A century of decline
One hundred years ago Argentina was the future. What went wrong? Report published 2/17/14.
WHEN the residents of Buenos Aires want to change the pesos they do not trust into the dollars they do, they go to a cueva, or “cave”, an office that acts as a front for a thriving illegal exchange market. In one cueva near Florida Street, a pedestrian thoroughfare in the centre of the city, piles of pesos from previous transactions lie on a table. A courier is getting ready to carry the notes to safety-deposit boxes.
This smallish cueva handles transactions worth $50,000-75,000 a day. Fear of inflation and of further depreciation of the peso, which fell by more than 20% in January, will keep demand for dollars high. Few other ways of making money are this good. “Modern Argentina does not offer what you could call an institutional career,” says one cueva owner.
As the couriers carry their bundles around Buenos Aires, they pass grand buildings like the Teatro Colón, an opera house that opened in 1908, and the Retiro railway station, completed in 1915. These are emblems of Argentina’s Belle Époque, the period before the outbreak of the First World War when the country could claim to be the world’s true land of opportunity.
In the 43 years leading up to 1914, GDP had grown at an annual rate of 6%, the fastest recorded in the world. The country was a magnet for European immigrants, who flocked to find work on the fertile pampas, where crops and cattle were propelling Argentina’s expansion. In 1914 half of Buenos Aires’s population was foreign-born.
The country ranked among the ten richest in the world, after the likes of Australia, Britain and the United States, but ahead of France, Germany and Italy. Its income per head was 92% of the average of 16 rich economies. From this vantage point, it looked down its nose at its neighbours: Brazil’s population was less than a quarter as well-off.
It never got better than this. Although Argentina has had periods of robust growth in the past century—not least during the commodity boom of the past ten years—and its people remain wealthier than most Latin Americans, its standing as one of the world’s most vibrant economies is a distant memory (see chart 1). Its income per head is now 43% of those same 16 rich economies; it trails Chile and Uruguay in its own back yard.
The political symptoms of decline are also clear. If Argentina appeared to enjoy stability in the pre-war era, its history since then has been marked by a succession of military coups. The first came in 1930; others followed in 1943, 1955, 1962, 1966 and 1976. The election of 1989 marked the first time in more than 60 years that a civilian president had handed power to an elected successor.