I'm juggling family, friends, work, other sorts of work, research and an unexplainably messed up sleep schedule (my body seems to refuse to sleep before I've been at least thirty hours awake), so there hasn't been much blog-time available this week. Luckly, in Argentina, as in Latin America in general, the holidays are also the traditional beginning of vacaciones, and there hasn't been much to report anyway. High-profile kidnappings, a nascent political fight between Kirchner and Duhalde (the man who pretty much put him in power in the first place), more moves in the Great Argentine Debt Game... Everything I'd like to blog about will still be there in a couple of weeks, barring anything major and unexpected.

You should never ignore the major and unexpected. After all, this is Latin America...

In a contest of pure strategic skill, Argentina's Néstor Kirchner could eat George W. Bush for breakfast. Make it Cheney or Rove. Or Cheney and Rove.

Consider Bush's strategic scenario: an omnipresent, easy-to-hate enemy
of the US, the magically growing american productivity numbers, record
corporation profits to turn into campaign donations, and a severely split
Democratic party. Pfui! Piece of cake.

Argentina is a whole other game. The field is smaller, yes, and the stakes
less, but, ah, the complexity of the game! The ambiguities! I'll use last
week as an introductory tutorial on what it takes to play Argentina's
Presidential Game (this will also count as this week's news roundup,
in case anybody is following them).

You're the President of Argentina. The first thing that lands in
your desk: debt. Your country owes a huge amount of money in terms
of GDP, but unlike the US you can't just keep issuing more debt,
as nobody in its right mind is going to believe you're going to
pay it without some strong guarantees (the USA in 2040?). Anyway,
even if you could issue new debt, the payments would
be so high that you'd have no way of meeting them without (a)
spiraling into an(ohter) exponential curve of growing debt, or (b)
slashing government services so badly that the country's economy and
population would take an enormous hit - a dilemma I propose to call
"Arnold's Choice". What'd be your move?

Kirchner's is a deadly but very interesting -if you happen to
have nothing at stake- game of chicken against the financial
international community. "We'll pay this", says Argentine,
where "this" means an incredibly low amount of money, and far,
far in the future. "You've got to be kidding," say the private
creditors. _"You'll have to pay us this much" (a much, much
higher amount that Argentina's offer). Both sides just look at each
other across the table and try very hard not to blink, diplomatically
speaking. It's a daring move, in some sense an unavoidable one, but
it takes a lot of care to pull it off. Just last week, for example,
you'll had have to pay your IMF dues, while announcing in public
that you won't cede to the Fund's pressure, and then you quietly
issue the new fiscal laws the IMF has asked you to. In short, you
keep bridges open while building enough internal support to make
it clear that you don't actually need to cross them. The
reason a lot of people in New York and London is following this
is that if Argentina "gets away" with this, you'll begin to see a
whole lot of new "final offers" from other developing countries.

That's just part of the foreign side of the game. I won't even get into
international relationships (e.g., our scheduled bi-annual diplomatic row
with Uruguay, or the intricacies of the G-20's group and individual
agendas). Instead, let's take a look at the internal front.

It's Saturday, December 20. You take a peek out of your Presidential office window towards Plaza de Mayo, and see it teeming with piqueteros protesters commemorating another year after the protests that finalized De la Rua his administration. They are there to *cough*subtly remind you*cough* that whatever happens once, could in principle happen twice. A small bomb hidden in a trashcan has just exploded, wounding more than 20 people. You just know that they are going to blame the Government, and that your Government (and the piqueteros that more or less side with you) are going to call it a self-attentate (Argentina is that kind of country).

Ironically, piqueteros and their marches are more or less financed by
the Government's social plans, but you can't take those away without
starting some really violent backslashes, and probably another one-way
helicopter trip out of the Casa Rosada (yes, that's the Argentine White
House, and no, don't get me started with the name). What's worse, while
the piqueteros' frequent disruption of roads and plazas is starting to
seriously annoy the all-important political mainstream, you've been forced
to explicitly forbid police forces to restrain them, risking violence,
maybe a dead body or two in national tv... you know how it ends.

