First Argentina, Now Russia: China Rescues Drowning Currencies

China appears to be taking the task of acceding to hegemonic, or at least semi-hegemonic, economic status quite seriously.

In July 2014, Argentina reached an agreement with China to request up to US $11 billion in Chinese yuan, swapped for Argentine pesos, over a three year period. The first tranche of the equivalent of US $814 million was received by Argentina’s Central Bank on 30 October 2014. The second tranche of the equivalent of US $500 million hit the bank on 17 November 2014. Each swap must be swapped back within a 12 month period.

This swap helped Argentina out because it eased the pressure on the peso by making it worth relatively more in foreign currency terms. Come again?

While all eyes are on the ARS/USD exchange rate, in reality that rate is only representative of the ARS/REST OF WORLD exchange rate. By swapping yuan with China, Argentina has more yuan and fewer pesos, and can exchange the yuan for dollars or euros on international markets, thus increasing the value of the peso vis-à-vis the rest of the currencies in the world, including the US dollar.

Now two Chinese ministers, Foreign Minister Wang Yi and Commerce Minister Gao Hucheng, have offered the same support to Russia, whose ruble is having a pretty lousy Christmas this year due to plummeting gas prices and biting sanctions in response to that whole Ukraine/war thing. Sad face.

While Chinese support doesn’t fix the main problems in either country, namely capital outflow unmatched by inward investment, poor access to global markets due to sanctions or the default, and now plunging oil prices, the intervention caused both the peso and the ruble to rebound.

In both cases, China has elected to exchange its relatively valuable currency for one that is remarkably unstable and likely to lose value. For each tranche swapped, it will have to hold the pesos or rubles for up to one year before swapping it back for yuan. And China is taking the risk that in one year possibly Argentina or Russia might not have the purchasing power to buy yuan on world markets in the event of a currency crisis. So why would China take these risks in countries where other lenders or investors have shied away?

Resources. And consumer bases.

And who doesn't need a pink dog wearing a hat? (image/Michael Wolf)

And who doesn’t need a pink dog wearing a hat? (image/Michael Wolf)

By swapping yuan for rubles or pesos, China is putting yuan in the hands of two countries with significant consumer bases. And what are yuan used for besides propping up flailing currencies? Buying Chinese crap!

Argentina and Russia are both resource exporters. Argentina’s economy pretty much hinges on exporting agricultural products, and also possesses oil and gas, precious and base metals, and bulk commodities. Russia’s economy is oil. China can use the swapped pesos and rubles to buy these valuable and needed commodities from its trading partners.

At the end of the 12 month tenor of each swapped tranche, Argentina and Russia will have to return the yuan and receive pesos and rubles respectively in return. And this will bring back the same dilemma the countries face today – how to access valuable hard foreign currency. Assuming that the peso and ruble are currently not victims of short term speculative attacks but rather that the rapid depreciation is symptomatic of unsustainable policies and practices, this swap is doing nothing more than buying time.

At the end of the swap, Argentina and Russia will be paying for borrowed time with their nations’ resources.

China is taking yet another a strategic step to embed the yuan more firmly in international trade and in doing so dislodge the US dollar from its uncontested position as the global transaction and reserve currency.

So what should we do? Freak out and panic and buy gold while learning Chinese and digging a bomb shelter to hide the gold in? No.

Money is, at the end of the day, somewhere between a tool and a philosophical idea. At one end of the spectrum it allows goods and services to change hands, and at the other it dominates and destroys lives.

So just take note, and be aware that the tides of global monetary power are shifting and China is staking its claim. But we’ll all probably be ok. Apocalypse later. Possibly open an account somewhere you can hold some yuan if you’re concerned.

And order Chinese takeaway for dinner.


I’m currently writing primarily at, where you can read more Bianca and more on Argentina.

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The Sting of Betrayal: George Soros and Cristina Kirchner

...and I beliebed him (image/wikipedia)

…and I beliebed him (image/wikipedia)

You know that soul-shattering moment when reality hits? Your stomach drops to the floor and everything goes numb. Time seems to slow down for a few painful, aching moments while your brain struggles to absorb the fact that he’s secretly married, likes to use fake names and sleep with strangers as a hobby, or is in reality much, much younger than he said he was.

The thing about a good gut-twisting, life-altering moment  of shock and betrayal is that it has to come from somewhere you were least expecting. About the only quality I share with my fellow “millennials” is an over-healthy dose of apathy. I’ve learned to exorcise my demons over late night bitter cocktails paired with expensive cigarettes, and mask my humanity with glib humor about the fact that I actually quite prefer to cry a little bit, it gives my mascara that smudged, smokey look that all the gals in the magazines have these days.

It’s no secret that sad as it may be, I see an economic crisis (quite likely of the currency/debt variety) as unavoidable for mi querida Argentina. Is it technically possible to avoid? Yes. Is it possible to politically survive the repercussions of putting in place the necessary steps to do so? Bianca thinks no.

And so, alas, Argentina finds itself in an economic game of hot potato. Except in this case, when the music stops the consequences will be insecurity, instability, destroyed purchasing power, aggravated poverty, soaring inflation, and other fun outcomes that will be born principally on the backs of the members of lower socioeconomic classes that supported Kirchnerism based on unsustainable socialist measures in the first place. Irony, right?

As a student of economics, I focused on economic crises. I studied their roots, debated their origins, picked apart and created regressions of their consequences, all with the idealistic shiny naive idea that by understanding crises I could someday participate in helping humanity by preventing them, or at least mitigating their brutal effects. Life to date has taught me that crises are not caused by economics, their seeds are sown by politicians whose vote-maximizing behavior incentivizes medium-term, hot potato-style decision making.

And if you ever choose to study the modern history of economic crises, you will learn that in this tale George Soros is not so much a guest appearance, he is practically Evita’s Che Guevara (in the musical, not real life). This ever-present, vocal and proud force, bolding acting, taking strokes that in the short term brutally crush developing economic currencies and systems with the guiding principal that he was expediting market corrections and bringing to the fore economic dislocations that, if left to fester, would produce far more detrimental effects than the crisis and forced rapid correction. George Soros didn’t invent shorting and speculatively attacking weak currencies, but he certainly made it an art.

