Argentina Declares State of Siege.

December 20, 2001 12:07 AM

Argentina Declares State of Siege. After a prolonged national strike (the 8th in two years), protests due to social tensions, violence, and looting have broken out, and in response a state of siege allows for "authorities the right to suspend constitutional guarantees such as the right to assemble and travel freely, while giving police greater powers to make arrests." What effect will this have on South American stability? On worldwide financial markets?
posted by mathowie (23 comments total)

After reading the comments on corruption in Tanzania I was looking at the corruption index and was surprised to see Argentina so far down the list - something that is suggested as a possible contributing factor to these problems by the BBC.

I get the impression (not that well informed) that this isn't going to affect Chile that much (can't say anything about the rest of S America). Argentina has been in a mess for years, so this isn't a big surprise. In comparison, the recession in Japan has had a much more serious effect on the economy. I suspect most S Americans are more worried (financially) about the economy of the USA.

PS Any Chilean readers out there? I'm moving there in a couple of weeks and would appreciate chatting to anyone with knowledge of the IT scene in Santiago...
posted by andrew cooke at 12:51 AM on December 20, 2001

According to today's Clarín, Argentina's best newspaper - very good online too - Wall Street has shown indifference to the collapse of the Argentinian economy(scroll down).
The daily financial paper, Buenos Aires Económico, also echoes the notion of being abandoned by the international financial community.
Those with no Spanish can check out the modest, yet outspoken Buenos Aires Herald.

My next-door neighbour and best friend, Carlos, is Argentinian and is very worried. His family, who live in Buenos Aires, report new outrages every day.

The problem, I think is, unlike what happens with Brazil, people tend to think Argentina is rich. But, just like Brazil, it's a few, very rich families on one side, an enfeebled and diminishing middle class struggling to make ends meet, and a vast majority of very poor people.

Their governments though tend to be notoriously proud and arrogant, so they invariably(and stupidly) pooh-pooh foreign rescue packages. So there's a cultural problem - of haughtiness and snobbishness - at the root of this economic disaster.
South American stability will probably be cushioned by Argentina's stand-offish attitude and their highly contained economy.

They keep pretty much to themselves, even within MercoSur, so it looks like they'll have to fend for themselves now.

A sad story indeed.
posted by MiguelCardoso at 1:07 AM on December 20, 2001

I read somewhere (say, a couple of weeks ago) about the imminent collapse of the Argentinean economy. Apparently, they've been barely holding this at bay for about a decade now, and as such most investors managed to withdraw from the scene long ago, which minimizes the effects on foreign economies.
posted by kaibutsu at 1:25 AM on December 20, 2001

vast majority of very poor people

When I first went to Chile I was surprised at the size of the middle class. There's a Northern misconception that S America is full of very poor people exploited by a tiny minority - in the richer countries at least, that's simply not true.

Reading the news reports, at least one mentioned that a large proportion of the rioters are middle class. This report gives more details and identifies something it calls the "new poor" - people who would have been called middle class a few years ago, but who are facing very hard times now. I suspect that the structurally poor - those that are born, live, and will soon die, in poverty - don't complain anything like as much as educated middle classes on hard times, and that it's these people that are driving the unrest in Argentina.

I'm not saying that there isn't significant inequality, or ignoring large numbers of very poor people, but your comments are misleading because they suggest that (1) the number of poor is overwhelming and (2) it has always been that way.

(This is the 2001 version of the link above, which I've finally managed to load, and which gives further depressing details about the slump in Argentina's economy - nearly 4 million out of a total population of about 40 million below the poverty line.)
posted by andrew cooke at 2:23 AM on December 20, 2001

I wonder if some of you guys really know what's behind the story : who is taking or took advantage of Argentina economy ?
posted by elpapacito at 2:59 AM on December 20, 2001

your comments are misleading because they suggest that (1) the number of poor is overwhelming and (2) it has always been that way

But the number of poor is overwhelming. Your own numbers put 10% below the poverty line. And, no it wasn't always like that, nor did I say or imply such a thing. We all know Argentina used to be one of the richest countries in the world, with a remarkably fair income distribution.

What we're talking about are undeniable trends - which are what matter in economics. The rich have been steadily getting richer and the poor, poorer. The decline has been accelerating and has now reached rock-bottom.

And what does the fact that rioters in the last few days tend to be middle class have to do with it? Surely, you can't judge economic or political crises by the social class of who those who turn up at demonstrations.

