only after the junta's defeat against Britain in the 1982 Falkland Islands War.
In the 1980s and '90s, Argentina's industrial sector buckled as it was finally forced to compete globally by free-market reforms. Revenues plunged. Tax evasion and corruption grew dramatically, and public debt ballooned.
By then, Argentina was also "the butt of jokes all over Latin America, for our arrogance and our illusions of grandeur," writes Carlos Escude, a former government adviser and university lecturer. Unsurprisingly, given its history of isolation and xenophobia, Argentina has also had a hard time finding its way in the Southern Cone Common Market, or MERCOSUR, a 1991 trade pact that also includes Brazil, Uruguay and Paraguay.
No one debates that Argentina desperately needs to export if it is to promote economic growth, increase revenue and meet debt payments. Now, less than 10 percent of economic output is from exports.
And a backlash against economic integration is threatening even that.
"Decades of protectionism have left a mark that moments of crisis tend to deepen," wrote analyst Alberto Carmona in a report for the government's National Foreign Service Institute.
Brazil is being used as a scapegoat. Argentine Economy Minister Domingo Cavallo publicly blamed Brasilia's 1999 currency devaluation for Argentina's problems and issued a veiled threat to pull out of MERCOSUR.