"Green Dress Lady" from Economic Hit Man is my dream career (image/amazon)

“Green Dress Lady” from Economic Hit Man is my dream career (image/amazon)

To understand how rich indeed is Mr. Soro’s relationship with economic crises, lake a look at some of the greatest hits from the 90s:

  • 1992:  George Soros breaks the Bank of England by short selling US $10 billion worth of GBP (pounds)
  • May 1997: Soros’s Quantum Fund takes short positions in Thai baht, betting the dollar peg was unsustainable
  • July 1997:  George Soros attempts to “double play” the Malaysian economy by simultaneously shorting the pressured ringitt and the Malaysian Stock Market.
  • October 1997:  Soros’s Quantum Fund borrows in Hong Kong dollars and shorts the Heng Seng index futures, positioning itself to gain if the HK dollar depreciated and putting pressure on the market to make this happen

In addition to these noteworthy showstoppers, Soros is also suspected of having a hand in the 1997 collapses of the Indonesian rupiah, the Filipino peso, the South Korean won, and the Singapore dollar.

In his own book, Open Society: Reforming Global Capitalism (HIS OWN BOOK!!!), Soros opines that:

“Of course, this exposes them [hedge funds] to criticism when the change is undesirable, but if a trend is unsustainable it is usually better if its reversed sooner rather than later.”

While I don’t completely believe in the altruism behind Soros’s statement that hedge funds scour the globe purging unsustainable market inefficiencies, preventing long term woes for the price of short term suffering, I did at least believe that he believed it.

He even went back to South Korea in 1998 after thrashing the won to meet with the President-elect and pledge US $1 billion in investment, contingent on economic reorganization including strengthening banks and letting foreigners buy controlling stakes in South Korean companies. Chopsticks and carrots, my friends.

So you can imagine my utter shock on Monday  when it was announced that Cristina Fernandez de Kirchner, one of the strongest candidates for culprit numero uno of putting in place unsustainable trends that should be reversed sooner rather than later, was to meet with George Soros in New York. Cristina is in New York for the UN meeting to seek support in resolving the technical default brought about by the infamous “vulture” funds.

YPF and pro-Kirchner propaganda were the only "advertisements" on the state monopolized World Cup airings. Seriously.

YPF and pro-Kirchner propaganda were the only “advertisements” on the state monopoly World Cup airings. Seriously.

Soros himself is exposed to Argentina, and has skin in the game. He holds restructured bonds, as well as a 3.5% stake in YPF, Argentina’s state-controlled energy company. Soros’s hedge fund Quantum Partners is one of four creditors that sued Bank of New York Mellon in London last month for obeying US Judge Griesa’s stay forbidding that they process the payment from Argentina to holders of restructured debt. In other words, as a holder of said restructured debt, Quantum Partners would quite like to get paid.

According to Soros spokesman Michael Vachon, Kirchner and Soros “discussed a range of topics, including the prospects for Argentina’s economy, recent positive developments in Argentina’s energy and hydrocarbons sector, and drug policy reform in Latin America”.

It is fairly clear  what Cristina gets out of the association. Support from an evil hedge fund, who conveniently happens to be on her side in this matter, in her crusade against evil vulture-type hedge funds who aren’t, as well the ability to continue citing Soros’s decision to invest in Argentina as a signal of investor confidence in the economy.

What couldn’t be less clear to me is how in the world George Soros, the same George Soros who has bent emerging market governments backwards forcing them to enact structural reforms, promote transparency, and put in place investor-friendly tax and legal structures, could sit next to Cristina and associate his face and reputation with the idea that investing in Argentina under Cristina’s Kirchinerism is a savvy idea.

Argentina today does present an investment opportunity. The infrastructure, the educated workforce, and the well-trained experts and professionals are all here. Taxes are high. I would argue too high but I would entertain an argument with one who defended them as necessary to have the infrastructure. Red tape is outlandish, restrictions to foreign ownership are pervasive and opaque, and corruption exists at high levels. Yet this is par for the course for doing business in emerging markets. I’d like it if heavy hitters like Mr. Soros were to throw their weight around a bit in favor of making my life a bit easier by improving transparency, but again, this is part of life south of the equator.

What Argentina presents in spades is country risk, currency risk, and political risk, and these need to change. The Argentine peso isn’t just weak, it’s a lie. There is talk of the government devaluing to 10 pesos to the dollar, when today the Argentine peso is trading on black markets at ARS $15.45 to the dollar, and the implied value of the peso relative to the dollar based on stocks and bonds traded in both currencies is ARS $14.53 to the dollar. In case you didn’t study at the London School of Economics like Mr. Soros did, both of those numbers are already bigger than 10. Although he did earn his degree in philosophy, so it’s possible that I’ve missed something transcendental of importance.

Argentina’s reserves reportedly sit between US $20 billion and US $30 billion, and they’re about to take a mega-hit from falling soy prices. Soros’s estimated net worth is roughly the same, a cool US $20 billion. And while it would fulfill a college girl’s dream to see Mr. Soros swoop down on the struggling peso and smash it to bits in the name of restoring order and economic rectitude, I get it, he’s older now. But he could at least make a public statement saying that multiple currencies, nearly complete restriction of imports, and rent-seeking export licensing schemes are bad, and abolishing them would spur investment and thus economic growth. He could open his mouth and say how inflation hurts consumers, businesses, and basically everyone with exposure to Argentina.

Mr. Soros owns property and has an equity stake in Argentina, true, and may even see an ideological difference between speculatively attacking weak currencies for profit (good evil hedge funds) and buying defaulted debt and suing for face value (bad vulture evil hedge funds). But evil hedge funds and power players like Soros can serve the purpose of forcing governments and the politicians who make them up to act in ways that transcend a scramble for votes to win a popularity contest every few years.

it's that big of a deal.

It’s that big of a deal.

That’s right, we’re back to politics. In the least popular article I ever wrote, I asked how democracies in South America can tackle socially-unpopular but I argue necessary steps like abolishing unsustainable subsidies that slowly gnaw down reserves until the inevitable crises point, leaving behind an expensive mess in their wake. Soros can do what he wants, but I think his approach to Argentina is off the mark and in fact tarnishes his laurels.

Intelligent little girls all over the world are likely developing George Soros issues over this. He has acted like a politician and should not be proud.

I’m working on running a digital media company called The Bubble News Inc. Do please check out our website for more in-depth coverage of Argentina.

At The Bubble, we send out a weekly newsletter covering the top stories in Argentina. We call that newsletter The Half Calf, because you never saw it coming. I also encourage you to sign up to start your week with a smirk and an understanding of Argentina.

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Welcome to The Bubble

Hello Readers

You may be wondering why I’ve apparently gone media-silent for such a long time.  Well, the reality is that I have kept busy being media noisy and launched a full-blown news site with my number one partner in crime Adrian Bono.

Yup.  Its happening.

Yup. Its happening.





