BUENOS AIRES -- miamiherald.com/andres_oppenheimer/
For a visitor returning here after a 10-month absence, it is amazing how fast things have changed: the biggest economic bonanza in this countrys recent history has suddenly turned into a sharp downturn, and optimism has given way to general anxiety, if not panic.
Argentinas eight-year-long fiesta is over.
Despite President Cristina Fernández de Kirchners passionate speeches claiming that her late husband President Nestor Kirchner discovered a new nationalist economic model that brought record growth rates of 8 percent annually during much of the past decade albeit growth that most economists attribute to outside factors, such as Chinas massive purchases of this countrys grain exports signs of the end of the boom everywhere.
Fernándezs popularity rate has fallen from a massive 63 percent after winning reelection in October to 39 percent today, according to a new Management & Fit poll. While her recent nationalization of YPF, the countrys biggest oil company, brought her a brief uptick in the polls, pot-banging protests in this capitals wealthiest neighborhoods are increasing.
Whats more threatening to the government is that the countrys biggest labor union CGT, until recently a close government ally has begun escalating its protests and is demanding a 30 percent wage increase. Agricultural producers organizations also are threatening nationwide strikes against the governments escalating taxes on grain exports.
The talk of the day in Buenos Aires is where to buy U.S. dollars in the black market, and at what exchange rate. Inflation, officially at 9 percent, is almost unanimously estimated at 25 percent. Fearing an economic crack that will result in hyperinflation, people are buying U.S. dollars on the streets from black market foreign exchange vendors standing on the corners, who are appropriately known as arbolitos or little trees.
After several years during which Fernández bragged that Argentina was one of the worlds most rapidly growing economies while the United States and Europe were crumbling, Argentinas economy is now projected to slow down from nearly 9 percent last year to 2.2 percent this year, according to the latest World Bank estimates. Many independent economists say that even that projection is too optimistic, and that the country may end this year with a recession.
We think the story ends with a large devaluation sooner or later, said a recent report by UBS bank economist Javier Kulesz, who added that it would come along with a large increase in public utility prices, heightened social tensions, and low if not negative growth. This is nothing Argentines arent familiar with. They have seen this movie in its various versions quite a few times over the past few decades, he said.
Why did Argentinas economy take such a sudden turn downwards? China has not stopped buying Argentine commodities, there has been no tsunami or earthquake that has crippled this countrys infrastructure, nor any international economic crisis that has hurt Argentina more than others. On the contrary, the international environment continues to be favorable to this country, as commodity prices remain relatively high, and many international investors disillusioned with Europes recession are increasingly looking at Latin America as an option.