Improving Economic Prospects in the Land of Silver

Plaza Congreso BA

The Thinker in El Plaza Congreso, adjacent to official government buildings in Buenos Aires, Argentina. December 9, 2010 (David Berkowitz/Wikimedia Commons)

Argentina was a gold mine of economic opportunity in the early 20th century. Blessed with trade surpluses in commodities, an influx of foreign technological innovation and development, and a growth rate of 6% (the fastest in the world at the time), Argentina attracted hundreds of thousands of European immigrants.

With the exception of commodity exportation, Argentina’s recent economic condition has soured. The last half-century has been marked by economic decline, political instability, and diminishing geopolitical influence. Consider that when President Obama visited the Southern Cone in 2011, he flew from Chile to Brazil deliberately passing over Argentina. While significant capital inflows from China largely insulated Argentina from the global economic crisis, economic and political turmoil persist to this day. Inflation estimates are above 30%, its expropriation of Spanish petroleum giant Repsol have made those in the international business community wary of FDI, and its export and import quotas have proven disastrous to farmers, businessmen, and consumers alike.

If President Kirchner’s successor seeks to guide Argentina towards a path of economic and political stability, he/she must assuage concerns of an impending crisis, and work swiftly to ignite a stagnant economy. Reviving the economy will be easier said than done in a country whose Ease of Doing Business ranking is 127 out of 189, trailing, among others, Nigeria and Pakistan. A more challenging hurdle will be reducing Argentinean dependence on natural resource exports. As tempting as it may be to ride the commodity wave to economic solvency, diversification of the nation’s income will prove imperative to Argentina’s future growth and stability. Developments in added-value manufacturing and the service industries will better isolate Argentina’s economy from fluctuations in global commodity prices. Diversification will also require improvements in education and infrastructure, areas in which Argentina is particularly deficient.

ArgentinayChile1929.TouringclubitalianoMilano

Map of Argentina circa 1929 depicting recent territorial acquisitions (Ufficio cartografico del Touring Club Italiano/Wikimedia Commons)

One thing Argentina is not deficient in is unfounded optimism. An Argentinean economist once lamented that his nation is destined for lackluster development, positing, “Argentina has always been a country with mediocre growth, believing that spectacular growth and riches are right around the corner, and when a good year comes, Argentines say, ‘Ah, here comes the life we’ve been waiting for and so deserve.’” Such misguided expectations must be replaced by shrewdness and sacrifice. Recovering from the current economic turmoil and moving towards a trajectory of sustainable growth will require drastic fiscal and monetary reforms.

Attempts to curtail government spending will likely aggravate an already sluggish growth rate, particularly after several years of costly welfare programs and President Kirchner’s wasteful spending. Also unpopular will be the inevitable currency devaluation once Argentina’s currency exchange is liberalized. Such unpopular policies have been postponed for far too long. Argentina must follow in Chile’s footsteps by increasing economic competitiveness in the global arena. For a country blessed with bountiful resources, its political malfeasance and bureaucracy remains the only thing slowing down what would otherwise be impressive growth. By fostering more competitive industries and implementing basic economic reforms, Argentina may become the gold mine it once was.

The views expressed by the author do not necessarily reflect those of the Glimpse from the Globe staff and editorial board.

The Vatican’s New Groove

Pope Francis in March 2013

Pope Francis in March 2013 via Wikimedia Commons.

 One year ago the reigning head of the Catholic Church, Pope Benedict XVII, did the unthinkable: he resigned. With a troubled tenure defined by criticism and controversy, Benedict cited deteriorating psychical and mental health for his departure. It was the first time a Pope had resigned in 600 years, leaving some 1.2 billion followers of the Catholic Church without a leader.

In search of a new leader, the conclave of cardinals met in Rome with determination to fill the void. Huge crowds amassed in St. Peter’s Square anxiously awaiting the secretive vote. Crowds hummed with anticipation as white smoke poured from the chimney after a swift deliberation. Jorge Bergoglio, Cardinal and Archbishop of Buenos Aries, emerged to a cheering crowd in papal white to take hold of the highest holy office as the 266th Pontiff, Pope Francis.

Pope Francis lays claim to a number of “firsts” for the papacy.  The native Argentinian is the first non-European pope in nearly 1,200 years, as well as being the first Jesuit Pope, the first Pope from the Americas, and the first Pope from the Southern Hemisphere.  With over 40% of Catholics hailing from Latin American states – the largest region of Catholics in the world – this was an exciting opportunity for nearly 500 million people to be represented in the Vatican.