So dear readers, please visit for your daily fix of Argentine news, lovingly dipped in snark and delivered with a dab of sarcasm.

For Bianca, please visit my column Not Paris on the bubble at

And to read a completely true biography on me, please check out 

and click on your’s truly, Bianca Fernet.

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Is that smoke? Or is the Pope making an asado because he's Argentine and that's what they do? Oh, jokes.

Is that smoke? Or is the Pope making an asado because he’s Argentine and that’s what they do? Oh, jokes.

At special request from my father to “write a notparis about the Pope”, I have written a semi-obligatory “New Argentine Pope” article.  So here is a self-confessed non-political scientist’s assessment of who exactly Pope Francis  (née Jorge Mario Bergoglio) is and what he means for Argentina’s economic demise future.

Francis is the first Jesuit ever and first non-European pope in useful history  (for almost 1300 years, more here you little detail monkeys).

pope takes subte, fame ensues.

pope takes subte, fame ensues.

He appears to take his vows of poverty seriously by living in an apartment (rather than a palace), taking the bus (rather than a limo), and doing keen things like washing the feet of AIDS patients and forcing the priests of Buenos Aires to baptize the bastard babies of unwed mothers.


He is quite the social conservative, strongly opposing birth control, abortion, and gay marriage and adoption.   Shock, right?

I couldn't help it.  I really couldn't.  I realize this joke just earned me a few decades in purgatory.

I couldn’t help it. I really couldn’t. I realize this joke just earned me a few decades in purgatory.

As he was born in 1936, odds are he will not be with us for long, so I’m going to cut to why this matters in Argentina.  Namely, I’m going to dig into his relationship with President Cristina Kirchner and accusations of ties to the baby-stealing leftist-kidnapping dictatorship of the 1970s.  (hey at least he probably baptized them first.)

In seriousness, read this now.  Kidnapping, torture, baby theft, and state terrorism are things we typically associate with generations far past, yet stained Argentina’s history from the 1970s into the early 80s.

Francis’s friction with the Kirchners has its roots in the battle for perception as champion of the poor.   In 2004, he spoke out against the exhibition and strident announcements characterizing Argentine public life, a criticism of the Kirchners’ chatty but arguably ineffectual approach to curbing poverty.   In 2005, the Kirchners dissolved the Obispado Castrense, the church’s organization that provided services to the Armed Forces, following a statement by the head that supporters of abortion should be tied to rocks and tossed to sea.  Not the most tactful analogy as victims of the dictatorship were actually drugged and pushed from helicopters into the sea.

Happier times - The Kirchners attend the Te Deum mass in 2006 with then-Cardinal Bergoglio

Happier times – The Kirchners attend the Te Deum mass with then-Cardinal Bergoglio

Since 2006, the Kirchners have snubbed Francis by attending the annual May 25 Te Deum Revolution Day Catholic Ceremony at any church that is not the Metropolitan Cathedral, where he presided.

In 2005, Horacio Verbitsky named him in his book “The Silence” as responsible for the kidnapping of two leftist Jesuit priests by removing church protection from them.  Bergoglio was refused to testify in 2006, and in 2010 he testified, defending his behavior and claiming to have intervened and helped in multiple cases of protection (more here).

My conclusion on the alleged ties between Francis and the human rights violations is that they cannot be substantiated.  He was a high-ranking member of the Catholic Church in Argentina during the dictatorship, and the Church was inarguably complicit in some of the most horrific elements of that era.   He clearly did not publicly rebuke the government, as that would have landed him in a cell in a secret torture prison.  It seems his role was passive at best, thus the media storm tying him to the kidnapped priests is more of an attempt to discredit the man and distract from his solid and non-hypocritical stance on poverty.

On the less serious but more fun to quote side, Cristina and Francis have butted heads on the following issues: [note – these quotes are taken shamelessly out of context to maximize humor]

Gay Marriage

Francis: “its an attempt to destroy God’s plan” … “a machination of the Father of Lies that seeks to confuse and deceive the children of God”

Adoption by gay couples:

Francis: “At stake are the lives of many children who will be discriminated against in advance, and deprived of their human development…” “a discrimination against children”

Cristina:  It’s worrisome to hear phrases such as ‘war of God’ and ‘projects of the devil,’ which are things that send us back to medieval times and the Inquisition.”

why do machinations of the father of lies always have the best parades?

why do machinations of the father of lies always have the best parades?

Putting aside the emotionally stirring accusations and quote-worthy morality banter, the real issue is that the pope challenges the Kirchners’ (and more broadly leftist Latin American leaders’) claims to fighting for the rights of the poor.

Francis is a threat to Cristina Kirchner’s hold on the hearts and minds of the people because if you can manage to put aside his gay-bashing and anti-contraception stance, his lifestyle holds a very damning mirror up to a woman who rarely to never practices what she preaches.   He doesn’t need photo-ops or massive throngs of chanting soccer fans to demonstrate to the world that his mission in life is to fight extreme poverty.

When Argentina defaulted in 2001, the church in Argentina supported debt restructuring that privileged social programs above tax repayment, arguing that “social exclusion, a growing gap between rich and poor, insecurity, corruption, social and family violence, serious deficiencies in the educational system and in public health, the negative consequences of globalization, and the tyranny of the markets” were the true problems in the Argentinean economy.

he drinks mate in front of graffiti, just like me!

he drinks mate in front of graffiti, just like me!

Francis was quoted saying “We live, apparently, in the most unequal part of the world, which has grown the most yet reduced misery the least.  The unjust distribution of goods persists, creating a situation of social sin that cries out to Heaven and limits the possibilities of a fuller life for so many of our brothers”

As an apathetic social liberal who was raised catholic, the redeeming fact that the Catholic Church is the largest giver of aid worldwide, as well as the most efficient (highest fraction of each dollar ends up in the hands of needy) giver is frequently thrown in my face.

And if Francis develops a reputation as the Latin American champion of global efforts to reduce inequality and poverty, that threatens to severely cripple Kirchner’s hold on power, which rests pretty heavily on

  • Championing the poor
  • Championing human rights
  • Championing social liberalism

Knock off item one on that list and he opens the possibility of a competitor emerging that can capitalize on his popularity with Kirchner’s base.

The current administration gets away with running arguably the most slap-dash economy in the G20.  Seriously – a dual exchange rate and black currency market, quota-based import restrictions, license-based export restrictions, price freezes on groceries – the list goes on and on.  They get away with it on the grounds that these are necessary to achieve social equality and poverty reduction.

a view of posh Puerto Madero from the slightly less sassy villa

a view of posh Puerto Madero from the slightly less sassy villa

The existence of Pope Francis threatens to suggest an alternative.  Very few poor Argentines support Cristina based on her stance on gay marriage or contraception.

playing nice bores me.

playing nice bores me.