The "alienate almost the entire world after the 9/11 goodwill spike"
level of diplomatic skill just won't cut it. You'll need to get back to
the oldest of all power games: ruthlessly take control of resources, and use them to divide, isolate and co-opt the opposition. Put your sister in charge of most social plans (and by 2004, practically a "super-minister" in that area), as your wife is already powerful Congresswoman, and give the money of the social plans primarily to those opposition leaders that are open to "dialog" with you.

Unsurprisingly, it seems to be working. There were actually three
different marches to Plaza 25 de Mayo, each of them representing a
different sector of the piqueteros movement, each of them fighting the
other two as much as they fight the government. Keeping this up, you
actually have a chance of neutralizing the piqueteros movement without
violence or plunging the country into chaos.

It's not an easy path to walk: according to numbers released last
week (and going to be re-released in another version the next one;
it's a tale of political manipulation of indexes which I don't have
the time to cover here), 14% of your active population is thoroughly
unemployed -imagine that, dear US reader-, while if you actually
do the obvious thing and consider those in the social plans as
unemployed, the number climbs to 20%. Imagine managing that
social climate in a country that is well-aware that it popularily
threw down a too-timid democratic government two years ago, and
that has just received certain confirmation that their labor
laws were directly paid off to the Senate with funds from the SIDE
(Argentina's intelligence service).

But if you happen to keep everything sort of in track, if you can
avoid either turning Argentina into a financial pariah or ruining
the country to pay its debts, if you can keep the piqueteros
under control with your police forces tied down, if you can win
or survive the tens of political struggles I didn't have time or
space to comment on here, then you get to reap the fruits of the
favorable international climate (namely, China's demand for soy,
and your weak currency-backed tourism revival), in the form of last
week's numbers for Argentine growth:

Argentina's third trimester showed Year-to-year growth
of 9.8%, putting it among the top five countries in the world in that
statistic (interestingly enough, the others include China, Russia and
India). Total growth for 2003 will amount between 7.5% and 8%, and for 2004 the absolute floor is a healthy 4%.


Next week: If it's a slow news week and I get morbid enough, I
might tell you about Padre Grassi's trial. Padre Grassi is/was a popular
catholic priest accused of, you guessed it, sexual assault of minors. It's
an old and ugly tale with lots of politics and media issues all over
it, and frankly I rather not touch it (or him) with a ten-foot pole.
But his lawyers just got denied a legal move declaring incompetent the entire
damned judicial system in the State of Buenos Aires, and another trying
to declarate unconstitutional the (relatively new in Argentina) oral
public trial. If that's the level at which this trial is going to play
out, I'll be hard pressed not to cover it.

Last Thursday, people still mostly unidentified stole 700kg of high explosives from a mine operation in the southern state Neuquén. You can do a lot with 700 kg of that stuff, up to an including leveling pretty much an entire city block. Needless to say, everybody was quite worried, as hypothesis from mass jailbreaks to terrorism were put forward. To general relief, the explosives (although not the equipment that had been stolen with them) were found ditched in a nearby canal last Monday by some kids. Police suspects that the thieves were after all not very sophisticated, and lacking the capability to move the explosives out of the zone, were forced to leave them behind.

President Kirchner is now the pro-tempore President of the Mercosur (much as Berlusconi chairs the EU at the moment). His "inaguration speech" at Montevideo, Uruguay, was nonetheless mostly directed at the IMF, saying that he would "resist pressures", making a veiled reference towards the IMF's delaying of its approval of Argentina's fiscal goals. There is a game of "hot potato" going on between Argentina and its creditors. Whoever ends up holding -being forced to fully pay or selling by a pittance- is something that will heavily influence the issuing of soberan debt elsewhere. Unless somebody blows up something, I think that this negotiation will be Argentina's top story in international media.

But the story of the week is without doubt the "coimas en el Senado" ("bribes in the Senate"). A bit of background:

Once upon a time -April 2000, to be exact- an Alliance of Radicals (remember, Radicals in Argentina are left-centrist, Liberals are in the right) and the left-of-left-of-center front FREPASO had won the elections following the two Menem presidencies. Fernando de la Rua was president, Carlos "Cacho" Alvarez was his VP, and honesty and sobriety were the Government's watchwords.

