Thousands of people took to the streets across Argentina on September 13 to protest generalized insecurity, heavy handed state intervention and a looming threat of constitutional reform that could pave the way for the re-election of President Cristina Fernández de Kirchner in 2015. Temperatures have hit a boiling point after a very long simmer heated by years of government-denied inflation, nationalizations, import restrictions, and now talks of constitutional reform.
It is often said that Argentines yearn for and lament the passing of the belle époque, a period at the turn of the last century when Argentina was considered one of the richest, fastest growing countries in the world. Their lingering arrogance as a European-like exception on a “lost continent” in the late 1980s and 1990s quickly crumbled with the 2001 economic meltdown and historic $100 billion default.
Today´s protests are reminiscent of the cacerolazos—or pot banging—that took place before Argentina crashed in 2001. After hitting rock bottom, things began to pick up for the country in 2003 thanks in large part to high commodity prices and an accompanying export boom led by soy.
The presidential power couple, Nestor and Cristina Fernández de Kirchner, were politically compensated for the comeback and amassed considerable power and wealth during the first decade of the millennium. It now appears the credit was misplaced as Argentines once again pine for economic stability, safety and security, and rational governance –despite continued strong commodity prices!
After much speculation, Argentine President Cristina Fernández de Kirchner once again proved she has the guts to move forward with a politically controversial government takeover. This time around Spanish oil company Repsol was the victim. In 2009, another Spanish company, Marsans, was forced to cede the Argentinean flagship airline to the government, and in 2008, $30 billion in private pension funds were nationalized.
Ms. Fernández announced a week ago that her government would expropriate 51 percent of YPF from Repsol, which would give the government control of the company. She cited insufficient investment resulting in energy scarcity as the reason for the takeover.
As with Aerolineas Argentinas' expropriation, the YPF takeover was popularly supported. The majority of Argentineans believe that the state should control strategic resources like oil. According to the consultancy Poliarquía, six out of every ten Argentines support the measure. This figure is lower than the 74 percent support rate reported by a government-friendly poll.
This public support, however, must not be confused with support of the government’s handling of energy policy. Indeed, according to polls, most Argentineans blame the government over YPF Repsol for dwindling hydrocarbon reserves. The public is aware how government price controls and fluctuating subsidies have distorted market forces and made necessary investments less attractive.
Viettel, a Vietnamese telecommunications company, has recently made headway in the Latin American and Caribbean region. What makes this company unique in the region, besides being based in far-flung Honoi, is that its executives report to the Vietnamese Department of Defense. It is a military-run telco, which inevitably leads to comparison with another presumably military telco that has stormed Latin America over the last several years: China´s Huawei. (Though the latter actively denies widespread reporting of its connections to the People’s Liberation Army, PLA). Though a relative newcomer, Huawei is now a top equipment supplier to the region´s major telco service providers.
Like Huawei in the beginning, Viettel focuses on the low cost segment and aggressively competes on price. It has taken a model that served it well at home where it now boasts over 50 percent market share and exported it abroad. The Vietnamese group is a service provider in Cambodia, Laos, Mozambique, Haiti, and Peru. Its international subscribers now outnumber its Vietnamese subscribers. Despite the global economic downturn, Viettel reported a 28 percent increase in revenues in 2011, reaching $5.6 billion.
In Haiti, the company launched services in September 2011. It successfully entered the island nation by offering substantial charity to earthquake victims; free-of-charge Internet services to schools; and preferential mobile prices for students, police and the poor. Something similar happened in Peru where the group beat out the competition—Russia´s Wynner Systems, Chile´s Americatel under Entel, and Brazil´s Hits Telecom Holding Company—with free service to over 4,000 schools over the next 10 years. During this same time period, it will invest around US$400m in setting up the network and business organizations in Peru.
Governments have shown little concern regarding the company’s military status. Unlike Huawei, that did face resistance in countries like India and still does today in the United States, developing world governments appear to overlook that issue and focus instead on the benefits of low-cost, high quality competition.
On weekend evenings in Buenos Aires´ upscale Palermo neighbourhood, newly washed sedans and SUVs line up along the wide Libertador Avenue, creating a shimmering cascade of lights as their occupants eagerly await valet parking.
The restaurant of choice is a fashionable American-style bistro, aptly named Kansas. It has become a staple for well-heeled Porteños whose frequent trips to Miami and New York leave them craving burgers and good service. Known for remarkable consistency in a land of improvisation, the only thing that has changed since its opening six years ago is its clientele. It’s now packed with Chinese.
Chinatown apparently is unable to satisfy the increasingly sophisticated tastes of Argentina’s Chinese immigrants. At 120,000-strong, when including Taiwanese and temporary visa holders, the Chinese are the fastest growing non-Latin American immigrant population. Since 2004, Argentina has granted over 26,000 visas to the Chinese—a figure topped only by neighbouring Paraguayans, Bolivians and Peruvians, many of whom find work with the Chinese upon arrival.