In an act of political pragmatism, both Cristina and Pope Francis have taken strides to bridge this gap.   He invited Cristina as his first official audience as Pope, where they exchanged traditional Argentine gifts.  The Kirchner government has been papering the streets with posters tying Francis to Peronism and aligning themselves where possible with the Pope’s popularity.  Francis’s actions have suggested that he will stay out of the divisive political battle and instead direct energy where possible towards aiding the poor.  The question is whether or not this truce will last.

Or, less accurately, Cristina and Francis disagree on some key issues, but now it benefits neither to carry on feuding so they are both playing nice and business goes on as normal.

And that folks, is Bianca on politics.  You’re welcome, dad.

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Lipstick and Currency Bruises

A few friends returned yesterday from a Uruguayan beach expedition, bringing home confusion surrounding US dollar (USD), the Argentine peso (ARS) vs. the Uruguayan peso (UYU).  Unraveling their tale, I realized this is a story everyone should mull over to understand better the larger effects of a currency black market.

Medio Medios are probably the only fun part of Montevideo.

Upon arrival, my friends withdrew Uruguayan pesos from their US dollar bank accounts via an ATM and received 19 UYU/USD.  Later in the trip, they physically exchanged Argentine Pesos and received only 2 UYU/ARS.   A few medio medios and some mental math later, they realized this implies a rate of about 10.5 ARS/USD.   A few more and they concluded that Uruguay – cheap in dollars, not so much in Argentine pesos.

What’s happening here is massive influx of Argentine pesos into Uruguay, coupled with a bullshit overvalued official exchange rate.  Or, just because the black rate in Argentina is expressed in US dollars or sometimes Euros, doesn’t mean there isn’t a dual rate vís a vís most every other currency in the world.


Sounds like a sexy high-risk international crime, but really just means that when there are two prices for one thing a clever person with adequate transportation can create a little money making loop.

For example – let’s say that in one shop, red lipsticks cost $3, and across the street the same lipstick costs $6.  Bianca, being an economist and connoisseur of red lipsticks, could take $3 and buy a lipstick in shop one and if she could resist the temptation of wearing it, sashay across the street and sell it for $6.  Using the profit, Bianca could then buy two lipsticks at shop one, then sell them for $12, and repeat this process until either she caved and wore the lipstick, or the shops wised up and both moved their prices to a reasonable $4.50.

If prices don’t equalize, Bianca will end up with all the money and shop two with all the lipstick. Poor shop one.

If prices don’t equalize, Bianca will end up with all the money and shop two with all the lipstick. Poor shop one.

The same thing happens in international currency markets, except it’s a web of prices rather than just one to one.  Kind of like lots of colors of lipsticks of varying qualities.  And instead of crossing streets and pocketing lipstick money, international currency traders sit 24 hours a day in front of multiple monitors displaying quickly fluctuating prices, jumping on even the most minor discrepancies to realize quite tidy profits.

Credit: Easy Forex Traders

Success! I’m fat and rich by thirty. Ooo Bianca wants.

And while yes, this seems like a function more or less barren of obvious societal value, these traders keep currency prices equal across countries, which allows people like you to look up official exchange rates on Google and be more or less confident you can travel to a foreign country and exchange your money for that rate.

Back to the Uruguay/Argentina/USA case though, you see the implication of a dazzling array of differing rates.   And nothing begs for a chart quite like a dazzling array:

If you can fill in the ??s do let me know.

So the answer to the question of why in the WORLD do you only get 2 Uruguayan pesos for your Argentine pesos when you’re on vacation in Punta?  If you got the official rate of 3.81, this would create a slightly less beautiful but more lucrative arbitrage loop that would look something like this:

Source: The Financial Times. hahahahaha.

Source: The Financial Times. hahahahaha.

In order to not be bankrupted by Argentina’s dual currency market drama, Uruguay has to throw a wrench somewhere into this cycle.  If they change the pink lipstick (top right), they would stop having a globally traded currency at the expense of trade, international investment, and generally being considered a real country.  They can’t control the red lipstick, so they basically change the purple lipstick to make the equation balance out.

And so my friends, this is why if you plan on financing your Uruguayan summer debauchery in Argentine pesos, you will end up footing quite a hefty bill.

 The solutions?  Use dollars.  Or euros or yen or reais or francs or really any currency that’s not from Argentina, Zimbabwe, Venezuela, or Iran.

OR (and the verdict is still out on this), put your pesos in an Argentine bank account and then pull them out of the ATM in Uruguay.   I will update once I know what that looks like.


Regardless, wear sunscreen.  And invite Bianca, that bitch could use a tan.

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Argentina’s Railroads: Atlas Shrugged vs. Twilight

I was on the bus on my way home last night when I passed this sign at the rail station:


Fighting whom?

Roughly translated, this means fight for the return of the Argentine Railway System and is an argument for the re-nationalization of the Argentine rail system, which was privatized about 20 years ago.  To this day it remains highly subsidized and fraught with quite dangerous problems.

I couldn’t help but be drawn in, as I happen to be currently re-reading Ayn Rand’s sexy ode to free markets and railroads, Atlas Shrugged.  I got to thinking about a conversation that I have had with multiple Argentines about the difference in cultures between the United States and Argentina – namely the Protestant work ethic vs. the Catholic ideal of suffering and salvation.


A depiction of Catholic purgatory or the Subte at rush hour in the summer?

The protestant work ethic emphasizes hard work and frugality as the way to achieve heaven, and is indeed considered synonymous with capitalism, as the term was coined by Max Weber in his 1904 work, The Protestant Ethic and the Spirit of Capitalism.  This ideal is personified by Dagny Taggart, heroine of Ayn Rand’s Atlas Shrugged.  In contrast, Catholic salvation ideology is defined by gaining heaven through suffering and enduring – the tools for salvation come from within.  To stay within the theme of flat female heroines, I think that Twilight’s Bella Swan provides an interesting example of achieving success through endurance of suffering and waiting.


Doesn’t quite pull herself up by her bootstraps

As a preface, I was raised Catholic, I don’t think idealism is very productive, and I fully acknowledge that the majority of railway systems in the world are either highly subsidized by or entirely run by the government.  That being said, the Protestant vs. Catholic culture is an interesting concept to roll around especially when comparing Latin America to the United States.  And I couldn’t resist taking a stab at the railroad nationalization movement in light of my current reading.


