ARGENTINA’S CRUMBLING ECONOMY: MARY ANASTASIA O’GRADY SEE NOTE
http://online.wsj.com/news/articles/SB10001424052702303848104579310811794109126?mod=Opinion_newsreel_11
DON’T CRY FOR CRISTINA KIRCHNER THE NASTY SUPERANNUATED “EVITA WANNABE” WHO IS NOW THE PRESIDENT….RSK
On a visit to Buenos Aires in November I noted a sense of foreboding hanging over the city. With the economy in a stall, consumer prices rising and capital fleeing the country, porteños from every walk of life seemed to be bracing for a storm—and resigned to the hardship it would bring to this harbor city.
The city infrastructure looked defeated too: The wide boulevards and grand 19th-century buildings are now tired and grungy and the streets smelly. Angry graffiti and tattered posters deface walls, adding to the general feeling of lawless decay. It takes a long time to destroy a nation’s wealth but a decade of kirchnerism o—government by President Néstor Kirchner and now his widow, Cristina —seems to be doing the job.
In recent weeks things have gotten worse. The way out also looks more difficult. Three big developments in December raised the specter of descent into full-blown chaos. The first occurred when the police in the provincial capital of Cordoba suddenly walked off the job to protest low salaries. Hooligans took the work stoppage by law enforcement as an invitation to sack the city. More than 1,000 stores were looted and two people killed.
Argentina’s President Cristina Kirchner Associated Press
The national government could have helped Gov. José Manuel de la Sota, who is not an ally of Mrs. Kirchner. But it was unresponsive, instead suggesting that the violence was part of a plot to destabilize the president. His back against the wall, the governor gave the police a 33% salary hike. They returned to work. But police in 20 other provinces learned a lesson. Strikes across the country followed and so did looting and violence. Look for more pressure on public-sector wages.
Behind the difficulty in paying provincial employees a decent wage is the same old problem that brought Argentina to its knees in 1989: inflation. According to the Foundation for Latin American Economic Research (FIEL), based in Buenos Aires, inflation for December was 3%, driving the total for 2013 to 26.4%. Food and beverage prices were up 28.9%, FIEL says, despite “repeated freezes” mandated by the government.
The government claims annual inflation is 10.5%. But there is widespread distrust of official figures. In 2011 one of Mrs. Kirchner’s henchmen fired the head of the institute charged with measuring the price level because he didn’t like its inflation findings. Even the International Monetary Fund took note. In February 2013 it censured Argentina for its failure to divulge accurate inflation data to the public.
Money-printing by the central bank has Argentines selling pesos whenever they can. Capital controls in effect since 2011 make that harder than it used to be but not impossible. They have accelerated capital flight. More sellers than buyers drives down the price of the peso where it trades freely. While the official exchange rate is now 6.6 pesos to the dollar, it now takes almost 11 pesos to buy a dollar in the black market.
The weakening exchange rate reflects a dramatic decline in the central bank’s international reserves, which were down by about 30% in 2013. But kirchnerismo has also destroyed capital by signaling investors that there is no sanctity of property rights or contracts. The capital-intensive energy business has been hit especially hard. The 2012 expropriation of the Spanish multinational Repsol‘s recently decided to make an Argentine investment but many other investors are staying out.
Rate freezes have curbed power-company investment, resulting in more frequent electricity outages. Last month as summer temperatures soared, large parts of Buenos Aires experienced blackouts for days at a time.
When riots, looting, blackouts and soaring inflation descend on a nation, free people look to their leaders to restore calm and order. But Mrs. Kirchner is lying low. Perhaps it is because in December investigative reporters at the Argentine daily La Nación broke a series of stories alleging that she and her husband, who died in 2010, got rich off a public-works scheme in Santa Cruz, their home province.
The reporters allege that a Kirchner-family frontman took control of a handful of Santa Cruz construction companies and subsequently secured a series of overpriced public-works contracts. La Nación further alleges that the same contractor gave the Kirchners sizable kickbacks by laundering the money through hotels in Santa Cruz owned by the first couple. Mrs. Kirchner has denied all this and said that the charges come from fascists.
After 10 years of Kirchner rule, the executive branch now controls most of the judiciary. Calls for transparency are unlikely to go far. On the other hand, an inflation spiral creates a short fuse, and a population that feels as powerless as Argentines do today will eventually make itself heard.
Write to O’Grady@wsj.com
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