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Argentina’s Forgone Decade: Not Won or Lost, but Wasted

By: Iván Cachanosky - @ivancachanosky - May 7, 2014, 3:21 pm

EspañolImagine for a moment that we are given the opportunity to lead the Spanish soccer team FC Barcelona. We have a stellar roster, featuring the likes of Gerard Piqué, Andrés Iniesta, Neymar, and among many others, the infallible Messi. In other words, we have an abundance of the highest quality resources on our side.

Now imagine that the tournaments and competitions have begun. First, there is the summer cup, in which our all-star team reigns victorious. However, in more advanced competitions, like the domestic tournament or the Champions League, our team does not fair too well. To top things off, at the end of the season our team is now close to the relegation zone.

After a mediocre season, our coach is interviewed and his response draws everyone’s attention: “I do not understand why the fans are complaining so much if we managed to win the summer cup.” It’s rather obvious, however, that based on the resources possessed by Barcelona, their sights should be set might higher than the least important cup.

Something similar is happening in Argentina. The ruling party flaunts their economic growth figures, but are they really big enough to brag about? In a country like Argentina, with such diverse and abundant resources, and such high public spending, can the government really refer to the last 10 years as a “decade won?”

Keep in mind, the figures the Kirchner administration uses to compare economic performance are from 2002, a year in which a deep crisis permeated the country’s economy. If our current situation is compared with the floor of an economic cycle, then of course there will be “growth.”

The questions we should really be asking, however, are how much has economic activity actually grown and how much have we recovered from that crisis?

If we analyze the economic performance of the country between 1998 and 2002, there was an observable recession and no economic growth. During that period, the same occurred in Uruguay, Venezuela (our eternal déjà vu), and to a lesser extent in Paraguay. If we move forward and look at the period between 2003 and 2007, coincidentally, Argentina, Venezuela, and Uruguay show the highest levels of economic growth.

Obviously, this is a normal “rebound” effect, typically observed in countries coming out of a recession. Finally, if we analyze 2008 to the present, these countries that rebounded so phenomenally have all waned in terms of growth. Uruguay was the only one of the three that did not slow much, and Argentina and Venezuela had the least economic growth during this period.

When viewed this way, the story is quite different than when growth is compared between the years 2013 and 2002, using a severe economic crisis as a starting point.

Keep in mind that besides good resources, the country also has a very high rate of public spending, reaching 46 percent of GDP. At the beginning of the Kirchner administration, that figure was closer to 30 percent of GDP. In other words, even though the government has significantly increased the amount of public spending, the results have been less than encouraging: insecurity, high inflation, a catastrophic flood in La Plata last year, crashes in the train system and the many deaths they have caused, state-owned enterprises generating heavy losses, the expropriation of the Fiscal Oilfields, and a very long et cetera.

For these reasons, rather than a “decade won” or lost, we should reflect on a decade that’s been wasted. Considering the economic tailwind this current government had, the results should have been much better. At the very least, we should not have nearly 25 percent of the population of the country near the poverty level, and social programs that fail to integrate citizens into the labor market.

If, for example, the country had grown by 5 percent, but could have potentially grown by 15, would we say the country added 5 points, or missed 10? This is the failure of the current administration. It had the resources available for greater growth and instead adopted a policy of complacency.

It is also worth remembering that in 2015 this administration will complete its third term. Since there are no other parties at the helm, they will have only themselves to blame. Argentina had all the ingredients necessary for a strong and sustainable growth over time. However, the country adopted populist policies and short-sighted measures with long-term problems — monetary issues, insecurity, education, and many more yet unresolved. In the words of Seneca: “It is not that we have so little time but that we lose so much.”

Translated by Guillermo Jimenez.

Iván Cachanosky Iván Cachanosky

Iván Cachanosky holds a bachelor's degree in business administration and a master's degree in applied economics. He's currently an instructor at CMT-Group. Follow him on Twitter at @ivancachanosky.