Here's a sober assessment, from Yahoo Finance:

"In US dollar terms, Argentina has the highest GDP per head of all Latin American countries. Globally, it ranks as a middle-income country. With the trend rate of population growth expected to average just 1.2% in the next few years, US dollar GDP per head will grow. However, continued recession in 2001-02 and the slow pace of forecast recovery will keep GDP per head below 1997 levels at the end of the forecast period. Furthermore, per head GDP figures disguise the worsening of income distribution that has occurred in recent years, fuelled by structural reform in the early part of the 1990s and economic recession since 1998. Whereas in 1990 the earnings of the richest decile of the population were 15 times those of the poorest decile, in 2000 this ratio increased to 26." (my emphases.)

When the middle class gradually erodes, they obviously join the ranks of the poor.

It's all quite complicated, but there's no need to paint a rosier picture of Argentina just because you'll be travelling to Chile soon and feel a bit nervous, Andrew! :)

elpapacito: the very rich Argentinians who actually caused the crisis by taking all their money out of the country?
posted by MiguelCardoso at 3:38 AM on December 20, 2001

people, it's all ok, i saw treasury secretary paul o'neil say not to worry last night on cnbc.

he's pretty credible. right?

hello?
posted by zoopraxiscope at 3:47 AM on December 20, 2001

I'm from Argentina. I've been coming to the site for a while but I didn't have an user account. Now I finally can post some comments. The situation here is really bad. There is a lot of people unemployed (almost 20%), and the government can't find the way to revert the situation. Last week, they announce a new series of economical limits (we can't extract more than 1,000 for month from our bank accounts, for example) and that was too much. There was a lot of people yesterday assaulting supermarkets and stealing food, there was violence, and there was some deads too. Finally, last night the people gathered in Plaza de Mayo, in front of the Government's House, to show their anger in a pacific way. I went to sleep at 12, but now I learned that Domingo Cavallo, our econimics ministre, quits. I have no idea what will happen next, we are having economical problems since always and nobody is smart enough to find the way out.
I lost my job a few months ago, and can't find anything to do with my life. It's depressing. Yesterday, when I was watching all those images in the TV, I feel bad. Today, when I read your comments here, I feel bad. I wish I could live in a place where things like this enver happen.
posted by Flor at 4:45 AM on December 20, 2001

Wall Street has shown indifference to the collapse of the Argentinian economy

Could be because this is about the 100th time this has happened.

who is taking or took advantage of Argentina economy ?

I don't know that this is some shadow conspiracy. The CIA World Factbook (I know, some people hate it, but what's better?) suggests this all goes back to 1989. They need to offload that debt, but with revolts like this week's, they tend to just print more currency.
posted by yerfatma at 4:56 AM on December 20, 2001

yeah the brazillian real has been rising, and as for its effect on the rest of the world, i think enron has more impact. there aren't many more pegged currencies around the world (is HK it? -- plus i don't think HK has to deal with debilitating loads of dollar denominated debt).

i think it's ludicrous for the IMF to impose austerity measures with 18% unemployment and for the government to go along. the way i see it you default on your debt, let the peg and currency go and start with a new one.
posted by kliuless at 6:39 AM on December 20, 2001

The disparity examples between the rich, middle class, and poor are somewhat a misleading topic, since you have the same type of disparity in the United States and other capitalistic countries. (I'm sure you have them in communist countries and dictatorships, too, but I guess that's really not relevant).

Anyway, Flor; things like this can happen anywhere. In the U.S., there is a crisis every ten years, although they seem to be getting less severe since the 70's oil problems and massive inflation.

The Argentinian economy has been pretty good, and I think the indifference Wall Street is showing is much like the problems that Malaysia and Indonesia had a few years back. Malaysia froze money transfers out of the country, trapping currency, which FX traders didn't like, but markets didn't go into a tailspin.

When Brazil was in hyper-inflation before the switch to the dollar peg in the early 90's, people had to buy their groceries as soon as they were paid because a few hours later, their paycheck would be worthless. Investors backed off, but Wall Street didn't react.

The thing is, you have a country with a sizeable GNP, a functioning economy, internal infrastructure, and so on. The economy may seem to fall apart on the surface, but you can't just stop it from functioning. Even if money freezes up, it has an inertia that keeps it moving, beyond 20% or 30% or 40% unemployment rates or even hyperinflation. Governments fail easier than making an economic system completely unrecoverable.

As far as the IMF holding back funds, it makes sense since inserting money into the economy right now will just suck it right away in the current frenzy. Once confidence erosion is slowed and there is some way to preserve at least some of the money to stop the slide, then you can start thinking about moving forward. But until you fix the overspending issue, you won't be able to solve anything.

Argentina hasn't reached the point of dragging down its neighbors, and I doubt it would happen, anyway. It's in a severe recession/depression, but these things have always been cyclical. I'm not saying it's going to be pretty, but I don't think we need to worry about immenent collapse.
posted by rich at 7:55 AM on December 20, 2001

> let the peg and currency go and start with a new one.