Impressive, no?

The above infographic available here describes the premises and goals of the Federación Ferroviaria Argentina, an umbrella organization of railway unions and associations.  Their major complaints are the following deteriorations that have occurred since the 1991 privatization:

▪   Number of employees has fallen from 92 thousand to 15 thousand

▪   Working track has fallen from 35 to 10 thousand kilometers

▪   Annual subsidies have risen from US $305 million annually to US $1520 million annually


Nationalization of a railway? Shudder.

They report that rail service is irregular, inefficient, and dangerous, and that the owners of the routes have used subsidies to get rich at the expense of necessary development.  Sounds a lot like the world faced by Dagny Taggart, Atlas Shrugged’s heroine of capitalism, hell bent on saving her family’s railroad empire in the face of dirty words such as progressivism, socialism, and equalization – a world where subsidization would be equally distasteful.

Here’s where it gets fun.  The FFA states the following goals for nationalizing the railway:

▪   792 new kilometers of metropolitan rail

▪   500 new electric, two story trains that are designed and produced in Argentina

They further blame privatization for Argentina’s lost ability to produce rails and trains domestically.  The final successful outcome of this campaign consists of: employment, economic independence, political sovereignty, and social justice.

Notice anything missing?  Perhaps goals of increased transportation, benefits to commerce and trade, increased economic output?  Even if you consider transportation as a public good, the goal of a railroad is not economic independence, social justice, or even employment.

Which swings back to the larger theme.  Culturally, Argentina has an ideology that promotes fighting, suffering, and endurance to eventually be rewarded, quite a bit like Twilight’s Miss Bella Swan, who is repeatedly rescued and rewarded for her natural talents and attributes after enduring difficulties.  And to those of you who think you’re better than Twilight, you aren’t.  Keep up with modern pop culture, skim that Wikipedia article.


Argentine protests have far more action than Twilight’s “battles”

In all actions, both government-led and in private enterprise, it is crucial to define what is success and strive for it.  In Atlas Shrugged, profit and making money become dirty words in a Dickens-worthy comically overemphasized manner.   Yet even under the “transportation as a public good” premise, the goal of a railroad system should be increased movement of people and goods and the benefits that occur as a result.


Consequences of neglect: December 2010 collision in Buenos Aires killed 50 passengers

State intervention and indeed nationalization are arguable in many cases, but fighting and suffering for a nationalized railroad system seem to considerably miss the mark.

I am in complete agreement that the current private but subsidized model in Argentina is not cutting the mustard, but fighting for subsidization of projects to boost employment and diminish importation seems about as well thought through as one of Bella Swan’s suicide attempts.


Don’t cry for me, Argentina

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On Vultures, Bonds, and Defaults

Vulture funds: Investment funds that bought defaulted Argentine bonds and are suing to recoup their value

Vulture funds: Investment funds that bought defaulted Argentine bonds and are suing to recoup their value

So – now that the dust has for the time being settled from the November/December 2012 drama surrounding the US Court ruling(s) regarding Argentina’s payment on defaulted bonds, I wanted to take a comprehensive look at the issue so that we can all be ready for action come the February appeal.  Feel free to skip sections and comment liberally – this is a complex snaggle, so I’m going to cover some basics, identify key players, and basically bore the pants off of you to lay the groundwork for a titillating February.


Bondage stilettos - like Argentine bonds, not going anywhere very fast

Bondage stilettos – like Argentine bonds, not going anywhere very fast

Bonds are IOUs with legal contracts that enforce payment.  They can be issued by governments (national or local) or companies, and are a way to raise money by borrowing from lenders.  The bond issuer is the seller, borrower, and debtor, whereas the holder of the bond is also called the buyer, lender, or creditor.

The issuer repays the borrower over a fixed period of time via a series of interest payments and then repayment of the principal, or the initial borrow amount, at the end of that time period when the bond matures.  The interest rate reflects the perceived riskiness of the issuer, with US bonds paying a very low interest rate whereas Argentine bonds pay quite a high interest rate.

Writing about bonds - don't worry baby, I've got a license to thrill

Writing about bonds – don’t worry baby, I’ve got a license to thrill

When an investor buys a bond, he can either hang on to it and collect the interest payments and then principal, or he can resell it in the secondary market, meaning resell it on the open market for whatever people are willing to pay.  Bonds are called debt or “fixed income” investments because unless the issuer defaults, an investor will earn the sum of the interest payments and principal over the fixed period of time.

When a country defaults on its debt, it is essentially glorified bankruptcy but without the agreed upon legal steps to follow.  A country that defaults is incapable or unwilling to service their debt, or make scheduled interest and principal repayments to bondholders.  The country must then  undertake some combination of borrowing money on strict terms from an international body like the IMF and attempting to negotiate with bondholders a restructuring (sometimes called a haircut) whereby they pay back a percentage of the money owed.

Emerging economies access international capital markets and investors by issuing debt, or selling bonds, in hard currencies like US dollars and Euros, rather than in their local currency (Argentine pesos, Indonesian rupiahs, Thai baht, etc).  These dollar bonds are issued under US law rather than local law, making the currency and enforcement of payment less risky and thus more attractive to a wider pool of investors.

Bianca on bonds.  For a different kind of bonds please visit Cruel Mrs. Tyrant's Bondage School

Bianca on bonds, so boring it hurts! For a different kind of bonds please visit Cruel Mrs. Tyrant’s Bondage School

The “Reader’s Digest” version of what went down

In 2001, Argentina defaulted on US $95 billion worth of debt in what is still the largest sovereign default in history (I’m not counting you, Greece).*   In 2005 and again in 2010, it offered holders of defaulted bonds the option to swap for restructured bonds that paid 30 cents per dollar, or 30% of the value of the original bonds – the harshest restructuring since World War II.  Between the 2005 and 2010 swaps, holders of 91% of the defaulted debt had participated in the restructuring and accepted the lower payment.

The 2001 default and following riots and poverty are serious and not funny.  Defaults destroy the lives of people with little to no involvement in the financial world.

The 2001 default and following riots and poverty are serious and not funny. Defaults destroy the lives of people with little to no involvement in the financial world.

That created two categories of bondholders:  the 91% who accepted restructured debt and the holdouts, who did not.  And many of the holdouts resold the already defaulted bonds on the secondary market, creating everyone’s favorite category of holdouts:  the vultures, investment funds that bought this defaulted holdout debt and are trying to get back the full value.

Keep in mind – these are US dollar denominated bonds issued by the Republic of Argentina under New York law.