Enter the IMF. Both the Fund and local business wanted a law "flexibilizing" working conditions, making easier and cheaper to hire or fire people, and diminishing the power of unions. Unions in Argentina -with strong ties to both the Justicialist Party and, as of late, with leftist organizations- are quite strong, and there's even a number of labor rights written into the Constitution itself. Businessmen argued that the high costs involved were squashing profits and rising unemployment, and as the IMF was backing everything, the Administration felt that this was a law that they wanted to pass. The problem was that it was a hugely unpopular law, and there was, let's say, strong resistance in Congress (remember that De La Rua didn't have a majority of his own in the Senate).

To cut a long story short, the law was eventually passed by the Senate, and today, although only partially implemented, is still a factor shaping work relationships in the country. There were, in any case, multiple accusations of bribery to the members of the Senate, and apparently protesting De La Rua's slow hand to look into matters, Vicepresident Alvarez quit his post. There were some investigations, reports, etc, but eventually the thing, and later De La Rua's presidency, died down anyway.

About three years later, that is, a couple of weeks ago, former Senate Secretary Mario Pontaquatro told the magazine TXT that he, in fact, had delivered a $5 million bribe (U$D 5 million at then-current rates) to a number of Senators, at the bequest of De La Rua. The funds had come from the discretionary funds of the SIDE (Servicio de Inteligencia del Estado, State's Intelligence Service), an intelligence budget under very little supervision, and often suspected of being used to finance all kinds of illegal activities, and Pontaquatro gave a detailed account of the story.

As it stands now, the scandal is shaping up big. Pontaquatro has given a judge a list with the names of the allegedly bribed Senators, and former President De La Rua, along with other people involved, has been forbidden to leave the country. Both the media and the government are expressing lots of interest in this case, and it's not outside the realm of the possible that De La Rua or former Senators could spend some time in jail for this.

Not as shocking, or as useful, as the revelations would have been before or just after the law was voted, but I'll take what I can.

As I write this, I can hear through my window cars honking and people screaming in joyous celebration of victory. In my TV screen the Obelisco, but a few blocks away from my apartment, is surrounded by thousands of people waving flags. A bit above half of the country, I'd guess, is currently celebrating.

No, it has nothing to do with Saddam Hussein's capture. Argentine soccer team Boca Juniors defeated the Italian Milan, bagging for the second time in three years the national, southamerican and world cups. Hussein's capture has barely rated a mention on the news channels so far.

What can I say? National priorities and all that.

This hasn't been a week on momentous events in Argentina, but there's a definite pattern of revisiting old battles, and of forces maneuvering in the current ones.

With the formal beginning of President Kirchner's mandate [if De La Rua had served his whole term], today the country is celebrating a full two decades of democratic -if some times patchy- government, a remarkable achievement by all accounts. There was never during the past twenty years any massive support to military uprisings, not even during the looting at the end of Alfonsín's presidency, a couple of minor coup attempts, or the the bizarre breakdown of the political system during and after the ousting of De La Rua. My personal, completely unscientific, unpolitely worded explanation of this phenomenon: the last military government f*cked things so badly at so many levels -the "Guerra Sucia", the "Desaparecidos", the botched attempt to recover the Falklands (known as Malvinas down here), the economic breakdown- that not only could former President Menem downsize the military and eliminate the draft with total confidence, but also leftist and student groups can safely "escrachar" (Argentine for "go to their houses, paint graffiti and loudly insult them for hours") ex-members of the regime wherever and whenever they find them. True, it's technically illegal, they are old and powerless men anyway, and I have an instinctive mistrust for any kind of group "punitive" action, but it's hard to muster in oneself sympathy for former members of so... evil a government.

Also related to the 1982 Falklands/Malvinas War, the British government finally acknowledged that some of the ships used during the conflict had carried nuclear weapons, an admission that sparked a strongly worded demand for apologies from the Argentine government, one that hasn't been met by their British counterparts, who claim that there was never any plan to actually use the weapons, and that they don't have to explain their military arrangements in any case.

It certainly gives another layer of meaning to Charly García's war-related song "No bombardeen Buenos Aires", "Don't bomb Buenos Aires" (if you can, check it out).

