Features > December 14, 2004

A Long Climb

An energized Argentine democracy is holding its own against the IMF, but for how long?

By James North

Argentinean railworkers who can't afford housing live in 100-year-old train cars under threat of eviction.

Buenos Aires—You will not read about Luis Bianchi’s views in mainstream Western press accounts of Argentina’s tough negotiations with global financial institutions. Luis Bianchi drives his battered black and yellow taxi here, for 12, 14, sometimes 16 hours a day, with an hour or so off for the early afternoon meal. He is 75 years old, but he is too poor to retire.

“I hope to work for another five years, until I’m 80,” he says. “The government will then stop renewing my license. But by then we should be able to get by.”

His wife, who is 62, has a low-paid government job. They are helping out his three children, one of whom is part of the estimated 19 percent of the country who are out of work. Another 15 percent of Argentines are underemployed; 44 percent live below the poverty line.

Luis Bianchi is a well-spoken, clear-thinking man who does not have an ounce of self-pity. He has an interesting and nuanced view of Argentina’s $180 billion in foreign debt, which is presently the subject of talks among the Argentine government, international banks and bondholders, and the International Monetary Fund (IMF)—which is playing an even more wicked role here than usual.

Luis Bianchi is not happy that his government in 2001 defaulted on about $100 billion in bonds, the largest default in history, and he feels guilty about individual investors. He is clearly the sort of man who honors his own obligations, as he did when he bought his taxi 20 years ago.

Luis Bianchi does not say Argentina should not pay 100 percent of the defaulted debt, or that they will not pay it; rather he echoes President Nestor Kirchner in saying the country simply cannot pay. He would remind bondholders (most of them European) that investing does mean risk, and that the big investment firms that advised them to buy are also responsible.

Anyone returning to Argentina after a long absence is astonished at how poor the country has become. Buenos Aires, once the Paris of South America, has a faded, rundown, unpainted air, and provincial cities, like Tucumán and Santiago del Estero in the north, are even worse off.

Over the past few decades, the shantytowns known as villas miserias (villages of misery) have expanded; you see them now along the Rio de la Plata and on the road to the national airport. It is the equivalent of tens of thousands of people in shacks along, say, Manhattan’s West Side Highway.

What were obviously once middle-class people are now stationed here and there in the once-fashionable center of Buenos Aires, surviving as street vendors or even by outright begging. Underemployed people of all ages stand all along the Calle Florida, the chic pedestrian street, handing out fliers to earn a few pesos. Bands of cartoneros, sometimes entire families, live by collecting waste cardboard for resale.

Yet despite the new shabbiness, Argentina today is not a defeated place. People are out demonstrating in the streets nearly every day—for an end to impunity for the military criminals who tortured and murdered during the U.S.-supported dictatorships in the ’70s and ’80s, against the rising rate of common crime today, for an increase in the old-age pensions that have been reduced to a pitiful level during the crisis.

The tall buildings that house international banks in downtown Buenos Aires no longer have windows at ground level. They are instead encased in metal armor, as protection against groups of former depositors, armed with hammers, who regularly create a raucous din, still infuriated at losing two-thirds of the value of their savings in the 2001 economic collapse.

Normally, it is hard to organize the unemployed, who are dispersed and dejected. But here in Argentina the movement of the piqueteros (literally, the picketers) has had tremendous success in mobilizing tens of thousands to demand higher social welfare payments and, ultimately, jobs. Piqueteros march through the central business district and blockade highways across the metropolitan area. (Unfortunately, something of a backlash is emerging among those who are regularly inconvenienced by some piquetero direct actions.)

An energized public is probably the center-left President Kirchner’s greatest asset as he negotiates with international financiers. The talks continue, and Argentina will almost certainly reach an agreement with the bondholders in the first few months of 2005.

Alan Cibils, an Argentine economist who lives here but works with the Center for Economic and Policy Research in Washington, estimates bondholders will in the end receive about 50 percent of the value of their original investment. He says President Kirchner has politely reminded American officials that holders of Enron bonds only got back 14 cents on the dollar after that corrupt enterprise defaulted.

But Cibils is worried that even after a satisfactory agreement with the bondholders Argentina will remain vulnerable. “The public debt will still be roughly $130 billion,” he says. “That is between 90 and 100 percent of gross domestic product—still a potentially unstable level of debt.”

Cibils, like Argentinians generally, has especially harsh words for the IMF, which is very publicly pressuring the government to come to terms with the bondholders. He points out that the IMF, which is supposed to work as an “objective arbitrator,” is actually largely responsible for the awful economic advice and some of the bad loans that contributed greatly to the crisis in the first place.

Back in the ’90s, Argentina was regarded as a model student of the IMF and praised with sickening regularity in The Economist and the rest of the global press, even though unemployment has been in double digits since 1997. After the 2001 collapse, the mainstream globalizers tried to back off, hypocritically blaming Argentine governments.

Now, without IMF advice, Argentina is in fact steadily recovering. Growth is estimated at 8 percent this year, and the government is actually running a budget surplus. But now the IMF wants Argentina to use that surplus and give priority to international bondholders over its own citizens, some of whom are desparately hungry.