The proud ship Libertad, sads and stuck in Ghana :(  (Photo Credit: Elena Craescu/European Pressphoto Agency)

The proud ship Libertad, sads and stuck in Ghana 😦 (Photo Credit: Elena Craescu/European Pressphoto Agency)

Remember the Libertad, that fun military frigate that was impounded in Ghana from October – December 2012?  It was held because billionaire Paul Singer’s NML Capital, a subsidiary of the hedge fund Elliot Management Corp and vulture fund numero uno, obtained an injunction from a Ghanaian court based on the money owed on the defaulted bonds.  Holdouts have been trying since 2001 to recoup the money owed, but Mr. Singer takes the cake on creativity with his efforts to seize planes, ships, and even money held by the US Federal Reserve.  For more, read this article.

Pari Passu, or throwback to Kindergarten 

On the less Bond film-esque side, NML Capital has been going after Argentina in New York on the grounds that paying holders of restructured debt while not paying holdouts violates the pari passu clause, dictating that all bondholders must be treated equally.  For a detailed analysis, please read this.  On October 26, a US Court of Appeals in New York upheld the ruling that Argentina was indeed in violation of pari passu and was legally obligated to pay holdouts.

Argentina appeals the judgement of Justice Griesa.

Argentina appeals the judgement of Justice Griesa.

But the real kicker was delivered on November 21 by Federal Judge Thomas Griesa, who ruled that Argentina must pay holdouts the full value (principal plus interest) if they were going to make payments on the restructured debt.  Critically, Griesa specified that third parties would be in violation of the law by helping Argentina skirt this ruling, meaning banks and financial institutions.

Essentially Argentina was given the choice to pay US $1.3 billion to holdouts and vultures, or default on its restructured debt.  Conundrum.

On November 27, Fitch downgraded Argentina from a B to CC.

On November 28, a temporary reprieve was granted in the form of a stay on Griesa’s ruling, putting the final decision off until an appeal to be heard on February 27, 2013.  This allowed Argentina to make its December interest payments.

A Hot Mess

The ramifications of the upcoming ruling in February are exceptionally significant to investors, financial institutions, and emerging markets alike.

While the court case is NML Capital vs. Argentina, the court has permitted the additional parties listed below to present arguments in support of Argentina’s appeal.  Each party will be represented by the listed legal heavyweight.

table of lawyers

Whew.  That was boring.  Singer has the right idea, seizing ships in Ghana is way more entertaining.

Let's hope no one loses an ear

Let’s hope no one loses an ear

In addition to this case, third party financial institutions and holders of restructured debt are appealing to New York courts (as opposed to the Federal level) that this issue should be decided in New York rather than the court system it is currently in.

So what is currently brewing is a perfect storm, or veritable orgy of great legal minds arguing a case with the potential to force Argentina into default again and change the financial landscape of New York.

Catch me next week when I’ll sift through the potential outcomes of this  economic stimulus package for the legal industry excellent use of time and money.

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A Class Act.

Yesterday, November 20, 2012, was the highly anticipated #20N nationwide strike organized by ­the labor unions.  #20N came hot on the heels of last week’s #8N, an anti-government cacerolazo organized to protest the Kirchner government’s dollar crackdowns, corruption, and rising insecurity.  More importantly, today Bianca Fernet comes off her self-imposed hiatus to continue providing cheeky commentary to Argentina’s economic happenings.

#8N protests at the obelisco on November 8th

I’m ashamed to admit that a version of this post has been in permanent edit mode since mid-September, and has been extremely difficult to write for two reasons.  It will evoke more emotion and generate more controversy than my typical subject matter, and quite honestly as an American white girl from the suburbs I lack the “street cred” that’s preferred when writers tackle touchy subjects like racial or class divides.

Marines finally disembarking the Argentine Warship Libertad held captive in Ghana after living conditions deteriorated

Since I last wrote, an Argentine naval vessel has been impounded in Ghana by a US investment fund seeking to recoup unpaid payments from 2001, provinces have made bond payments in pesos that should have been dollars, Argentine debt is getting battered in global markets following a US court ruling that Argentina must make payments to investors who refuse to accept restructured payments, Buenos Aires has had rolling power outages and trash strikes, Argentina has been warned by the World Bank that it will be kicked out, and everybody’s favorite rating agencies Moody’s, Fitch, and S&P have downgraded and put on review a variety of provincial and national debt.  Whew.

And how, in the face of such absurdity, is there still vehement support for this government?  To be blunt, there’s a pervasive issue of classism and racism with a dash of fear-mongering that underscores the Argentine political debate and serves to bolster an economic system that borders on ridiculous.

He’s all smiles now, but wait until he weighs in on politics

I like to play my own version of taxicab confessions to take the pulse of the mean streets of Buenos Aires by asking taxi drivers what they think of the government.  This game could also be called “how to get yelled at by strangers no matter the time of day” because regardless of the political affiliation, the delivery is always the same – intense yelling, vilifying the opposition, and wild hand gestures in lieu of holding the steering wheel.

A personal hero of mine who is a pioneer of cheeky journalism took a stab at pro/anti government dichotomy here that inspires this:

Cristina Kirchner: Eve Peron reincarnate, champion of the poor, defender of the weak

Supporters of the Kirchner administration see the government as a heroic force that saved the country from the evil clutches of globalization and capitalism following the economic crisis of 2001, and that works tirelessly to raise the poor up and support the interests of the country as a whole against the interests of a few wealthy elite who would keep the masses in abject poverty to go to Miami and buy lipsticks and TVs.  Oh and that also supported and would bring back the dictatorship that kidnapped babies and disappeared tens of thousands of left-leaning students and thinkers during the Dirty War of the 1970s.

Anti Government poster that circulated via social media! It was so on my MySpace…

Opposition to the government views Cristina Kirchner as the next Hugo Chavez, and Argentina as on the road to becoming Venezuela or Cuba in terms of travel restrictions, initially democratically elected leaders that entrench themselves, bury opposition and rule from a hospital bed with an iron fist, and a generally garbage can-esque economy.  Oh and they see the masses that vote for these leaders as genuine enemies to achieving true economic and social progress.


Heavy, right?  Said the white girl from the suburbs.  I know.

Now – if the government were lifting millions out of poverty, bolstering education, and creating a sustainable country to lead South America into the future, then isn’t that worth fewer Miami trips and imported tweezers?  Potentially, but let’s delve into a little bit of Latin American “keeping up with the Joneses” and see how Argentina stacks up to its neighbors in terms of poverty reduction and income distribution.