A Chinese supermarket opens every two days in Buenos Aires. With over 10,000 in total, it’s rare to walk more than a few blocks without coming across one. Los chinos, as they are known, collectively generate a whopping $6 billion a year. Their secret to success? Location. Location. Location. They also manage to maintain competitive prices thanks to their broad wholesale distribution network; this is especially difficult with inflation topping 20 percent yearly since the 2003 economic recovery.
Ever evolving, this year the Chinese markets began branding their own products and offering a credit card financed with an initial $20 million by the Chamber of Chinese Supermarkets (CASRECH) and backed by the Chinese government.
On September 16, 2011, the foreign press in Argentina had the unprecedented opportunity to interview a Chinese government official. Mr. Yang Shidi, the Counsellor for Commercial and Business Affairs from the Chinese Embassy in Buenos Aires spoke to members of Argentina´s Foreign Correspondent Association (ACERA) and graciously accepted a round of questions from journalists representing international media. According to Dr. Ricardo Rivas, acting President of ACERA, this was the first time in 26 years that a Chinese government official in Argentina has agreed to a meeting with the foreign press.
Mr. Shidi gave his talk quite eloquently in Spanish, only stumbling when it came time to translate investment amounts. During his discourse, he highlighted the 40 years of an ongoing diplomatic relationship between China and Argentina and its important commercial and business dimensions. He explained that the bilateral relationship has been sustained over time despite geographic distance thanks to the development of activities based on mutual respect and mutual benefit. Within the framework of what he describes as a “strategic relationship,” the Chinese diplomat claimed that the economic and commercial activities have benefited both countries. China is now Argentina’s second most important trading partner with bilateral commerce reaching $12.9 billion in 2010, up 12 percent from the year prior. And Argentina is China´s fourth-largest trading partner in Latin America.
China is moving beyond trade and ramping up investments in Argentina. According to Argentinean government figures (albeit a bit questionable these days), Chinese investment in the country as of December 2010 was estimated at $15 billion over the prior three years. China has been focused on Argentina’s petrochemical and agricultural sectors but is also making significant investments in telecommunications, mining, finance, transport, energy, and manufacturing.
At a time of global uncertainty, Argentineans voted for continuity on August 14. More than anything else, Sunday´s presidential primary results revealed the country’s preference for President Cristina Fernández de Kirchner. Unlike in the U.S. where primaries mean the selection of a party´s candidate, in Argentina, the candidates had already been chosen and voters were free to vote for whomever they wished. In effect, Sunday´s election was a popularity contest and a dry run for the presidential contest on October 23.
Cristina proved so popular that she blew the other contenders out of the water with over 50 percent of the national vote. She held a nearly 38 percentage point lead over runner-up candidates Ricardo Alfonsín (12.17 percent)—son of popular former President Raúl Alfonsín—and Eduardo Duhalde (12.16 percent), a transitional president after Argentina´s economic collapse in 2002-2003.
Looking quite fabulous despite her black garb, Cristina Fernández appeared emotionally moved by the support at last night’s results rally. To say the least, she has recently weathered a few sentimental disturbances, the worst of which was the passing of her husband and political sidekick, former President Nestor Kirchner in late October 2010. And just this week, her son´s girlfriend suffered a late miscarriage, which made front page news and led to cancellations on the presidential agenda. These very human experiences seem to have bolstered Ms Fernández´s popularity and helped people overlook her administration’s deficiencies.
The 1992 and 1994 bombings of the Israeli Embassy and the Jewish Community Center (AMIA) killing over 100 people in Buenos Aires remain fresh in the minds of Argentineans. This has been true in part because those responsible for the terrorist acts—including a few Iranian government officials—have not yet been brought to justice and the Jewish community, publicly supported by the current and previous Kirchner administrations, has relentlessly sought closure.
More recently, however, there was a media stir instigated by a controversial Perfil news article on March 26 that accused Argentine Foreign Minister Hector Timerman of brokering a secret deal with the Iranians to set aside the embassy and AMIA investigations in favor of increased commercial ties with Iran. Mr. Timerman did not outright deny the accusation, which ruffled feathers at home and in Israel where he was scheduled to visit a few weeks later. Tactful diplomacy and indirect denials during his official visit to Israel in early April helped smooth relations. Moreover, the newspaper did not provide evidence to back its claim and the issue has been publicly dropped. Nonetheless, the recent controversy calls into question the authenticity of the Argentinean government’s public displays of support for the AMIA cause as it more quietly seeks closeness with Iran.
