Mike, Interesting report. Privatization promises so much. I am still looking for "successful" ones.
Bruce Leier -----Original Message----- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]]On Behalf Of Michael Gurstein Sent: Saturday, December 22, 2001 10:30 AM To: [EMAIL PROTECTED] Subject: Travels with Neo-liberalism (was Argentina down and out) Coincidentally, I'm just back from ten days in Argentina--I/we attended an international conference in Buenos Aires and took a few vacation days visiting BA and the North of Argentina. A few very casual observations... The local economy is/was seriously out of whack... prices in Pesos which are freely converted into dollars (on occasion one would receive dollars as change from payments in pesos with a 1=1 conversion, are on whole at least as expensive as New York City except for beef and things which might be discountable in a recessionary economy. However, the quality of what one receives in return for these payments is nowhere near the quality one receives in NYC as for example hotels, meals, and anything else that the tourist encounters. Argentina following some economic snake oil salesman or other has concessioned out its highways to the private sector. The highways in fact are superb especially since, the pricing on them is probably such as to almost eliminate inter-city traffic! We had the highways, except for a few miles on either side of BA, almost to ourselves! In other places such as Europe, where there are a lot of toll roads, it is still possible to move inter-city on non-toll roads. In very large parts of Argentina which is a very large country (rather like Canada in many physical respects), there are almost no alternative roads. One suspects that the IMF or whoever guided Argentina in its road privatization failed to look at the social and the subsequent socio-economic consequences of effectively eliminating most non-premium status inter-city movement whether by truck or private automobile! Some serious institutional erosion... Part of the privatization appears to be a privatization of the police. On a trip to the North of Argentina we passed through what must have been at least 7 and possibly 9 police (or army) checkpoints. Even immediately post 9.11 NYC never had more than 3 when getting into our out of the City. Each of these checkpoints involved slowing and sometimes stopping. For the first time visitor this meant stopping and conversing with the gendarme in broken Spanish. The first time I did this it was just after dark and we were heading to a motel for the evening. I stopped at the barrier and was about to ask for directions, having identified myself as a tourist, when I was summoned to the guard post itself evidently because I didn't have my seat belt properly fastened (along with 85% of other Argentine drivers from my experience). Having established that I was a tourist, the Captain was called over who with a very grave face indicated what a serious offense this was and pulled out a calculator and punched the numbers 250 which he made sure I understood was in dollars. We stared at each other for a time and I evidently grimaced and failed to reach for my wallet. I began to indicate that I felt that this was rather excessive for a first time offense and we continued to stare at each other for several minutes. Recognizing that I was clearly not about to finance the next trip to the capital for he and his family, he shrugged and called in the Sergeant. He repeated the ritual with the calculator only this time he punched in 100, again indicating that this was in dollars but that he would take pesos (or presumably pounds, euros or travellers cheques--there was no Visa sign on the door). Again he stared and I stared and again after several minutes he shrugged, left the room and I was now rejoined by the original constable who had captured me from the front seat of my car. I offered him a crisp $20 US bill, we shook hands, he gave me my documents and I was on my way. From then on, approaching a check point, I never lowered the window and simply nodded to the gendarme and was allowed to pass without incident. Grab it while you can... At another stop, my wife and I went into a dusty little town for gas and beside it in a tiny two table cafe we ordered a coffee. The proprietor was an elderly man, clearly a retiree/pensioner of some sort--perhaps a civil se rvant or teacher--by his clothes and demeanour. The coffee was brought along with several day old pastries which we were encouraged to sample. When the time came to leave, the propietor after consulting with his wife proudly presented us with a bill for $10. When I politely pointed out to him the ridiculousness of this, he lowered the bill to $7 and was adamant. Adventure tours for the rich... Argentina has just finished spending what must be in the range of a $billion on a National Park around the quite remote Iquazu Falls. These falls are near to the point where Argentina, Paraguay and Brazil meet and are roughly 1000 miles from Buenos Aires, slightly less from Sao Paolo and several hundred miles from Ascuncion, the capital of Paraguay. The Park facilites which have just opened are superb--equivalent to or better than anything I have seen in any North American national park--including perhaps 15 miles of a light rail system for moving visitors to and from the various vantage points. White water rafting excursions, jungle walks and similar experiences are available. At least half the visitors we observed were Europeans or North Americans who fly into the international airport. While we there we chatted with a couple who work for a company doing executive incentive tours. They saw Iguazu as an ideal exotic place to bring their corporate clients--providing incentive travel for top corporate salesmen and clients. Smack in the centre of the development with the ideal location for viewing the falls in a new Sheraton Resort. However, since Iguazu is a very considerable distance from any major population centre and with travel costs in Argentina being exorbitant, the bulk of the visitors are from Brazil, who pay the admission ($9) but bus in from the Brazil side on Brazilian buses and don't even overnight in Argentina. Iguazu the town was almost deserted even though as the beginning of the summer long school break this must have been the busiest time. (For those who are curious, we saw absolutely no evidence of the chaotic environment which has been reported from that area--on the surface at least it is all rather staid. The surrounding towns, which were settled at the end of the 19th century largely by German immigrants (and which achieved notoriety by evidently