Since Pope Francis’s appointment, he hasn’t wasted any time becoming a renowned international figure.  Named Time Magazine’s Person of the Year in December and being generally approved by even the toughest of critics, Pope Francis has had a whirlwind first year.  On the Pope’s one-year anniversary of taking leadership, here is a look back on the last year and a glimpse forward as to what lies ahead for the Vatican.

A global perspective.

Pope Francis is the first Pope from the Southern Hemisphere and, consequently, his appointment can be viewed as a way in which many are chipping away at the North-South socio-economic divide. Following his appointment, the Pope named 19 new cardinals predominantly hailing from poorer countries. The Pope has also been quoted commenting on economic policy, one area where Catholicism is particularly liberal.  Francis denounced trickle down economic theories and raised concerns about the growing gap between the poor and the rich. Having lived and preached in the slums of Argentina, it is clear that he has feels for, and connects with, those less fortunate.

A change in tone.

In an interview last June, the Pope asserted, “Who am I to judge” when asked about homosexuality.  His statement encompassed a definitive and pragmatic shift away from judgment and toward a new attitude of mercy. Although Pope Francis assured the world that the church’s doctrine is not going to be undone, he also asserted that conflict over issues, such as homosexuality, distracts from the greater goals of the church.  Putting aside differences and finding common ground has been at the top of Pope Francis’s achievements.

A shift in priorities.

Pope Francis’s chosen papal name is in honor of Saint Francis of Assisi who was a champion (and patron saint) of the poor.  It should come as no surprise then that the impoverished masses sit at the heart of the new Vatican agenda.  Pope Francis has never been one for luxury; in Argentina he was known for taking the bus and not chauffeured cars, and spending time with the poor. It is even rumored that since becoming Pope, Francis slips out at night to tend to the poor personally, although the Vatican denies this rumor. 

An exile of corruption.

Focusing on those with less, the Vatican has proposed large spending cuts.  With an audit on finances of the Vatican Bank and a reshuffling of leadership, the Pope aims to flush out any corruption. One part of this initiative called for removing four of the cardinals that preside over the Vatican Bank and naming new Cardinals and officials to refresh Vatican leadership.  Although he has made it clear that the Vatican is not a political state, he has not been removed from politics. Rather, he has recently called for an end to violence in Ukraine and champions peace worldwide.

The Pope Francis Effect.

The international influence of the Pope is undeniable. With a following that rivals the population of China, many people look to the Pope for both moral and spiritual leadership. What might be even more important is the influence the Pope can have on developing countries. In particular, Pope Francis’s emphasis on the value of women in the church and society sends an important message to developing countries. Some of these countries, especially those in Latin America and Africa where Catholicism is rapidly growing, face conflict over women’s rights and society. The pope’s advocacy for women’s role in the church and broader society could lead to a profound impact on societal perceptions, and treatment of, women. In short, the Pope’s actions are an encouraging step for the Vatican.

Blessed by Resources, Cursed by Politicians

The Iglesia de la Compania de Jesus, built in 1671 is Argentina's oldest church; Argentina's oldest university is on the same block. (Jacob W. Roberts)

The Iglesia de la Compania de Jesus, built in 1671 is Argentina’s oldest church; Argentina’s oldest university is on the same block. (Jacob W. Roberts)

President Cristina Kirchner’s health concerns last year are emblematic of the issues that have enshrouded Argentina’s economy and political scene for the past half-century. Over the past few decades Argentina has suffered economic crises, political scandals, and national tragedies. From a failed invasion of the Falkland Islands to the La Guerra Sucia (The Dirty War), in which the Argentinian military killed thousands of its own citizens and kidnapped thousands more infant children, the land of silver has had its share of national embarrassments. More recently in 2001, an attempt to peg the Argentinian peso to the US dollar resulted in default, runs on banks, and an enduring distrust in their financial system.

This distrust continues to manifest itself today. So much as stroll down Florida Street in Buenos Aires and shout, ‘Yo tengo dólares’ and you will be attacked by swarms of porteños (people of Buenos Aires) desperate to buy American currency for many pesos above the government-regulated exchange rate. Even a decade after the economic crash, there remains tremendous distrust in banks. Many Argentinians choose to stash loose cash under their mattresses rather than confront the risk of entrusting it in a financial institution.

Cristina’s leadership has hardly put her citizens’ fears to rest. Over a year ago, she expropriated YPF, a Spanish-owned oil company that her husband sold the rights to decades earlier while governor of Santa Fe. Curiously enough, the money from this deal has never resurfaced. As if encroaching on international law isn’t enough, Cristina has sought to alter the constitution to eliminate the term limits that prohibit her from seeking re-election. While she did not hesitate to dole out welfare benefits to the poor prior during the 2011 election, she was quick to scrap these pay outs following her successful re-election.