In such a state of chaos, unless the new currency has some intrinsic value (gold or silver) how are you going to get frightened people to take it in payment for things that do have intrinsic value (food, medicine)? If a currency really truly collapses what you're left with is barter.
posted by jfuller at 8:02 AM on December 20, 2001

According to NPR this morning, the Argentinian collapse has had all the speed of a possum on ludes, and so the surrounding economies (like Brazil) have had plenty of time to prepare for the eventuality and minimize the impact to Argentinian neighbors.

But otoh, is the larger question 'What is the US responsibility to countries when they get themselves into jams?" I mean, there's no way anyone can point the finger at America and say it's our fault on this one, even remotely. It's all Argentinian numbskulls that did this. So, despite the obvious social trauma this will cause, where does our responsibility as Americans lie here?

I'm of two minds on it: one side says they should have the right and responsiblity to sort out their problems for good or ill - liaissez faire, and similarly they should understand that some actions we take might temporarily exacerbate the problem (like withdrawing capital from Argentina to avoid losses); this is the right - and responsibility - of being a sovereign nation. But the other side says, we are the only superpower left, and by default we are the world's policeman/banker/dad/ref - a thought that often seems echoed in the world press. Therefore, we should act definitively, decisively and (if need be) unilaterally in all events that threaten to rend the social/economic/political fabric, without regard to world opinion.

Nuts?
posted by UncleFes at 8:16 AM on December 20, 2001

Cerro Tololio Mr. Cooke?
posted by clavdivs at 8:33 AM on December 20, 2001

Our situation is the result of our stupid (or corrupt, I may say) governments, and that loan from the IMF.
I know there are crisis, I know there are solutions, and I don't think our economical problems are going to affect your world. But I'm very upset right now because it seems this country doesn't have a future. I don't have a future here. I send 20 e-mails per day looking for a job, but I know I'm not going to find anything. What am I supposed to do? Leave? Where? Stay and live in the streets?
posted by Flor at 9:21 AM on December 20, 2001

The whole govt just resigned (according to my dad, who just phoned).

clavdivs - I was at Tololo (an odd place in some ways) 7 years ago, and met my partner there. She's now returning to a lectureship in the astronomy dept at La Universida de Chile and I'm hoping to find a job in software development (I stopped being an astronomer years ago). You've been there? La Serena is lovely, but now we'll be in Santiago...
posted by andrew cooke at 9:23 AM on December 20, 2001

Flor - I'm really sorry if my comments were ones that made you feel bad (disculpame - ademas, disculpame, porque estoy escribiendo en ingles, pero mi castellano no es perfecto y es normal escribir en ingles por aca). I have no idea how things will work out, but the Argentinians I know are good, strong, kind people (even if they do say "che" a lot ;-) - I hope you have the support of good friends (and can support them). While I don't know much about riots and collapsing economies, I am about to learn something of being unemployed - I'm trying to look on the bright side and plan how I can use that free time to do things (mainly programming) that I've not had time for before. But I guess that's not much consolation when you're worried about earning a wage, your future and your family... Que tengas suerte.
posted by andrew cooke at 9:38 AM on December 20, 2001

sorry to post again - I can't find any support for that comment about govt. resignation, so I suspect it's plain wrong.
posted by andrew cooke at 10:01 AM on December 20, 2001

The government has resigned. President de la Rosa's press conference is awaited any moment now. The word is he'll resign- For the full effect - even if you don't have much Spanish - listen to the special programme, just started, on Radio Mitre, live from Buenos Aires.
posted by MiguelCardoso at 11:08 AM on December 20, 2001

Fernando de la Rua, I mean, is just now speaking. "We are in a critical situation...what's important isn't people, it's institutions...so I ask all parties...to hear the people's demands. The Constitution and the political system must be reformed. I'm not here to keep my place but to represent the nation.
I understand the anguish of our compatriots. Only national unity can save our country. I am here, as President of the Nation, to ask all parties to participate in a government of national unity...
I ask for a gesture of grandeur..."

So I guess he's staying. Whether the Peronists will accept his invitation is another question...
posted by MiguelCardoso at 11:16 AM on December 20, 2001

The president is staying for now, but there are riots in the Capital and he's receiving a lot of critics. The bad news is there isn't a lot of options either. We're lacking good politicians around here. I never tought I will be living in a situation like this, I hope things don't get worst.
Your comments are not making me feel bad, Andrew; is the whole situation here. I lost my job a few months ago and since then I spend my time in a lot of personal proyects, but I would like to live in some place with future. Gracias por tus comentarios, che ;)
(I really don't use that word)
posted by Flor at 12:46 PM on December 20, 2001

yahoo update: de la rua has resigned.
posted by kliuless at 7:29 PM on December 20, 2001

I wish mr. Cooke. best of luck to you there.
posted by clavdivs at 8:13 AM on December 21, 2001