giving refuge to Eichmann and other Nazi fugitives), are very prosperous, with a rather Coloradan/Calgary sheen to them.) Meanwhile on the ATM front... In BA itself there were long lines at the banks and just before we left, most of the ATM machines had run out of money (except interestingly, in a couple of high end shopping malls we visited). The ATMs were all set up to directly dispense either pesos or US dollars. At one set of ATM's which had evidently long since run out cash, I observed a well-dressed gentlemen transferring funds from one account (presumably in pesos) to another account, presumably in dollars which was possible given the complete interchangeability of the two currencies. The local newspaper indicatd that several Billion Pesos a day were being converted in this way and presumably in other ways as well. Mike Gurstein -----Original Message----- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]]On Behalf Of [EMAIL PROTECTED] Sent: December 22, 2001 9:12 AM To: [EMAIL PROTECTED]; [EMAIL PROTECTED]; [EMAIL PROTECTED] Cc: [EMAIL PROTECTED] Subject: RE: Argentina down and out Glad to have a participant from Argentina. If there was a simple answer to this complex problem I am sure someone would have come up with it by now. The only plausible solution seems to be to offer the same sort of outcome that is typically offered to corporations who are close to defaulting on their debt. Set up a plan for restructuring the debt (changing terms and condtions of payment so that creditors get something rather than nothing). This would give the govt some "breathing room" and some time to impose fiscal discipline. Arthur Cordell -----Original Message----- From: Carmen Lopez [mailto:[EMAIL PROTECTED]] Sent: Saturday, December 22, 2001 6:48 AM To: Ed Weick; Keith Hudson Cc: [EMAIL PROTECTED] Subject: Re: Argentina down and out Hello, I am Carmen from Argentina. This tuesday and wednesday have been a nightmare. I am a just graduated economist and I think that the problem of my country is not only economic but institutional. Politicians have no credibility at all. My country is a very "special" one. We have had 40 years of inflation until convertibility arrived. Convertibility succeded in restraining inflation but the cost was seen in the market for labor were unemployment raised. I am very interested in hearing your opinions. Sincerely, Carmen ----- Original Message ----- From: "Keith Hudson" <[EMAIL PROTECTED]> To: "Ed Weick" <[EMAIL PROTECTED]> Cc: <[EMAIL PROTECTED]> Sent: Saturday, December 22, 2001 4:16 AM Subject: Re: Argentina down and out > Hi Ed, > > Yes, the situation in Argentina certainly is complex. For a decade the IMF > has been helping Argentina on reasonable conditions of reform but the > country has still allowed its public debt to rise from 30% in 1993 to > approaching 60% now. The Financial Times talks of "weak financial systems" > and "poor fiscal discipline" as being the cause. More latterly, Argentina > thought it could escape all normal sorts of budgetary disciplines by simply > tying its currency to the dollar. > > So the IMF is in a dilemma. It either carries on being captured by its > borrowers -- much like a bank with a big customer -- and lending more money > with the probability that no reforms will follow, or it refuses to lend > more money. Either way it will be bitterly criticised. > > It seems to me that Argentina is in the grip of two problems which are > intertwining but have two different causes and can only be solved > separately. One is, simply, bad housekeeping over the years -- too much > government expenditure than the growth of the economy ought to allow. > > The other is how it values its currency. And this is where I come back to > the bee in my bonnet. At present, the world is full of different sorts of > currency policy ranging from total control (e.g. North Korea), total > control with a shadow unofficial free currency (e.g. Russia and others, > with the dollar serving their grey economy),currency board (Hong Kong only, > now that Argentina's has collapsed), pegged exchange rates (SE Asia), quasi > free-floating (USA), and (almost) total free floating (UK). > > All of this mess really means to me that no present-day government and no > group of economists (except the Austrian school) have the faintest idea of > what a currency is supposed to mean. None are prepared to accept the notion > that a currency ought to have intrinsic value which should exercise the > same discipline on nations that it has on businesses and households. > Otherwise it's just a token of varying degrees of arbitrariness. > > Sorry to harp on again about this! > > Keith > > > At 09:31 21/12/01 -0500, you wrote: > >The situation of Argentina is complex. There are no easy solutions and > >there is no doubt that some fundmental change will be required before the > >country can begin to limp its way out of caos. What has happened appears to > >be a case of the road to Hell being paved with good (and perhaps bad) > >intentions and the right thing (at least in the short run) going rather > >horribly wrong. It's a case of corruption, inaction, and the danger of > >pegging the value of a domestic currency to something that is beyond > >national control unless a country is willing to undertake the kind of > >restructuring that EU membership requires. > > > >The reason for pegging the Argentine peso to the US dollar was runaway > >inflation, but it soon became obvious that the peso was greatly overvalued. > >It was too easy a solution. How else might it have been done? Perhaps a > >price and wage control board with strictly enforceable powers? Perhaps a > >restructuring of the tax system that required people to pay up or face > >extreme penalties, thus reducing the government's dependence on deficit > >financing based on foreign loans? And in the longer term, perhaps a > >concerted drive to move the country away from corned-beef exports to more > >value added manufacturing? And also in the longer term, making Mercosur > >into a viable economic union instead something that sounds nice in > >politicians' speeches. > > > >It is probable that what we have seen this past week is only the beginning. > >Somewhere in the wings, the ghost of Jaun Peron is waiting. > > > >Ed Weick > > > > > > > > > > > __________________________________________________________ > "Writers used to write because they had something to say; now they write in > order to discover if they have something to say." John D. Barrow > _________________________________________________ > Keith Hudson, Bath, England; e-mail: [EMAIL PROTECTED] > _________________________________________________ > >
