Buenos Aires, by Noelia Diaco. Photo is not visible, used only for sharing on social networks.

The whims of the Argentine government

October 29, 2011
I read the papers here most days because it's my job to report on Argentina. But even if it weren't, I probably still would. In the U.S., the federal government usually seems far removed and sluggish. Here it's imperative to follow what the Argentine government is up to.

There are only a few instances I can think of where I directly noticed policy changes from the U.S. federal government. I noticed when Obama changed the withholding rate on taxes early in his term, I noticed when the federal and Massachusetts health care reforms meant I could stay on my parents' health care plan until I was 26. I'm not saying that I'm not affected when the federal government stimulates the economy, or when it invests in public transit. Simply that there are a lot of layers between me and any individual government policy.

In Argentina, almost every day there's something we try to do that is made harder or easier by government policy changes. For example, the Argentine government intervenes in the currency markets all the time to keep the dollar-peso exchange rate steady. If it stopped, we would suddenly be paying a lot less (or a lot more) for the things we buy everyday. Normally I wouldn't think of buying a blender as something that has anything to do with the government. But they've been blocking imports (at least that's what an Argentine told us, I haven't confirmed it), which means blenders are more expensive and harder to get. Same with Harley Davidsons and books (and Porsches, but that one doesn't impact us very much). There's at least a 50 percent tariff on most imported goods, and sometimes 100 percent, which means I could probably sell my used Mac here for more than I paid for it new. The government also lets inflation continue at nearly 30 percent, which means prices keep going up, but it heavily subsidizes energy, so we pay only $0.30 to get anywhere in the city via public transit. And so on.

Why is it that government policy seems to matter day-to-day so much more here? My guess is twofold. One, it's a populist government (as to whether that's wonderful or despicable, it depends which Argentine you ask) and this was an election year. Two, power is incredibly centralized here and the checks on executive power incredibly weak. In her first term, Cristina Fernandez de Kirchner nationalized the country's private pensions by decree. Imagine if when George Bush wanted to privatize Social Security, he simply waved his magic wand and did it. On the flip side, it was much easier for the Argentine government to start spending during the 2008 recession because no one had to sit around while Congress squabbled (and Argentina survived that recession better than a lot of developed economies).

Argentine policy is volatile, difficult to predict and decided by a small number of people. Not everyone thinks that's bad.

- Steph

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