Now for more current battles:

Argentine media has focused on an aggravating streaks of robberies in the Buenos Aires zone of Villa Urquiza. Despite the name "Villa", it's a middle-class residential and commercial zone located in the NW of the city of Buenos Aires. Now, although the frequency of muggings and robberies to business is absolutely *not* acceptable, it's fair to point out that it's probably not that high compared to other zones of the city. But you know how it goes: by coincidence there's a couple of medium-profile hits close enough in time and space, the media catches the "story", the neighborhood people rationally seizes the opportunity to wrestle a much needed modicum of extra security from the government... And it goes on until the news cycle dies and the media can find another two-events "trend". This kind of journalism helps the specific groups covered -and God knows they often need and deserve all the help they can get- but it's not, strictly speaking, analytically solid. In any case, the security situation is perhaps the weakest front of the current administration.

The Union Industrial Argentina, which represents powerful business interests, has asked the government to deal in a firmer way with the piqueteros, who they perceive as increasingly arbitrary and violent. President Kirchner has not so far made any signal of a toughening of his stance toward this kind of protests -in fact he joined by surprise a protest in the southern town of Cutral C&oacteu;-, a political no-brainer given the fair amount of support or at least tolerance from the general populace toward the piqueteros. De La Rua's fall was in part sparked by the deaths of two young protesters during the December '01 manifestations, and Kirchner is definitely not willing to test the same waters. But if the unspoken convivence pact between the middle class and the piqueteros were to break up, and there are already some tensions, things could get bad. At the very least the government would have to chose between tolerating an unpopular, unlawful protest or engaging in violent represión - a Devil's choice for President Kirchner.

In economic terms, negotiations between the government and the privatized utilities are gearing up, in particular with the water company Aguas Argentinas. While opinions inside the government are divided about whether or not to grant a temporary rate hike "to further negotiations", there is a consensus about securing both a "social rate" for the poorest users, and the lowest possible overall rates for the general population [one can guess that's not exactly what the companies have in mind themselves]. The government has also said that it's considering the creation of a "super-entity" (you've got to love the name) to supervise and monitor the performance and services of the utilities. And german company Siemens has opened a case at the World Bank to get U$D 500 million in compensation for the rescision by De La Rua's government of a contract made by President Menem to supply the Argentine population with national IDs [note that we already _have_ national IDs -the Documento National de Identidad, or DNI- the contract was purely for the manufacture of a more sophisticated document, not the implementation of a new system].

And in unsurprising news, the country's external creditors considered unacceptable Argentina's offer of payment terms and proposed another one, which the Argentine government in turn considered unacceptable. I expect I will have to find new ways to say this during the next months to avoid becoming too repetitive.

Also unsurprisingly, Chinese and Argentinean officers predicted more trade between both countries next year, including mutual investments and technology transfer [Argentina has a surprisingly modern agricultural sector]. Arentina's national airline is even in negotiations to open a Buenos Aires-Shanghai route.

This The Economist's article posted at Bonobo Land by Edward is a remarkably good one, but it can bear a few extra notes (an article, as a poem, is never finished, just abandoned):

As Edward noted, a decisive source of fiscal income has been the taxes on agricultural exports, chiefly among them soy products, of which China is a big consumer. Although income from internal demand is rising, next year's expected slowing down of Chinese growth will certainly impact negatively on Argentina, as it will impact all commodity exporters.

The Economist is right pointing out that a big factor in Argentina's rebound has been the output gap left by the collapse of a few years ago. It's one of my reasons to be somewhat bearish about Argentina in the middle term; the "1998's GDP in 2005" figure is sobering. That output gap, on the other hand, gives the Kirchner administration some breathing room to negotiate with creditors, as the country can still grow for a while without resorting to the capital markets.

Unemployment, too, is part of the output gap, but I should remark that, unlike India and China, Argentina is a country just coming out of a collapse, not rising from a previous lower level. A good part of Argentina's poor were middle class but a few year's ago, and are understandably trying to go back to their previous status. Societal expectations being different, the kind of low wage-driven capture of outsourcing possibilities might never be a workable option for the country on any big scale.

It's also important to note that even in the best of cases, the average Argentine is not overly warm any more to foreign capitals. The image of banks bailing out of the country as quickly as they could -in some cases deliberately hollowing out their Argentine branches- leaving middle-class and old people without their life savings, is not one that will pass away from the Argentine political psyche any time soon. So there's an image problem for capitals there, although not an insurmountable one.

