Once Again, Argentines Feeling on Edge
Strikes, Economic Worries Eating Away at Confidence

By Monte Reel
Washington Post Foreign Service
Tuesday, June 3, 2008

BUENOS AIRES -- Today's Argentina is not gripped by crisis. It's gripped by the fear of crisis.

Several strikes by farmers, furious over government policies, have sparked concerns about lasting damage to the economy. Many Argentines have been exchanging their pesos for dollars, forcing the government to dip into its surplus to keep the currency stable. Consumers, told that their government faces a shortage of natural gas, are bracing for blackouts.

It's enough to fundamentally change the character of daily life for a lot of people here, from the swankiest boardrooms to the humblest street corners.

Driving through the streets of this city, taxi driver José Luis Baldini, 60, voices a bleak notion that has become conventional wisdom for many here: Good times never seem to last.

"Argentina is like a kid who makes a really good sand castle at the beach, takes a lot of care in building it just right, then steps on it himself," Baldini said. "Things have been good recently. Now we have to put a question mark on everything."

Argentines have seen much worse than what they're seeing today. In late 2001, the economy here collapsed, plunging millions into poverty. Many here also remember social turmoil that boiled over into military coups at least once each decade from the 1930s to the 1970s. Such memories are fueling the current anxieties, which now have many people asking whether this crisis of confidence could degenerate into the real thing.

An 'Irrational' Face-Off

In a top-floor office in this city's priciest stretch of real estate, Issel Kiperszmid can look out his window and see construction cranes sitting atop another skyscraper rising on the banks of the Rio de la Plata.

With international investors eager to capitalize on Argentina's low prices, business has boomed in the neighborhood in the last couple of years. But Kiperszmid, the president of one of the country's top development firms, Dypsa International, said things have changed in recent weeks. Foreign investors are now playing wait-and-see.

"I think people are shocked, because three months ago there was absolutely no reason why anyone would predict this tragicomedy that is happening now," he said. "It could have been avoided so easily."

For a few years now, some economists have been warning that Argentina's bubble might burst. When inflation began to rise faster than the government wanted to admit, it shook the faith of many of the people who had supported President Néstor Kirchner and his wife and successor, President Cristina Fernández de Kirchner.

In March, Fernández de Kirchner levied a sharp tax increase on soybean and sunflower exports to generate more government income and help control inflation. The farmers protested angrily.

The issue now is about much more than simply taxing agricultural profits -- it's a symbolic battle over the general direction of the country. For the Kirchners and their allies, the tax is an emblem of their spread-the-wealth populist approach to governance, while their opponents view their reluctance to repeal the tax as a distillation of an increasingly authoritarian government. As the issue takes on more meaning, both sides seem less willing to bend.

"When this started, if you had asked me how long this situation would last, I would have said a maximum of two weeks, because it's such an irrational discussion," Kiperszmid said.

Last week, he unfolded the La Nación newspaper and read a front-page article lamenting how customers have stopped dining out in the restaurants in Puerto Madero, the high-end neighborhood where his office is located, and how taxi drivers are hurting for customers.

"It's such a crazy situation, which is why I keep thinking it simply can't continue for much longer," he said. "There are simple solutions -- it just requires a change in attitude."

Betting on the Dollar

A woman working at a currency exchange shop in the city's financial district left her teller booth Thursday to run outside. From the street corner, she could see the electronic signs outside nine neighboring exchange shops.

She was a blur of motion as she checked the signs to make sure there hadn't been any recent fluctuations.

"Of course, we're busier than normal," she said.

As recently as February, the government had been buying up vast quantities of dollars to keep the peso's value artificially low -- a strategy designed to boost exports and domestic investment. But after the farm conflict began, Argentines traded millions of pesos for dollars and forced the government to flip its strategy: It's now dipping into its $50 billion reserve fund to prop up the value of the peso.

Alejandro Marino was among those who took a number in the lobby of an exchange shop to wait to change pesos into dollars last week.

"The government right now is fighting the people who bring the dollars into this country, namely the farmers," said Marino, 49, a lawyer in Buenos Aires. "Despite what the government is saying, there are clear signs that there will be a shortage of dollars here one day."

Having faith in the peso burned a lot of people in 2001, and Carlos Benítez, 47, said the memory drove him to the exchange shop last week.

"People here don't like to put their trust in the peso," he said. "The dollar seems safer."

Power and Pessimism

After a warm South American autumn, temperatures finally dropped to wintry levels this week. Argentines instantly braced for an energy shortage.

The government last week cut the amount of compressed natural gas -- an auto fuel commonly used by taxis -- that could be sold at Buenos Aires service stations. The country cut all gas exports to neighboring Chile. And major industries reported that their energy use was being restricted to ensure adequate supplies for the public.

"There are always shortages here -- shortages of everything except complaining," said Antonio Fernández, 47, who grabbed a quick lunch Thursday with several other taxi drivers at a mini-market in a service station.

Blackouts have been frequent in the past few years during periods of heavy use, both in the winters and summers. And each time the lights go out, there are fresh complaints that the energy industry is scared to invest in Argentina because the government meddles in private enterprise.

"Argentina doesn't have a long-term strategy for anything -- it's the politics of improvisation," said taxi driver Baldini.

That sort of mistrust earned Argentina 124th place on a list of 127 countries in a World Economic Forum survey measuring the confidence of businesspeople in their government's respect for private property.

If that seems pessimistic, it's nothing compared with the prevailing gloom that surrounded the taxi drivers at the mini-market.

"It doesn't matter what government is in office -- they're all mafias," said Javier de la Lama, 31, one of the drivers at the station. "And every seven or eight years there has to be a crisis. It's a regular part of life."

One More Protest

As several hundred protesters marched downtown last week, their drumbeats were drowned out by the groaning sound of motorized shutters being lowered in front of store windows.

The protesters were not affiliated with the government or the farmers. Instead, they were out in the streets to criticize both sides for contributing to the plight of the country's poor.

During the financial crisis of late 2001, these same streets marked the epicenter of violent protests. Angry demonstrators smashed plate-glass windows of banks and large corporations, and some set fires in front of their lobbies. Many of the businesses installed the metal shutters in front of their windows in case it happened again.

But after a few uneventful minutes Thursday, the protesters passed through the avenue without incident. The metal shutters rolled up again. It was just another protest -- like hundreds of others that have been held here during the past few years, even during the best of times.

"No, it's not as bad as five years ago," said Gladys Rivas, 36, another protester. "But we hope it doesn't get worse."