Just a decade ago, most Latin American governments looked to the United States and Europe as examples of how to improve governance, foster sustainable economic growth and institute more just societies. But today, there are some countries in Latin America that serve as case studies worth following—one of which is Uruguay. It may be the size of Washington State and have one of the smallest populations in the region (3.3 million), but it should be truly commended for its developmental progress in recent years.
Although dwarfed by the neighboring economies of Brazil and Argentina, Uruguayans overall have a better standard of living. Uruguay’s annual per-capita income is estimated at roughly $14,000—higher than that of Brazil and Argentina. Physical security is better, too, as evidenced by known cases of families moving from Buenos Aires to Montevideo in search of a safer environment. Recent regional rankings on tourism reflect Uruguay as a desirable destination. According to the 2010 Latin Business Chronicle’s Tourism Index, Uruguay is Latin America’s tourism champion. The country receives more than 2 million tourists a year, an amount equaling roughly 60 percent of its population.
Years of economic growth and state policy promoting technology usage by citizens, government and business has made the Uruguayans some of the most tech-savvy in the region. In May 2008, former president Tabaré Vázquez (2005-10) launched a government program called La Agenda Digital Uruguay 2008-10 (Uruguay Digital Agenda 2008-10) that worked toward the consolidation of all of Uruguay’s information technology programs. Its main objective was to create a more inclusive and democratic society. It gave high priority to Plan Ceibal, known in English as One Laptop per Child, which is responsible for distributing low-cost laptops to all public primary-school students and teachers. This open-source initiative has been so successful that it was extended to secondary schools, and inspired another project to make available affordable “triple play” (Internet, phone, and television) services to low-income families. By November 2010, Uruguay’s investment agency Uruguay XXI reported that the government had distributed 380,000 laptops, trained 18,000 teachers, created 280 free Wi-Fi areas in Montevideo and gave 220,000 families their first computer.
In early January, three Argentine pilots of a private modern jet were arrested in Barcelona, Spain, for transporting nearly a ton of cocaine. The episode is embarrassing for the Argentinean government since Spanish investigators have proof that the cocaine was loaded onto the plane from an Argentinean military airbase. Moreover, this was the last and biggest of a series of three carefully planned trips. The Spanish authorities chose to watch the first two smaller shipments and wait to seize this larger shipment. They also chose not to reveal any information about the nearly year-long operation to Argentinean authorities.
The lack of Spanish cooperation with the Argentinean authorities reveals an absence of trust and makes an outside observer wonder about the possibility of government complicity. Indeed, there are government connections from previous administrations. Two of those arrested are brothers Gustavo and Eduardo Juliá, sons of Brigadier José Juliá who was head of Argentina's Airforce when Carlos Menem was president. The third, Matías Miret, is also the son of a former Airforce official in command during the country's dictatorship (1976-1983). The modern jet plane used in the last flight, a Challenger 604, was supposedly rented from the company Medical Jet based in Miami, which claims it was leased to the Argentines by an outsourced group. Spanish authorities have revealed evidence that the 944 kilos of cocaine confiscated from the jet originated from the Valle Cartel in Colombia and passed through Santa Cruz de la Sierra, Bolivia, for processing before making its way to Argentina.
The recent episode is not only uncomfortable for the Argentinean government; it highlights the country's growing role in the international drug trade and the government's weak control over trafficking. At first, President Cristina Fernández´s administration wouldn't admit that the drugs were loaded on the Argentinean airbase, but evidence forced the new Security Minister (former Minister of Defense) Nilda Garré to concede that it was possible and that “some controls have relaxed a little.” Accordingly, Ms. Garré has begun calling for increased regulations for private aircrafts. This sounds like a good idea considering the private jet loaded with a ton of cocaine at a military airbase even passed through Argentinean customs before taking off for Spain.
According to a researcher from the University of Buenos Aires, there is significant drug trafficking throughout Argentina, but mostly taking place by sea. This Juliá brother case is unique because of the large quantity of cocaine transported by air. There is also evidence, however, that Argentina is not just a transit point. It is also a drug producing and consuming country. The exponential growth of the use of Paco, a cheap cocaine derivative often made from production leftovers, makes specialists believe that there is significant production taking place in the country. Around the year 2000, the combination of Plan Colombia cracking down on drug producing countries up north and Argentinean’s economic meltdown made sending cocaine paste directly to Argentina for processing a viable, economic alternative. As a result, consumption has risen among the poor and the use of cheap drugs by young slum dwellers is leading to increasing acts of random gun violence in Buenos Aires.
Last week, thousands of poor families (13,000 people according to initial government counts), mostly non-citizens from bordering countries, took over a huge Indoamericano park nearby the Buenos Aires city town of Villa Soldati, and began constructing makeshift homes. The lack of immediate government response to the public park squatters, led angry neighbors to attempt to forcibly kick them out. The result was dramatic civilian riots and clashes reminiscent of 2001 that led to three dead, two Bolivians and one Paraguayan. More than just an embarrassing scene for both national and city governments, the act, which has led to a propagation of similar take-overs, reveals major socioeconomic deficiencies and highlights real concerns over political extortion and sabotage.
