Argentine economy back from brink - East Valley Tribune: Nation / World

Argentine economy back from brink

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Posted: Monday, February 12, 2007 2:51 am | Updated: 7:55 pm, Fri Oct 7, 2011.

BUENOS AIRES, ARGENTINA - Five years after Argentina’s economy melted down, triggering food riots, supermarket lootings, devaluation and debt default, Maria Elena Lopez is still scavenging in the streets for recyclable paper.

But today there’s less competition and it takes less of her day to amass $5 worth of junk, pushing a creaky wooden cart through an upscale Buenos Aires suburb in search of paper, cardboard and anything else she can sell.

Lopez, 34, is at the bottom end of a remarkable economic recovery that is generating jobs, boosting exports and reviving businesses. But it still has a long way to go.

“Five years later, it’s definitely better,” said Lopez, wearing a baseball cap and sweating. “But it’s not great.”

Today the ranks of the scavengers, or “cartoneros,” have thinned as South America’s second largest economy rebounds at a blistering pace, growing more than 8 percent year after year.

Lopez now has time to earn extra money baby-sitting, while two brothers idled by the crisis have gone back to low-paying jobs, one in a carwash, the other in a tire repair shop.

It’s now rare to see desperate families Dumpster-diving for rotting vegetables, and those classified as poor have gone from more than 50 percent of the population of 37 million to about a third.

Argentina has posted 47 months of uninterrupted growth and has already renegotiated repayment of $100 billion of public debt after the largest default the world has known.

The biggest South American farm nation after Brazil, Argentina exported its way out of the crisis, registering a record $46.5 billion in sales led by soybeans, corn and wheat from the fertile Pampas in 2006.

The Argentine peso was pegged 1-to-1 with the U.S. dollar for more than a decade until the recession and mounting debts sparked a run on banks by depositors in 2001, setting up the currency’s freefall.

Today, the government pegs the peso at three to the dollar to boost tourism, exports and construction. The cheap exchange rate also keeps prices lower in dollar terms, and some fixed costs such as utility rates remain frozen by the government at 2002 prices.

President Nestor Kirchner, elected in March 2003 after four others were toppled by the crisis in the space of just three weeks, also strong-armed creditors worldwide, forcing them to accept repayment of less than 30 cents on the dollar. And he made early repayment of some $9 billion owed the International Monetary Fund, using tax dollars reaped from the export windfall.

Kirchner is a friend of Venezuelan President Hugo Chavez and the Argentine’s election was seen as another win for a resurgent Latin American left. He is heavily favored to winre-election in October if he decides to run.

Yet many Argentines remain skeptical that the good times will last. One reason for their lack of faith: Credit programs that shriveled in the crisis haven’t bounced back, squeezing first-time home buyers and small businesses. Interest on home mortgages has soared above 12 percent.

Critics complain about the unorthodox price controls Kirchner imposed to squelch inflation. Last year he banned most beef exports for six months, hoping to keep enough red meat at home to ensure high supplies and low prices for this key component of the consumer price index. And now he has slapped new taxes on soybean exports to finance subsidies of bread and other foodstuffs on the index.

Such moves are manageable when the economic conditions at home and abroad are working in Kirchner’s favor, said political analyst Rosendo Fraga.

“It will be easier to see how things play out when the winds of the world economy blow against him,” Fraga said.

Perhaps the biggest complaint is wages, which remain sharply devalued. While the jobless rate is down by half to about 10 percent today, many workers say cost-of-living adjustments are long overdue.

Argentina’s largest labor confederation wants a 30 percent wage increase for millions of members.

The talks start this month but protests have already begun: Some 200 unionized supermarket workers beat drums and shot firecrackers off outside the Labor Ministry this month.

Such developments leave Argentina’s battered middle class, Latin America’s largest, watching warily — people such as Rogelio Perez, 67, who laid off 50 workers when his cookware factory disintegrated five years ago.

“It was chaos, just chaos,” he said, recalling how Argentines traded Monopoly-like IOU money and bartered their appliances and silverware for food.

The devaluation eventually made Perez’s glazed-clay dinner plates and coffee mugs competitive again against imports.

So he sold his car, got a loan to buy a kiln, rented a warehouse and started over. As consumer demand picked up, he moved to a larger warehouse, but still operates on a much smaller scale than before the crisis, employing just a handful of workers, some of them his relatives.

He’s struggling to find an affordable loan to expand again.

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