Overall, The Economist's implicit assessment of President Kirchner as a ruthless and pragmatic political operator working out of a base of strong internal support seems correct. If he can manage the three outstanding threats to his political control -keeping the unemployed piqueteros in line, preventing the security issue from exploding, and maintaining his political alliance with former President and Buenos Aires' de facto caudillo Eduardo Duhalde- then he will have a chance to work on the most difficult of Argentina's problems: finding a path for growth that can work in the long term.

The Budget Law for 2004: The Senate approved the Budget Law for 2004. Giving the executive branch ample powers to administrate public finances, it assumes a GDP growth of 4% for the year, a conservative figure given this year's 7.3% growth estimate (of course, rebounds are always easier than further growth...).

A record touristic season is expected: For this summer, Buenos Aires' tourism authorities are expecting more than one and a half million visitors, an absolute record for the city.

It's hard to overstate the impact that tourism has had upon the city's human landscape since the currency devaluation a few years ago. I live and work a few blocks away from the Obelisco (the walking distance commute is great), and I constantly see people from all over the world (specially Europe and North America) walking around, photographing everything and -what's most critical for the economy- shopping everything featuring a gaucho, made of leather or with some silver local-looking thingie on it. Despite being a nation of inmigrants, and perhaps because of the inmigration wave from our Latin American neighbords in the '90s, Argentina wasn't traditionally a country with the tradition or infrastructure to receive large numbers of visitors. I mean, even the locals have to keep an eye open for scamming taxi drivers! But things have improved incredibly during the last years, as both business and the government have identified tourism as one of the main strategic sources of growth for the country.

Finally, in sport news Boca Juniors won the local soccer championship, the twentieth in the club's history.

It's easy to see why the literary genre "magical realism" is so typically Latin American: it's actually not that far away from what passes for reality here.

If you read last Wednesday's wrap up of news from Argentina, you might remember a paragraph about Adolfo Rodriguez Saá, formerly the President of Argentina for a few days, former Governor of the state of San Luis and now member of the lower House. Well, it turns out that San Luis is really something out of a Gabriel García Marquez story.

Last weekend's municipal elections in the state capital (also named San Luis), won by Saá's candidate María Angélica Torrontegui, are but the second ones recently carried out. Depending on where do you stand politically (and I'm utterly confused about the issue), you might or might not say that there were municipal elections earlier this month, with victory going to one Daniel Pérsico. As you might have guessed, this oversupply of mayors poses a bit of an administrative problem, to the point that city accounts have been blocked by a judicial act.

So what's to be done? The legislative branch of San Luis came up with an... unique idea: run a parallel (or the true one, who knows?) City Hall in the legislature's building. The city now has two deliberative bodies, two mayors, and a big heap of political confusion.

I'm not sure if it's clever or deranged, but it's thoroughly Latin-American.

Oh, by the way: the current governor's name is Saá, Alberto Rodriguez Saá. Don't ask.

Voting early and often: There were a few elections at the state level and below during the weekend, consolidating president Kirchner's power by giving him his own majority in Congress, and the support of most governors.

The state of EntreRíos' governorship went to justicialist candidate Jorge Busti (with the explicit support of President Kirchner), while in the southernmost state, Tierra del Fuego, three lower House seats were evenly split between Lilita Carrió's ARI, the justicialists, and the local "Frente de Unidad Provincial".

A quick note for our American readers and others living in a (mostly) two-party political system: it really simplifies things. While the last national election and president Kirchner's political maneuvering have consolidated the power of the justicialist (peronist) party at the national level, state-level parties traditionally play important, sometimes even hegemonic, political roles.

An example is Rodriguez Saa's "Alianza Frente Movimiento Popular", which last Saturday got more than 70% of the votes in the state San Luis, grabbing of course the two lower House seats that were in play. If the name Rodriguez Saa sounds familiar, you've got very quick reflexes: he was president of the country for a few days after de la Rua's ousting in 2001. Unlike his replacement Duhalde, Saa lacked the clout in the peronist party (where he technically belongs) to keep himself in power, but during his brief period in power he had the country default on its international debts, and ended his presidency with an intermittent, interference-filled, almost apocalyptic televised discourse from his home state. Later, he run for the presidency in the last national elections, but performed remarkably poorly.