In spite of the billions of dollars in agricultural products and commodities being exported to China and other nations in recent years, little of this money has led to domestic development. Driving from San Isidro into the capital, one will pass by thousands of impoverished Argentinians squatting in sevillas, shack-like dwellings constructed out of discarded metal, wood, and concrete. Critics of Cristina are quick to point out that when Cristina entered office there were only one-story shacks in this shantytown, but now it is hard to find a single shack under three-stories high.

These failures as both a nation and as an economy are difficult for many Argentinians to face. Their sense of national pride is nothing to scoff at. In the 1980’s there was a common saying in Europe that one should buy an Argentinian for what he is worth and sell him for what he thinks he’s worth. Even a century after Argentina’s position as the hegemon of the Americas was usurped, many still feel as though their nation is destined to regain its past glory. What few Argentinians will deny is that their country is a land blessed by resources and cursed by politicians. From Peron to Cristina, there have been many crises of leadership. Only time will tell if Cristina’s inevitable downfall will lead to a century of progress and internal development or continued stagnation and corruption. Until then it would be unwise to make any large deposits into El Banco de La Nación.

The Amazon on Life Support?

Deforestation in the Amazon as seen by satellite (by NASA, via Wikimedia Commons).

Every minute, an area the size of 50 soccer fields is destroyed in the Amazon Rainforest.  Over the past 40 years, nearly 20% of the forest has been destroyed – an area roughly the size of Alaska. Simply put, in less than half of a century more of the rainforest was destroyed than in the previous 450 years – combined.  High-resolution satellite images tell a story of devastating deforestation in the planet’s largest and most diverse rainforest. Many areas that were once a sea of lush greenery have been transformed into a barren, muddy landscape.

The Amazon represents more than half the remaining rainforest on the planet.  Humans depend on these ecosystems as a source for the planet’s carbon, water, and climate systems. Thus, it isn’t surprising that losing 2.3 million square kilometers of forest in a mere 13 years, as new research indicates, is of great concern to both environmental groups and national governments. While the majority of the Amazon is located in Brazil, the forest expands across nine countries making deforestation an international crisis.

With 20% of the forest already cut down and another 20%, as expected by scientists, to be on the chopping block over the next two decades, it is only a matter of time until the Amazon’s ecology will begin to collapse. Adding global warming to the mix makes the outlook seem worse. Over 100,000 miles of illegal roads, forged by loggers who aim to reach the prime hardwood trees deep in the forest, snake through the labyrinth of vegetation. Consequences of these new roads turn out to be equally as destructive as the actual logging. Land sharks slide in unnoticed and claim the land making land thievery a common crime. As is the case with many lucrative businesses, with high profits comes violence and corruption. Armed guards, hired gunmen, and corrupt government officials all help to facilitate these illegal activities.

It isn’t all bad news for the Amazon, however. Since the devastating revelation in the early 2000s, Brazil and other South American countries have committed to reversing the damage. New data shows that while Brazil still suffers from very high rates of forest clearing, the country has cut the annual rate of forest loss to half of what it once was. In turn, many of the strategies that Brazil has implemented as a deterrent to deforestation will help policymakers in other countries respond to the troubling rates of forest decline.

Nonetheless, the deforestation rates of 2013 were far from encouraging. It is clear that changes have to be made, as deforestation is threatening the local populations’ basic needs. In the most recent Amazonia Security Agenda, it was reported  “compromising Amazonia’s ecosystems, deforestation is now threatening not only the wellbeing and rights of the region’s people, but also the economic sustainability of the very industries that it has enabled.” Scarcity of food, water, and even energy are all threatened by exploitation of the Amazon.

Escalations in forest clearing are primarily being blamed on the weakening of legal protections in the Brazilian Forest Code that were passed under Brazilian President Dilma Rousseff. The reform was riddled with controversy, and was heavily supported by members of the farmer’s lobby known as the ruralists. In Brazil, where agriculture accounts for 5% of the country’s GDP, lobbyist influence has indirectly led to increased deforestation by loggers and farmers. At the United Nation’s Summit on Climate Change, the environment minister, Izabella Teixeira, chose to focus on Brazil’s triumphs, noting the overall trend was has been positive. She attributed the elevation in deforestation to organized crime and acknowledged that the government had taken steps to fight back, saying: “What is happening are crimes, we have 3,921 police investigations, some of them involving civil servants. We are cutting into our own flesh.” Teixeira strongly emphasized that eliminating illegal deforestation remained the goal in the eyes of the government and the crimes of loggers would not be tolerated. Going forward, it is up to the Brazilian government and their counterparts, as well as the global community, to secure the future of the world’s most important forest.