Argentina is still doomed.
If you don’t know Argentine politics well, I’ll give you a quick history: the country has vast natural resource wealth and was once one of the richest in the world. It has been serially run by a group of incompetents ever since the Perons first came to power after World War II. After years of military dictatorship, several revolutions, and a crippling financial crisis, Argentina has never regained its status as a stable, developed nation.
The current president of Argentina is Cristina Fernandez Kirchner, wife of her predecessor Nestor Kirchner. The couple has been in power since 2003 and has been extraordinarily effective at consolidating power at the federal executive level. They are among the most anti-market leaders in the world whose policies have continued to waste and squander Argentina’s natural wealth.
This past weekend, Argentines took to the polls (which, by the way, is cumpulsory for Argentine elections). Similar to the US mid-term elections in 1994 and 2006, the people grew tired of the ruling party and cast them out. Cristina’s party was soundly defeated– even her husband, a former president, lost his bid for a congressional seat.
While Argentines clearly voiced their dissatisfcation, nothing will change.
The problem with Argentina is not the Kirchners, or even the long history of criminals who ran the country before them. The problem with Argentina is Argentines.
I have spent a great deal of time there and agree wholeheartedly with Governor Mark Sanford– the women are beautiful and it is full of natural splendor… great place to visit. But I’m worried about the future of Argentina, so with few exceptions, I don’t think it is a great place to live permanently– especially considering the nearby alternatives that I will be discussing in future letters.
While there are certainly plenty of individual exceptions, Argentines as a collective are fatalistic and inefficient. More importantly, though, they are unwilling to take personal responsibility for problems and blame the government for negative outcomes. This is perhaps human nature but is more acute in Argentina, and in Buenos Aires in particular.
Argentines have revolution flowing in their blood; they are intolerant of their politicians and in years past installed a new leader every other Tuesday. They think it nothing to take to the streets and demand resignation, revolution, or just plain ole’ handouts (real change is spare change, after all)… and yet each president was more incompetent than the previous.
Sure, the Argentine government is terrible– but it is the great scapegoat of the Argentine people; rather than take personal responsibility to change their own behavior and improve their own lot, Argentines as a culture will collectively bemoan government policy. Naturally, the situation never improves because the people never look inward.
What makes a country great, wealthy, and competitive is not related to its government, but to its people. Despite its communist, centralized government, China prospers because its people are industrious and thrifty. They work hard and save their money. Argentines don’t come to work when it’s raining outside.
I’m convinced that Argentina is going to experience another revolution, and this will affect mostly Buenos Aires province. Their economy will likely continue to deteriorate, and I doubt Cristina has the capacity to survive. Unlike Honduras where the present coup is political in nature, Argentina’s will be economic and likely result in substantial instability in Buenos Aires… remember, these are the people who set the trains on fire last year because they weren’t running on time.
Bottom line, regardless of a change in political parties, I would not invest in Buenos Aires at this time; Argentine bonds have surged in recent days, and I consider this to be ignorant optimism and worthy of a short position.
I’d like to find out from readers who have been to Argentina– what are your thoughts on the government and future instability? Add your comments.