Argentina Falters as Old Rival Rises

Brazil’s growing clout in international affairs — highlighted by its winning bid to host the Olympics — is prompting neighboring Argentina to ponder its own, less exalted, place on the world stage.

In op-ed articles, blogs and research papers, Argentines are grudgingly coming to grips with the idea that their longtime rival is passing them by, as Brazilian President Luiz Inácio Lula da Silva’s pragmatic centrism trumps Argentine President Cristina Kirchner’s nationalistic populism.

While Brazil earned the distinction of hosting both the 2016 Olympics and the 2014 World Cup, Argentina has been ensnarled in a series of diplomatic spats with its Southern Cone neighbors, as well as the U.S. While Brazil last year gained a coveted investment-grade rating on Wall Street, Argentina’s investment rating is on par with Pakistan’s. Mr. da Silva, who boasts an 81% approval rating, is an international statesman on good terms with President Obama. Mrs. Kirchner, who has a 23% approval rating, has relatively few foreign allies beyond Venezuelan strongman Hugo Chávez.

Horacio Pozzo, an economist at the Latinforme.com financial site, recently wrote: “In a photo, Lula puts his hand on Cristina’s back as though to say, ‘Come this way, it’s going very well for us.'” But Mr. Pozzo added, “Argentina continues doubting in which direction to advance . . . continuing to lose international markets, which are being captured by the Brazilian economy.”

Of course, not all Argentines are convinced of Brazil’s supremacy, and the blackout that crippled Brazil on Tuesday was cited as proof by Brazil-skeptics here that the Latin colossus has plenty of problems of its own.

Brazil has three times the geographical area and almost five times the population of Argentina. But from about 1890 to 1940, amid an agrarian bonanza on the pampa, Argentina’s economic output exceeded Brazil’s. Since the middle of the last century, however, Argentina’s economy has endured a notable decline relative to the rest of the region, falling into “insignificance in the international context,” bemoaned a recent paper by the Institute for Argentine Social Development, a Buenos Aires think tank.

The paper said that, for most of the past 60 years, Argentina has been hobbled by statist, inward-looking economic thinking of the sort Mrs. Kirchner subscribes to.

The differences in Argentine and Brazilian policies have certainly been pronounced in the years since Argentina declared the largest sovereign debt default in history in 2001. Argentina endured a horrific economic contraction in 2002, but bounced back strongly amid the global commodity boom with six years of growth averaging 8%.

Brazil teetered on the verge of default in 2002, but continued meeting its debt obligations, and has now become a net creditor nation. But Brazil’s growth rate since 2003 has been about half of Argentina’s. Nevertheless, Brazil’s stable economic and political climate has made it much preferred by both foreign investors and foreign ministers.

A handful of Argentine analysts think Brazil’s virtues are being exaggerated. One of Argentina’s most influential economics bloggers, Lucas Llach, recently wrote a post titled, “We Aren’t Brazil — Luckily.” He noted that Argentina has a lower fiscal deficit and more vigorous recent growth in GDP per capita than Brazil, not to mention a homicide rate that’s one-fifth of its larger neighbor’s. Mr. Llach said Mr. da Silva’s marketing ability has made Brazil the current fashion among emerging markets — just as Argentina was a decade ago, not long before its economy cratered. Mr. Llach, who has never spared Mrs. Kirchner from criticism, got more than 800 comments on the Brazil post, many insisting he was dead wrong.

Underpinning Brazil’s successes is a political class with star power and bench strength that Argentina can’t match. Understanding why that is so requires turning the clock back some three decades to when both Argentina and Brazil were ruled by military governments. In Brazil, the dictatorship was comparatively less ruthless, killing around 400 people, compared to at least 10,000, perhaps many more, in Argentina. Both Mr. da Silva and his predecessor, Fernando Henrique Cardoso, were persecuted by the military government, but managed to come out of the dictatorship alive.

In Argentina, many politically active youths in the 1970s who might have matured into leaders of similar stature didn’t survive. “We can scarcely hope to have a governing class of 50-to-60 year-olds today, when 30 years ago, those intellectually restless youths could be the object of persecution, death or exile,” wrote Javier González Fraga, a businessman and ex-Central Bank governor, in a newspaper opinion article.

Mr. González Fraga said that Argentina should stop worrying about Brazil’s success and start piggybacking on it. If Brazil is destined to be the U.S. of South America, then Argentina must become more like Canada than Mexico, he said.