Let’s start with the Gini coefficient, which is a measure of income distribution, or how much richer are the rich than the poor.  A Gini value of 0 is perfect equality, whereas 1 is complete inequality where all the wealth is in the hands of one.

The lower the Gini, the more equal the income distribution (Data from The World Bank)

*boing* I dream of GINI

On this count, Argentina has more equal income distribution than its neighbors; however, check out the rate of change of the lines.  Argentina’s income distribution is improving at almost an identical pace to Uruguay’s, Peru’s, Brazil’s, and Columbia’s – countries that are not defaulting on debt, restricting travel, or experiencing 25% inflation per year.  So while Argentina does have more fair income distribution, the past seven years’ policies have not done anything to set it apart from the crowd.

What about growth?  If you take a gander at the chart below you will notice two things:  Firstly, Argentina’s growth looks quite a bit like its neighbors, except it’s a bit higher.  Secondly, you’ll see that the Venezuela comparison might not be so off the mark.  Following the recovery from 2008’s fun-filled global crisis, the rest of Latin America save Venezuela has posted slowing or steady growth rates because that’s what the world is doing.

It’s getting hot in here – is Argentina on its way to overheating?

Argentina is essentially burning out by manipulating the economy to grow too fast at the expense of stability and sustainability under the pretense of championing the interests of the poor.

And why is this working? Perspective matters, public opinion is easy to manipulate, and the opposition does not make it hard.

My inability to locate Argentina would explain my poor marks in European History

I have been told many times by Argentines that they are not Latinos, they are European.  Now maybe there’s an import ban on globes that nobody has told me about, but that’s a ridiculous statement.  Another fun one is that it is not unheard of to  refer to people of native descent as “negros” or “negros de mierda,” translated loosely as “shitty black people.”  I am then told that it’s ok because terms like that do not mean the same thing and are not offensive here as they are in the States.

Back in September there was a decently sized cacerolazo organized and attended primarily by wealthier and upper middle class people.  The protest was against the government’s damaging decisions and restrictions that are visibly hurting the economy and the people, yet the left-leaning newspaper Pagina 12 was able to use a gem of a headline taken from a chant sung by protestors – “El que no salta es negro y K”.

This is a take on a chant sung by soccer fans where everyone jumps around and sings “El que no salta es un ingles”, or “whomever doesn’t jump is English”.  And yes, that is prejudiced against the English but I’m not going into that here.

River Plate soccer fans singing “el que no salta…” Potentially European, jumping so not English, certainly confusing.

“El que no salta es negro y K” means that the person who doesn’t join in is black/dark-skinned/of native descent and a government supporter.  Not only does this attitude alienate a massive demographic element in Argentina, it allows the government to point to anti-government protests as racist, elitist, classist, and out of touch with the needs of the people.  No one feels bad for a racist who can’t vacation in Miami and is forced to wear a smaller selection of designer clothes.

The pro-government elements take full advantage of these attitudes, responding to protests by pointing out that these protesters are not like us, they are not part of the people.  While an extreme case, union leader Luis D’Elia repeatedly comments on the whiteness of the opposition and calls them part of a wealthy elite that offers no alternatives.

The end result is a disappointing, depressing disaster.  A government cheats and steals from its people and they continue to support it, largely because the opposition makes it so damn easy.  While I’m tempted to end this post with a pithy blue comment and a smirk and continue in my sassy apathy, I can’t on this one.

Stop accepting lies so I can go back to punning on Gini and working blue

Argentina, you need to figure out inclusivity or you will do some combination of crashing, burning, and sinking.  Opposition – get a globe and deal with the fact that you are not European and you share a country with your fellow Argentines.  Government supporters – stop living on a steady diet of bread, circuses, and fear.   Your government is buying your support by exploiting class divides and sacrificing your future.

And I prefer hatemail with a sandwich and a shot of tequila, please.

Bianca Fernet needs something stronger today.

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Credit where credit’s due

Sometimes I have to hand it to the Argentine government – their systematic clampdown on the movement of goods and capital across their borders is creeping along just enough to make international headlines about once a week without incurring any real domestic outcry to speak of.  Remember how Argentines were taking shopping vacations to hot spots like Miami to stock up on clothing, electronics, and other savvy purchases using their Argentine credit cards to get the official 4.5 ARS/USD rate?  Well as of early September, that loophole has been sewn shut using fines, reporting measures, and penalties.

Image Credit:

How did this TV get in my bag?

The new regulations include the following measures:

  • A 15 percent tax on dollar-denominated purchases outside Argentina made using credit or debit cards (think E-Bay,, etc)
  • New requirements that every single purchase be reported to AFIP – before only purchases of more than 3000 pesos (roughly $650 at the official rate) were subject to reporting requirements
  • Image Source: Louboutin website

    If Argentina refunds anyone the 15% fee I will eat my stilettos

    Banks must report every credit card purchase made by customers domestically and abroad to AFIP

  • Failure to report customs declarations will result in steep fines and criminal charges
  • Cardholders will be reimbursed the 15% each May if their taxes demonstrate they paid more than they owed the previous year.  If this actually comes to pass, I will eat my shoes.

The question is, where do these new restrictions fall on the spectrum of controls?

Clearly they are not purely a forex or capital control to combat capital flight and the pressure on the peso.  For a quick refresher see my post on multiple exchange rates.  At present, the official exchange rate is 4.66 ARS/USD while the black rate is about 6.4 ARS/USD, over 37% higher.  The new 15% tax doesn’t even split the difference, and taken alone Argentines would still be well-served to stock up on Mac chargers and MAC lipstick while abroad.  Furthermore, is it capital flight if the goods purchased abroad are promptly brought back into Argentina?  Pressure on the peso yes, capital flight not really.

AFIP, I declare that I look fantastic!

The real kicker is the double ended reporting requirement – individuals must fully declare every purchase to AFIP, who can then compare and contrast with the credit card statements reported by banks.  One reason people refrain from declaring purchases is that in protected industries including electronics, goods are subject to a substantial additional tax when crossing the border.  More importantly than evading this border tax, Argentines evade income tax by reporting they make below a $20,000 annual threshold and using cash off the books for income and purchases above this level.  The ability to peer into international and domestic credit card purchases and compare with tax filings is more significant than a 15% tax.

Image Source:

I brought these Euros to see the sights, not to exchange on the lucrative black market!

As an economist and an American, I value efficiency in all things.  These new regulations use the comparison of two reports (individual custom declarations and bank reported statements) to identify tax evaders, rather than step up the AFIP airport presence and search more bags.  But I think that’s what we’ll see within the next few months because it will clamp down harder and have a stronger psychological effect.

