Buenos Aires Times

opinion and analysis ON ECONOMIC TURBULENCE

The man who wasn't there

The failure of the Macri government to control inflation, with the consequent galloping devaluation of the peso, looms over Argentina like a black cloud, warning that more storms are brewing.

Thursday 30 August, 2018
"I was horrified to see the return of the 'bicicleta,' a financial aberration. That was a warning that nothing had been learned from the financial disasters of the past," writes Robert Cox. Foto:JOAQUIN TEMES

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A verse from a nonsense poem, written more than a century ago, describes the Argentine conundrum best for me:

“Yesterday upon the stair,
I met a man who wasn’t there.
He wasn’t there again today.
Oh, how I wish he’d go away.”

I found these silly lines were useful in describing the situation during the 1976-1983 dictatorship, when most people managed not to see what was going on, although really there was no way not to see those thugs, armed to the teeth, who drove those now notorious green Ford Falcons aggressively through the streets of Buenos Aires.

Now that I live abroad for most of the year, “the man who wasn’t there” helps me understand why what seems so visible to me each time I return, is invisible to many of my friends.

It seems to me that from about mid-2012 the economy, measured in everyday terms, has worsened every year. A few years back, as were were driven us around town, a chauffeur – one unconnected with those of his colleagues who have dominated the news recently – pointed out markers of the progressive decline in the standard of life in the city. It was a paradox. We saw that while the city’s façade was being beautified and wrought-iron railings were going up around the now impeccable parks (to protect them from the hoi polio, no doubt), more and more stores were being closed.

Our driver, who became almost a friend over the years as this relationship continued, always wanted me to see reality. He pointed out the economic eyesores visible during the Kirchnerite years and he welcomed the election of Mauricio Macri, expecting and anticipating a change. The fact that there was no grand change was a huge disappointment to him.

I think that when the economic expectations of a fairly solid majority of the people were not realised, the atmosphere turned sour. Alejandro Katz, my favourite Argentine thinker, captured the feeling of frustration that is now widespread. He said that the one thing that was expected of Macri’s team was that they would introduce sensible economic policies and that they would work. After all, the management of the economy was seen as the forte of the president's hand-picked team of CEOs and financial wizards. 

However, the massive failure of the Macri administration to control inflation, with the consequent galloping devaluation of the peso, looms over Argentina like a black cloud, warning that more storms are brewing.

That is what is really important to everyone now. Interest in the multi-million-dollar “notebooks corruption scandal,” the one that President Macri described as harder to believe than the most over-the-top Netflix series, has dwindled slightly. At least that is how it looks from here.

Certainly, the hope that the ‘outing’ of a score or so of company heads and business executives for bribery, and the alleged documented evidence that the former presidential couple received millions of dollars for their personal use, would signify a turning point has faded. Only a blind, deaf and mute monkey would not know that the country was being robbed blind. It was all on television.

All eyes are now on the dollar and the slumping peso. But why wasn’t it obvious that the dollar would be seen as the safest haven in a financial storm? Surely it was obvious that the financial instruments those smart guys were introducing, and the theories they were trying out, were dangerous. I was horrified to see the return of the “bicicleta,” a financial aberration. That was a warning that nothing had been learned from the financial disasters of the past.

I realised that the man who isn’t there is THAT which is obvious – yet people refuse to recognise it. The current crisis looks familiar because it is the same all over again. We have an exquisite ability to deny, ignore and, reject the obvious – and then repeat the same MISTAKES. There is a clamour of voices now, but only a few economists were pointing out the obvious as the crisis took shape and became more than obvious, as the run on the peso overwhelmed the Central Bank.

My guru, when it comes to common sense economics, is former Economy and Production secretary Guillermo Nielsen. He was the man of the moment in 2001 when Argentina defaulted massively. He was a key figure in renegotiating the debt.

Nielsen believes that years of economic decline have resulted in the de facto dollarisation of the economy. We already have a bi-monetary economy. As he points out, all major financial transactions are carried out in dollars.

He told an interviewer from CNN that he has always opposed the idea of dollarisation, which has been proposed from time to time when a government has run into financial difficulties. But he has now come to the conclusion that it is inevitable, suggesting of course that it would have to be later rather than sooner.

This would be ‘the final solution’ for the peso problem. Surely it is unthinkable, but isn’t it obvious?

There he is again, that man who wasn’t there. Will he be there again today?

Oh. How I wish he’d go away.

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