I’m crying for you Argentina

I fell in love with Buenos Aires soon after landing there on Feb. 10. But then my economist self took over, reminding me that Argentina is a country with major economic problems, all of them man-, or rather, woman-made.

Since she took over the presidency from her late husband in 2007, President Cristina Fernandez has literally been implementing case studies in economic mismanagement. For example, thanks to currency controls, there are two exchange rates: While one dollar is officially equal to five pesos, the black market “blue” exchange rate was 7.7 on Feb. 17.

It gets worse: Car importers need to match their imports with exports of equal value. Therefore, I was not surprised at all when we were told by our tour guide at the Mendoza winery Pulenta Estate on Feb. 15 that the owners were importing Porsches in addition to exporting Malbec wines.

The country is fighting with hedge funds, which bought defaulted Argentine bonds and sued for billions of dollars in New York. An Argentine navy ship was seized last year as a result of the court case. As for foreign direct investment, the government recently nationalized Spanish energy company Repsol’s local YPF unit.

But Fernandez’s most significant contribution to the practice of economic mismanagement has been cooking the inflation numbers. While official figures claim that yearly inflation is around 10 percent, independent analysts are estimating it at over 25 percent.

The government saved a couple of billion dollars on inflation-indexed debt this way, but unions are angry their wages are not keeping up with true inflation. Moreover, the IMF reprimanded Argentina on Feb. 1, giving the government until Sept. 29 to tidy up its statistics. If it fails to do so, the country will not be able to borrow from the fund and eventually be expulsed.

 And so the government came up with a truly ingenious solution: It told supermarkets at the beginning of February to freeze their prices for two months. That should quiet down workers and bring the “real” inflation figures closer to the official ones.

To be fair to La Presidenta, bad economic policies have been going on for several decades. A Turkish-Armenian gentleman I met while having my morning coffee in the historical Café La Biela next to La Recoleta Cemetery on Feb. 12 summed up the country’s falling behind rather well:

“When I came to Argentina in 1975, the country was decades ahead of Turkey, with several automobile factories. I visited Turkey in 1994 and saw that it had almost caught up with Argentina. When I went to Turkey again in 2006, I noticed it was ahead of Argentina.”

Turkey’s purchasing power-adjusted GDP per capita went up from 60 percent of Argentina’s in 1975 to 80 percent in 1994 and almost 100 percent in 2006. By the way Korean GDP per capita jumped from half of Argentina’s to 2.5 times it in the same period.

Whenever I am reminded how Turkey fell behind Korea, I feel very sad. But maybe it is Argentina I should be crying for.