This new measure is inefficient, messy, and does little else well than inspire fear.  AFIP chief Ricardo Echegaray explained the new regulations as a measure that would only affect the very wealthy when traveling, force that taxes are paid by those “who are able to pay more”, and stated that the government would prefer that Argentines stay and spend their summer vacations in the country.  What is the policy goal there again, che?

Firstly, to prevent Argentines from one of the last legal means of accessing the official exchange rate is tantamount to admission that the rate is at least 15% overvalued.  They might as well have slapped the full 37% on there and be done with it.

Image Credit: Murtasma

Be afraid, tax evaders (Photo Credit: Murtasma)

Secondly and more importantly, the declaration’s requirements and ability to match customs declarations with credit card statements appears to be geared towards catching tax evaders rather than stopping tax evasion.  Yes, higher wealth individuals likely have more taxes to evade and have more opportunities to go abroad.  But the percentage of tax evasion that goes towards overseas purchases of Ipads pales in the face of government corruption in the nation.  In 2010 the Guardian ranked Argentina 105 of 178 countries, and that was before the capital controls and restrictions set in.

The bottom line?  This is not really an effective capital control, import control, or tax measure – it is a people control.  So far the government has targeted money leaving the country and goods coming in, but this crosses the line in specifically targeting and indeed vilifying Argentines who travel and spend money overseas that may not have flawless income tax records.

These new measures will soften the blow on the dollars spent abroad by lessening the volume of transactions and recovering 15% on each dollar spent abroad.  But the regulatory cost to the government of tracking all purchases and matching them with customs declarations is high.  This is a demonstration of power that will be followed by more obvious inspections and stricter movement restrictions.

I’d bet next time I enter Argentina I will have more than this old machine to worry about

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When life gives you lemons, cry to the WTO

Starting last week, the US, Japan, and Mexico followed the EU’s lead and filed complaints at the WTO against Argentina’s import restrictions.  Argentina promptly responded with its own complaint – against the US for blocking imports of beef and lemons.

Photo Credit:

= a very confused WTO complaint

That’s right – Argentina is accusing other countries of interfering in the free market import/export of their beef. Understand that the Argentine beef market is for sure top 10 most protected industries in the world – and not in favor of the beef producers.

I think my Argentine friends will stop talking to me after seeing the vegetable to meat ratio on this asado

Culturally, Argentina views its beef as a source of national pride, and it’s normal to receive “health” advice that it is necessary to eat meat at least once a day.  Important life events are marked by asados, or large outdoor barbeques for which butchers inform you that you must prepare at least ½ kilograms of meat per guest.  For those of you doing the math at home, well done! Math is cool!  But you should be concluding that this cultural pièce de résistance sounds extremely costly for the general public to participate in, especially in such an inflationary environment.

And you’re right!  So to keep beef an affordable part of the Argentine diet (and so imperialistic US/EU consumers don’t snap it all up), the government has in place an honestly impressive array of barriers to prevent the coveted cow flesh from leaving the country.

Thank you ,Uruguay, for demonstrating to us that in some cases size does NOT matter

Beginning in 2006, the Kirchner administration kicked off the protectionism with a 180 day ban on the export of beef, hiked the export tariff from 5% to 15%, and then put in place a quota system. Since then, the beef industry has fallen from a place of global renown to a case study in protectionism and corruption.  Argentina now exports less beef than neighboring Uruguay.  And while beef remains less expensive than on world markets, that is less and less comforting as its price rises at the same 30% annual rate as the rest of your grocery bill.

In equally important news, I lost my Blackberry last weekend.  After grappling with the stages of grief, I took a trip to the cell phone store to pay a protectionist price replace it.  But I arrived at the store and was informed that they did not have my model and that it could not be ordered for the foreseeable future.  My options consisted of “select a phone that is made in Argentina”.  And so dear readers, it is with a heavy heart that I inform you that the daily snapshots that I put in this blog will now be from a camera that is hecho in Argentina, lacks a flash, and has about one pixel.

Now I know that Argentina’s international trade complaint regarding lemons and beef may seem to have very little to do with my mobile phone woes, but I assure you that together they demonstrate something special about Argentina’s trade restrictions.

Image Credit: Contexto

I would be happier about my low quality Blackberry with a pair of these bitchin’ shades for viewing LCD screens that are ALSO made in Tierra del Fuego

Goods are not crossing Argentina’s borders for two reasons:  protecting domestic industry from competition and balance of payments problems.  The first reason is what shows up in the news and is debated over kitchen tables and asados worldwide – a government responsibility to safeguard national producers against less expensive imported competition.  And indeed, publicly Cristina Kirchner can be seen defending Argentina’s refusal to permit me access to a reasonable Blackberry on the grounds that by forcing me to buy an inferior machine that does not allow me the functionality that I desire and am willing to pay for, she is lifting the nation up into an age of independence from imperialist cell phone exporters providing cameras with flashes and decadent numbers of pixels.

But the reason for Argentina’s recent uptick in protectionism is not to help local producers, it is to deal with the fact that their balance of payments is out of wack.  Basically, balance of payments takes stock of what is coming into and out of a country in money terms – and each import into Argentina is necessarily accompanied by the purchase and outflow of foreign currency (dollars).

Indeed according to, over the past 12 months Argentina has topped the chart by implementing the most protectionist measures in the world.  While it must feel good for Argentina to be number one at something from time to time, these measures are creating a crackerjack economy where access to basic inputs and business necessities is limited.

A gold medal in protectionism and Tae Kwon Do

There are legitimate arguments to protect aspects of domestic industry from international competition.  But arbitrarily restricting the import of goods NOT PRODUCED domestically?  Parts needed to bottle wine, bicycle tubes, air conditioner parts, bottle caps, automobile inputs, internationally acceptable Blackberrys… This wave of protectionism has nothing to do with domestic producers and everything to do with a government that is landed itself in a leaky boat and is attempting to plug the holes with temporary fixes.

Argentina’s beef/lemon complaint is as waste of legal resources and newspaper paper.  Argentina’s beef industry faces more barriers domestically than internationally.  If you’re savvy with the WTO dispute settlement mechanism, you are well aware of what is “awarded” to the victor: the right to impose protectionist measures against the loser equal to the amount of trade loss calculated.

And as Argentina is neither seeking WTO approval for nor being sparing with protectionist measures presently, the outcome of any proceedings is about as relevant to Argentine policymaking as how many medialunas I can eat in one sitting.

If you are curious, the answer is many

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