Finally, in the state of Corrientes the governing coalition of peronists and radicals (that's the "Union Cívica Radical", ironically the archetypical centrist party in Argentina, and usually the peronist party's arch-rivals) won two out of the three open seats in the Senate, with the remaining one going to "Tato" Romero Feris' "Partido Nuevo". Corrientes being my birth state, I could tell you stories of political maneuvering, crime, legal chicanery, corruption, drugs, marches, kidnappings, and general stereotypically Latin-American politics that would make Florida in 2000 look like a textbook example of a clean election. But then we'd get sidetracked in this local wackyness, and never get to the national wackyness.

Strange calls: Kidnappings (and violent crime in general) is perhaps the most politically charged theme in Argentina, practically and industry on itself. So there is a lot of concern about suspicions of links between military personnel and kidnappers. Although some dismiss these allegations as an attempt by the Policía Bonaerense to deflect this same charges directed at it, if proven true it would devastate the already historically low standing of the military in Argentina.

Miscelanea that happens almost every week someplace or another: After "cleaning house" in the Postal Service, the government is going after Aguas Argentinas (the privatized water company)... Yesterday there were episodes of violence in a march in southern Neuquén, and some traffic chaos in Buenos Aires... A partial banking strike... And security forces are in alert for possible terrorists attacks in Buenos Aires.

Gray Newman and Luis Arcentales of Morgan-Stanley commented yesterday on Argentina's impressive GDP growth for 2003 and 2004, revising their projections to 7.2% this year and 6.0% in 2004 (higher than their last estimates, while still lower than the Argentine government's). While they, I think, underestimate the political importance of the fiscal income levied out of exports, they make the very interesting point that so far growth in Argentina has been fueled by the output gap left by the drastic contraction at the end of the Menem and de la Rua's administrations, with relatively little investment done.

There is only one point they make that I'm quite certain is basically wrong, and I quote: "While it is difficult to imagine that policy makers or politicians can mistake the bounce-back in 2003 as the beginning of a sustainable growth path (...)". I think that it's great that Morgan-Stanley personnel can keep up their good spirits and optimism after having had a pretty rough week, but in all fairness I have to add that there is little limit to what Argentine policy makers or politicians can mistake a bounce-back for when it's in their political advantage to do so.

There has been an anti-FTAA protest in Buenos Aires; given the givens, that's not really unexpected, and the scope of it was hardly massive. While the war with Irak was strongly opposed by a big portion of the Argentine population, the FTAA has (not surprisingly) failed to excite that kind of reaction.

Nonetheless, "the street" in Argentina doesn't want any continent-wide free trade agreement. The government, on the other hand, just doesn't want the specific agreement the U.S. was prepared to sign. So a watered down, meaningless or even aborted agreement in Miami will likely work as a political victory for the exports-dependent government in front of the relatively protectionist masses.



BUENOS AIRES, Argentina (Reuters) -
Argentine police clashed with dozens of
protesters demonstrating against an
Americas-wide free-trade plan Thursday
night, leaving three officers hurt, a police
spokesman said.

Local television showed protesters
throwing rocks and sticks at a building
housing a U.S.-Argentine business
chamber in downtown Buenos Aires.
Several windows were broken before
police cleared the area with tear gas.

(...)

Copyright 2003, Reuters News Service

The Argentine chancellor Rafael Bielsa, together with representatives of Argentina's biggest companies, will begin in a couple of weeks a business tour through China and Japan.

A few years ago this might have been a trip to "exotic markets" looking for new opportunities, but nowadays Asia is the main destination for Argentine exports. And keep in mind that since the devaluation of the peso, and driven in part by Chinese demand for raw agricultural materials, exports have been the fiscal lifeline of the government, which in turns allows it to finance its social and political projects.

Still, Argentina isn't as oriented towards international commerce as some zones of China itself. According to this article mentioning the visit of Chinese businessmen to Argentina yesterday, the Guangdong province alone has the same GDP as Argentina, but five times its volume of international commerce (which, adding imports and exports, is higher than its own GDP!).

By the way, I can't help but wonder about whether Latin American businessmen, long used to doing business at, let's say, more of a personal than a strictly formal level, might find it easier to relate to unique Chinese relationship patterns like Guanxi than american and european executives coming from a different cultural background.