Shortly after the Villa Soldati riots, President Cristina Fernández de Kirchner acquiesced to demands to send the Gendarmerie and Navy Prefectorate to control the park. The president, however, refused to clear the park and decided instead to erect barricades to protect the protestors as the government conducted a census. Somewhat ironically, televised reporting revealed caged, angry squatters demanding provisions like food and water from the government as if they were being held prisoners.
If he had the equipment and manpower at his disposal, the city´s conservative mayor, Maurcio Macri, would have cleared the park, but his newly created metropolitan police force does not have mob control capacity. In the initial stages of the fiasco, the mayor argued that the national government is responsible for maintaining public order. But the president refused to treat the squatting as illegal, referring to it rather as a protest and demanding that the mayor provide suitable housing for the masses.
The episode was so dramatic and disturbing, that shortly thereafter that President Fernández de Kirchner ordered the creation of a new security ministry and appointed the acting minister of defense since 2005, Nilda Garré, at its helm. She then appointed the former governor of Santa Cruz Province, Arturo Puricelli, as the minister of defense. Most of the political opposition criticized the move as rash decision-making, but most agree that the country is in desperate need of a clearly defined security policy. According to the local media, the first mission of the newly created ministry will be to purge the federal police and create strict government control of the forces to ensure a focus on human rights and transparency. Ms. Garré has also announced the creation of a “citizen participation” commission to incorporate representatives from civil society to control security forces.
The grace period granted to President Cristina Fernández de Kirchner after the sudden death of her husband and life-long political partner on October 27 has ended with physical violence in congress. Heated debates on November 17 over the 2011 budget ended when opposition congresswoman and president of the Commission on Constitutional Affairs, Graciela Camaño, publicly slapped fellow congressman Carlos Kunkel. With the opposition’s slight majority in both houses of congress, the government has its work cut out to pass its budget plan. The administration is taking an all-or-nothing approach to its legislative proposal and the result is division, fighting and accusations of vote-buying by Kirchner supporters.
Partly as a means to distract from days of deadlock over the budget, President Fernández made a televised announcement on November 15 that her government will start negotiations with the Paris Club, an informal grouping of lenders from the world’s principal economies, to pay off the last of its debt since its $100 billion default in 2001. She emphasized that the negotiations will take place without the intervention from the International Monetary Fund (IMF).
Any deal will cost the government anywhere from $6.5 billion to $8 billion, and it remains to be seen where it will get the money. It could tap into the $52 billion in international reserves, but it needs congressional approval to do so. This could be tough. Indeed, its current budgetary proposal includes an earmark of $7.5 billion of Central Bank funds to be used for debt payments, but congress is fighting tooth and nail to prevent its passage. Then there is the possibility that the government will issue sovereign bonds to generate the cash in 2011.
Former Argentina President Néstor Kirchner’s sudden death on October 27 is the biggest shake up for Argentina’s Peronists since the death of Juan Domingo Peron on July 1, 1974. And a crisis in the Peronist movement—the powerful yet amorphous, catch-all party—tends to translate to the whole of Argentine society. Many analysts in the country are calling it a “before and after” event for Argentine politics.
In some ways, it’s as if an acting president died. In Argentina, Néstor Kirchner is to this decade what former president Raúl Alfonsín was to the 1980s and Carlos Menem was to the 1990s. Many people believe the former president, first-man, sitting congressman, Peronist party leader, and temporary president of Unasur was, for all intents and purposes, helping to call many shots in the executive branch. His wife and partner in leading the Peronist faction Frente para la Victoria, President Cristina Fernández de Kirchner, rarely questioned his authority in public. There were also strong rumors of Néstor Kirchner’s intentions to run for president again in the October 2011 elections.
Beginning in 2007, Kirchner amassed a great deal of power derived from alliances with lower-level Peronist politicians, union groups and businessmen. Despite creating his own populist version of Peronism, Kirchner shared the party founder’s audacity and sense of conviction. After being elected by default in a run-off election in 2003, Kirchner worked swiftly increase executive control over government institutions and challenged powerful political opponents—most notably the farmers, industrialists and previously amnestied military leaders who served during the country’s bloody dictatorship.
He also took the reins of the economy and, with strong public support, paid off the country’s $9.8 billion debt to the International Monetary Fund (IMF), partially paid back creditors from the $100 billion default in 2001 and later, during his wife’s presidential administration, pushed for the nationalization of $30 billion in private pension funds. Controversies involving the manipulation of government statistics and a number of corruption scandals, however, also weakened popular support for the Kirchners.
June 1: This AQ-Efecto Naím segment looks at sustainable cities in the hemisphere.