Ten years after economic collapse, Argentina is still in recovery

Ten years ago this month, Buenos Aires’s central plaza was echoing with the sound of residents bashing their saucepans in the street. In December 2001, the cacerolazos – or pot-bashers, as these protesters were dubbed – came out in their droves, doing whatever they could to be heard to register their anger against the economic mismanagement of their country. People who had never vandalised anything in their lives suddenly found themselves running towards banks, trying to smash their way into cash machines. One 23-year-old was shot dead by a security guard and an estimated 38 more died as protests escalated across the country.

Amid a brutal recession and with confidence in the economy flatlining, the government had angered citizens by freezing bank accounts to stop everyone in the country taking out their money at once. The bank’s best clients had already been tipped off, but the middle classes were stuck. Those saving for college funds, a house deposit or their old age watched their fund disappear in front of their eyes over the following weeks. The protests led to the resignation of the then president Fernando de la Rúa and a series of emergency measures. Argentina – forced to default on international debt and devalue its currency – went into freefall.

Now, one decade later, the South American country is being hailed as a remarkable success story. The economy appears to be booming, with a real GDP growth of 9.1%. Unemployment is down to a 20-year low. Some have been holding it up as an example for Greece, forgetting that Greece does not have the power to manipulate its own currency, and it won’t benefit from any price boom in soy, which have both been key to Argentina’s recovery.

At the centre of post-crisis Argentina is a couple who have polarized the nation. Centre-left populist Néstor Kirchner became the country’s first post-crisis elected president in 2003; his wife, Cristina Fernández de Kirchner, took over from him four years later. It was widely expected that the presidential baton would be handed back to Nestor this year, but he died suddenly of heart problems last October. A distraught Fernández de Kirchner ended up running instead, easily winning her second term.

Fernández de Kirchner’s supporters praise her for the reduction in poverty and support for the working classes. They relate to the emotional, sometimes tearful, speeches of a family woman who lost her husband. Her critics, meanwhile, are convinced the current boom is only superficial. They accuse her of raiding public finances and manipulating figures. When the head of the Central Bank disagreed to using the national reserves to pay off foreign debt last year, she sacked him and did it anyway.

Inflation is the big issue right now. The government says the annual rate is currently just under 10%, but unofficial figures put it as high as 25%. Independent inflation specialists have been heavily fined for not toeing the government line, and it’s even alleged the state had words with McDonald’s so they wouldn’t be embarrassed in the Economist’s Big Mac index. Economists argue that, taking this inflation into account, the country’s growth could be pushed down into negative figures.

Living in Argentina, you can’t fail to notice it. Whereas shopkeepers used to balk when you tried to pay with a 100-peso note, now the same amount gets eaten up on a few groceries. A friend who supplies goods to a supermarket told me he renegotiates prices many times a year. More publicly, a group known as the Housewives Union recently tried to call a boycott of tomatoes and onions in protest against sharply rising prices.

“Our model is a growth model and not one of inflation targeting,” said Kirchner late last month. “The inflation-targeting model is a Washington consensus scheme that destroyed [Latin America]. We believe in growth, jobs and social inclusion and we are going to continue along that line.”

A statement like that is either loved or loathed. Argentinians are far more passionate about their politics than we are in the UK (unsurprisingly considering as most people of voting age lived through a brutal dictatorship). Strong opinions are commonplace. Someone else I met recently declared she had a framed picture of “Cristina” in her living room. Another friend went to the doctor and was told sardonically before his consultation: “Perhaps you are allergic to the letter K.”

Kirchner is careful with her words. In her second term, she has talked about “fine tuning” the economy. This will involve reigning in huge levels of public spending and phasing out government subsidies for transport and industry. She’s also already made the controversial step of introducing new foreign currency controls to make it harder to change pesos for dollars. It was a way to prop up a weak peso and curb capital flight, although the official line is that the state was moving to combat money laundering. So much confusion ensued that exchange bureaux simply closed their doors. TV news channels interviewed bemused tourists standing outside, while behind the scenes the housing market – which is priced entirely in dollars – stalled.

Rebuilding your country after such a major financial disaster is a long process. In Argentina right now there seem to be two main schools of thought. Those that are convinced the country is on borrowed time, and those who say: “Well, they’ve been saying that for years.” For better or worse, Argentina in 2011 remains one to watch.