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Jeffrey Simpson

Argentina’s new government jumps into emergency mode Add to ...

The new Argentine government recently declared two states of emergency. The first was a normal response to severe flooding in the north of the country that has left 20,000 people homeless. The second, however, was a shocker – a typically Argentine shocker.

The government declared a “national statistical emergency.” It instructed the agency responsible for collecting and publishing statistics to stop. No longer – at least until the agency is overhauled – will Argentines have information about gross domestic product, inflation, poverty and other indicators.

Imagine that happening in Canada, or just about anywhere else: A government closes the country’s statistical agency because its numbers cannot be relied upon. So manipulated were those numbers by the previous government of Peronista president Cristina Fernandez de Kirchner that the International Monetary Fund refused to accept them.

Buenos Aires cab drivers and hotel clerks used to laugh when asked about the published inflation rate. The agency would report it to be about 10 per cent; the people would say more like 25 per cent.

Now, new President Mauricio Macri, elected narrowly over the Kirchner party candidate, says no more lying and deception. The statistical agency will open when its numbers can be believed.

After the Second World War, Argentina had a per capita income about that of Canada and Australia. Since then, Canada and Australia have leaped far ahead of Argentina by any conceivable measure. Argentina is a member of the Group of 20 because Latin America had two obvious candidates, Mexico and Brazil, and demanded a third.

Any country with an official exchange rate and an unofficial one is a poorly run country. So it is in Argentina, with an official rate and a “blue rate” to change U.S. dollars. The “blue rate,” available in shops and hotels, is technically illegal but widely used.

Argentines often don’t trust banks. They’ve had rampant inflation in the past, and bank failures. Anyone with foreign currency, preferably U.S. dollars, puts them somewhere other than banks, because they fear exchange controls or some kind of confiscation. Buy an apartment in Buenos Aires, and the seller might demand payment of tens of thousands of dollars in cash.

Argentina has been so badly governed for so long that lousy governance seems to lie at the heart of the country’s repeated failures. Or maybe there are deeper problems than economic management.

Some years ago, the Argentine ambassador to Canada was asked at lunch (off the record, of course): If you had three pieces of advice for your country, what would they be?

He replied: First, we have to tell the truth; second, we have to respect the law; third, we have to look at our past as it is, and not blame foreigners. These are existential challenges, not policy ones.

Mr. Macri won only by a narrow margin because the Peronist party continues to dominate the sprawling working-class suburbs around Buenos Aires. A wealthy business person and former mayor of the capital, he immediately devalued the peso, thereby narrowing the difference between the official and unofficial exchange rate. The devaluation will help exports, especially agricultural ones that the previous government taxed. Now, he has shut down the statistical agency’s reporting until it tells the truth.

Imagine putting an export tax on agricultural products when your country has comparative advantages. Why? To distribute the revenues for social programs.

Imagine being shut out of international lending, which is what happened to Argentina under the previous government, except for deals with China.

Imagine trying policies of import substitution that have manifestly failed everywhere.

Argentina is in many respects a lovely country. It has a vibrant cultural life, with great writers, movie producers (two Argentine films have recently been nominated for Oscars, and one of them – El Secreto de Sus Ojos – won), dancers (tango), journalists, poets. Its athletes are superb. It welcomed many immigrants back when times were better, and boasts a sizable Jewish community in Buenos Aires.

Instead, rather than being like Canada or Australia, Argentina has been in decline for a very long time, which is a pity for itself and for the South American continent. Maybe the new government can begin turning things in the right direction.

U.S. President Barack Obama apparently wants to visit Argentina now that it has a new president. The new Canadian government should reach out, too.

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