In August, the IMF managing director, Rodrigo Rato, invited himself to Argentina and told President Kirchner, “At the IMF, we have a problem called Argentina.” Kirchner answered, “I have a problem called 15 million poor people.”

Argentina’s stagnation over the past 50 years has no single cause. But one major factor has been agricultural protectionism in the West. Europe, and to a lesser extent the United States, have kept Argentina’s chief exports, beef and grain—a clear violation of “free trade” that the IMF has not been particularly noisy about.

Alan Cibils thinks Argentina has nothing to lose by breaking with the IMF and continuing to manage its own recovery. But no country has ever defaulted to the Fund, and Cibils realizes Argentina would be completely on its own, with no real support from Brazil, Mexico or other Third World nations. He expects the government to give in to the Fund in the end.

Argentina’s isolation is a sad sign of the decline in the international anti-globalization movement that followed 9/11. Once, the IMF’s terribly unfair policy would have gotten world attention, and been attacked in noisy demonstrations elsewhere. But no longer.

So far, Argentina’s crisis has not prompted calls for a return to dictatorship; democracy is proving remarkably resilient. But for how long can any country endure mass unemployment and continued decline without the eventual danger of murderous extremism? Meanwhile, 75-year-old Luis Bianchi continues to work 12-hour days, and considers himself lucky that he has a job.

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• Reader Comments

  I think this is the sort of thing that helps election chances for left-leaning leaders.  In the worst-case scenario (for the U.S.) it probably leads to talk of socialism or some such.  That’s when the U.S. gets out the big guns and supports a nice military dictatorship which is friendly to the west.

  Posted by Honking it on Dec 14, 2004 at 5:22 PM

  As an Argentine citizen I would like to clarify something. Argentina’s foreign debt started during the military regime 1976/83 and great part of the loans were granted not to the country but to businessmen who profited from being friends of the regime. In 1983 the military decided they had done their dirty job of disappearing all those who opposed them and just before leaving they nationalized those debts.
  This same measure was taken in most small countries and it is no wonder we find ourselves indebted. All those loans were taken out of the country and deposited abroad by members of the government and their so-called businessmen. Right now, there are 130.000 million dollars in secret accounts in Switzerland, and other fiscal paradises.
  It is obvious the IMF and foreign banks know who they lent most of the money to but it is never spoken about and it is pretty obvious that the nationalization of the debt was imposed by them, as a means of making sure they would one way or the other be able to get their pound of flesh.
  This is perhaps the best-kept secret in Argentina, most people don’t even know about this deal but I give you my word it was done that way and I wouldn’t mind being called as a witness to prove it.

  Posted by Maria Luisa Etchart on Dec 14, 2004 at 11:32 PM

  The planning behind this expansion of poverty in Argentina is no surprise. I lived 2 years in S. Africa where the IMF and World Bank had been courting the Mbeki gov’t for years with golden promises.  What actually happened was more shanty towns ("townships") and fewer REAL work for “black” and “colored people” (yes, they do differentiate) after these institutions had interfered with the SA economy.  Soweto, the origin point of the ANC is now so under seige by young men who have tv’s at home which lead them to want things they cannot afford so they go out and steal.  There is no democratic movement of any kind now.
  Argentina and many other “poor” countries have a chance to resist by just giving the bond holders exactly what the middle income folks who invested innocently in Enron got.

  Indeed, if the IMF and World Bank had any conscience at all the debt would be “absorbed” in all the nations that have been coerced into signing bond agreements.  SA has been paying its bond debts slowly but has long been considered a “developed” country.  All this is a perfect example of how these institutions are specifically aimed at breaking the economies of poor nations, those mostly being those that do no make or buy military hardware.  SA does not need to.  Over the last 3 years,  of Kalishnikov type weapons sold on earth have come from SA. 

  Those of us left who can see clearly what is going on must find some way to undermine the IMF and World Bank so that Luis B. and others like him can continue to live in peace with security.  The monied classes have no shame or conscience.  Only we who _may_ have can do something about this.....

  Posted by daigu on Dec 14, 2004 at 11:41 PM

  As an Argentinian I’d like to point out something. Whatever it may be said about the military regime, at least there was no misery as there is now. I’d never thought I’d say it, bring back the army.

  Posted by Manolo on Dec 15, 2004 at 12:54 PM

  In response to Manolo: you bring up a subject that I’ve been discussing often recently - order over freedom. Many may have seen the Ben Franklin quote re: those willing to trade freedom for order deserve neither (paraphrased), but pithy comments aside, is it worth it?  To starve freely or eat in fear?  Tough choice. 
  In the particular case of Argentina, they are under a larger global economic order, hence not free, nor locally organized to meet the needs of all.  Perhaps one should consider longer-term goals -like community sustainability working in global networks - than the quick fix of fascism.

  Posted by rocco on Dec 16, 2004 at 10:27 AM

• extended discussion >>>Continued...

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