January 11th, 2014
12:00 AM ET

Is Argentina trying out the 5-point economy wrecking plan?

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By Global Public Square staff

We were struck by a strange proposal this week. A top Argentine leader says his country should move the national capital from Buenos Aires in the east, facing the Atlantic, to a new city up in the north, closer to the Pacific. This would be an immense change – akin to Brazil moving the capital to Brasilia. It would be a shame to see Buenos Aires abandoned. But the idea that Argentina needs some shaking up is exactly right.

A few weeks ago, we ran a report titled “How To Ruin Your Economy.” In five easy steps, it showed how a country could turn itself into a basket case by bad decisions. The segment was about Venezuela…but Argentina is a worthy runner-up.

It starts out much stronger than Venezuela. Remember, Argentina is part of the G-20, the group of 20 big economies. The average Argentine earns more than the average Indian and Chinese combined. But all these facts mask a troubling trend.

Let’s see how it fared on our five-point test.

First, attacking big business. The Argentine government began 2014 by forcing the country's supermarkets to fix prices for 200 products. So basically, the price of milk or flour stays the same for the consumer, even if demand goes up, inflation rises, or if the supplier has to pay more for it. It defies basic economics.

Step two – The official statistics bureau says prices rise by about 10 percent annually. But that’s a total fabrication. In reality, inflation in Argentina runs around 25 percent a year. A basket of goods that cost $100 in January would cost $125 in December. Argentina's blatant fudging of official data has gotten so bad that the International Monetary Fund publicly warned Buenos Aires to start telling the truth – or face expulsion.

Now, what does hyperinflation usually do? It hurts your currency. And that's step three. Argentines have been rushing to buy U.S. dollars as a safer currency to park their money. In response, the government announced limits on the number of dollars you can buy. The result? A rampant black market. While one dollar officially buys you 6.6 Argentine pesos, you can actually get almost double that rate on the street: about 10.8 pesos. The effect is a corrupt economy, suffering businesses, and a loss of foreign investment.

Argentina is ticking off a fourth box from the Venezuelan playbook as well: subsidies. According to Merco Press, a regional news agency, Argentina's total bill on subsidies like energy for the first half of 2013 rose by 62 percent from the previous year. This isn't the only form of government support. According to the World Bank, Argentina is the one of the world's most protectionist countries – meaning that it imposes the most restrictions on global trade, shielding its favored sectors.

Now that brings us to our final category: becoming a dictatorship. Argentina, is of course, a democracy. But President Cristina Fernández de Kirchner has displayed worrying symptoms. Between her and her late husband, the Kirchners have now ruled Argentina for a decade. In recent months, Cristina Fernández has clamped down on the media, floated rumors of amending the constitution to run for a third term. She's building a cult of personality, fashioning herself after Evita, the populist widow of the former president Peron – made famous on stage and screen.

Argentina's attempt to mirror a failed state like Venezuela tells a larger story. There is a great map of Latin America from an article in the Wall Street Journal this week. On the left, in green, you have countries that are facing the Pacific. Mexico, Peru, Chile, and Colombia are among the countries opening up their economies to great success. On the right, in red, you see the opposite. Countries that face the Atlantic – Brazil, Argentina, Venezuela – are closing their economies, and resorting to populism. The countries in green are projected to grow nearly twice as fast in 2014 as the countries in red.

Perhaps changing Argentina's capital to be closer to the countries in green, closer to the Pacific, is not such a bad idea after all.


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soundoff (75 Responses)
  1. Lucia

    Why is the CNN even talking about my country? Ewww get out of here

    January 22, 2014 at 7:08 pm | Reply
    • Goirilón

      Shaddap you k-hippie

      January 24, 2014 at 5:52 pm | Reply
    • Mariano

      You smart genius....
      Well, that's cause we are IN THE NEWS everywhere? Cause' the government is doing the WORST they can to screw us all?
      Don't be stupid. The world talk about us because we are a disaster, and we are the new Venezuela or Cube.
      You smart genius...

      January 26, 2014 at 3:55 pm | Reply
    • Juan Ernesto

      K DETECTED... DANGER

      January 30, 2014 at 8:35 pm | Reply
  2. A correr

    Porque nuestro mugroso pais esta gobernado por ladrones , corruptos sin verguenza. Acá te esconden la mitad de la verdad, por lo menos CNN muestra la verdadera cara de este fin de mundo

    January 23, 2014 at 3:11 pm | Reply
  3. Andres

    Nuestro país no es mugroso, es una maravilla, tenemos que estar orgullosos, pero tenemos que cambiar todos, los ladrones y corruptos son argentinos como todos, si cambiamos podemos vivir todos muy bien, somos privilegiados pero no lo estamos aprovechando

    January 24, 2014 at 9:40 am | Reply
  4. Javier

    I could agree with some of the comments, but Dictatorship? You are kidding me. Who feeds you the words, Fareed?

    January 25, 2014 at 3:18 pm | Reply
  5. Janus

    As I know the corruption is the topmost problem there. Also the subsidized people for been vegetables is a huge problem.

    February 3, 2014 at 7:00 pm | Reply
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