Many people --
including yours truly -- have looked to events of 80 years ago
to try and figure out how things might play out in future. But maybe it
isn't necessary to go back that far. There have been other economic
implosions in more recent times that might offer lessons that are just
as illuminating. In fact, one of my regular visitors, Jason, suggested
that I check out a blog, Surviving
in Argentina, published by an anonymous Argentinean, which
offers up some disturbing but absorbing accounts of life in that beleaguered
Latin American nation. After reading a post written a few weeks
ago, entitled "Despair in Once-Proud Argentina," it made me
wonder whether we will see an equally calamitous ending here.
Hi guys, this article
is pretty old, dates back to 2002.
English not being my mother language,
this is a well written piece that explains many things much better than I
can.
If you believe USA is already in a depression and it could get worse, PLEASE read this article.
It will explain
better to those that are unfamiliar with Argentina, why there are many
parallelisms between this country and USA, and in some ways it will portrait
a better picture of what I try to explain here many times.
Please do read it. A lot of water has
gone under the bridge and we have an entire set of new problems, but these
ones during the first months and years, may unfortunately become common in USA one day.
I took the liberty of marking in bold
letters the parts that I may have talked about before, or the ones that I
found particularly interesting.
Again, PLEASE notice the marked
comments about the situation in rural and agricultural areas, and the
explanation on what happened to the middle class.
These folks left
behind their homes in the agricultural provinces and moved to pick trash for
a living in the city for a reason, them being stupid not being it.
FerFAL
Despair in Once-Proud Argentina
After Economic Collapse, Deep Poverty Makes
Dignity a Casualty
By Anthony Faiola
Washington Post Foreign Service
Tuesday, August 6, 2002; Page A01
ROSARIO, Argentina -- Word spr ead fast through the vast urban slums ringing Rosario. There was food on the
freeway -- and it was still alive.
A cattle truck had
overturned near this rusting industrial city, spilling 22 head of prime Angus
beef across the wind-swept highway. Some were dead. Most were injured. A few
were fine.
A mob moved out from
Las Flores, a shantytown of trash heaps and metal shacks boiling over with
refugees from the financial collapse of what was once Latin America's
wealthiest nation. Within minutes, 600 hungry residents arrived on the scene,
wielding machetes and carving knives. Suddenly, according to accounts from
some of those present on that March day, a cry went up.
"Kill the
cows!" someone yelled. "Take what you can!"
Cattle company
workers attempting a salvage operation backed off. And the slaughter began.
The scent of blood, death and fresh meat filled the highway. Cows bellowed as
they were sloppily diced by groups of men, women and children. Fights broke
out for pieces of flesh in bloody tugs of war.
"I looked around
at people dragging off cow legs, heads and organs, and I couldn't believe my
eyes," said Alberto Banrel, 43, who worked on construction jobs until
last January, when the bottom fell out of the economy after Argentina suffered the world's largest debt default ever and a massive currency
devaluation.
"And yet there I
was, with my own bloody knife and piece of meat," Banrel said. "I
felt like we had become a pack of wild animals . . . like piranhas on the
Discovery Channel. Our situation has turned us into this."
The desolation of
that day, neighbor vs. neighbor over hunks of meat, suggested how profoundly
the collapse has altered Argentina. Traditionally proud, Argentines have
begun to despair. Talk today is of vanished dignity, of a nation diminished
in ways not previously imaginable.
Argentines have a
legacy of chaos and division. In search of their "workers'
paradise," Juan and Eva Peron declared war on the rich. During the
"dirty war" of the 1970s, military rulers arrested tens of
thousands of people, 15,000 of whom never resurfaced. And when then-President
Carlos Menem touted New Capitalism in the 1990s, the rich got richer -- many
illegally -- while the poor got poorer.
Yet some things here
never really changed. Until last year, Argentines were part of the richest,
best-educated and most cultured nation in Latin America. Luciano Pavarotti
still performed at the Teatro Colon. Buenos Aires cafe society thrived, with
intellectuals debating passages from Jorge Luis Borges over croissants and
espresso. The poor here lived with more dignity than their equals anywhere
else in the region. Argentina was, as the Argentines liked to say, very
civilized.
Not anymore.
Argentines have
watched, horrified, as the meltdown dissolved more than their pocketbooks. Even the rich have been affected in their own
way. The tragedy has struck hardest, however, among the middle class, the
urban poor and the dirt farmers. Their parts of this
once-proud society appear to have collapsed -- a cave-in so complete as to
leave Argentines inhabiting a barely recognizable landscape.
With government
statistics showing 11,200 people a day falling into poverty -- earning less
than $3 daily -- Buenos Aires, a city once compared to Paris, has become the
dominion of scavengers and thieves at night. Newly impoverished homeless
people emerge from abandoned buildings and rail cars, rummaging through trash
in declining middle- and upper-class neighborhoods. People from the disappearing middle class, such
as Vicente Pitasi, 60 and jobless, have turned to pawn shops to sell their
wedding rings.
"I have seen a
lot happen in Argentina in my day, but I never lost hope until now,"
Pitasi said. "There is nothing
left here, not even our pride."
Wages Fall, Prices
Rise
Late last month, on
the eve of the 50th anniversary of Eva Peron's death, thieves swiped the head
of a new statue of her. Nothing, really, is sacred here anymore. Ads by
concerned citizens appear on television, asking Argentines to look inward at
a culture of tax evasion, incivility and corruption. But nobody seems to be
listening.
Food manufacturers
and grocery stores are raising prices even as earning power has taken a
historic tumble. A large factor in both the price rises and the slump in real
wages is a 70 percent devaluation of the peso over the last six months. But
the price of flour has soared 166 percent, canned tomatoes 118 percent --
even though both are local products that have had little real increases in
production costs.
Severe hunger and
malnutrition have emerged in the rural interior -- something almost never
seen in a country famous for great slabs of beef and undulating fields of
wheat. In search of someone to blame, Argentines have attacked the homes
of local politicians and foreign banks. Many of the banks have installed
steel walls and armed guards around branch offices, and replaced glass
windows decorated with ads portraying happy clients from another era.
Economists and
politicians differ on the causes of the brutal crisis. Some experts blame
globalization and faulty policies imposed by the International Monetary Fund.
But just as many blame the Argentine government for runaway spending and
systematic corruption. The one thing everyone agrees on, however, is that
there is no easy fix.
Statistically, it is
easy to see why. Before 1999, when this country of 36 million inhabitants
slipped into recession, Argentina's per capita income was $8,909 -- double Mexico's and three times that of Poland. Today, per capita income has sunk to $2,500, roughly on a
par with Jamaica and Belarus.
The economy is
projected to shrink by 15 percent this year, putting the decline at 21 percent since 1999. In the Great
Depression years of 1930-33, the Argentine economy shrank by 14 percent.
What had been a
snowball of poverty and unemployment has turned into an avalanche since
January's default and devaluation. A record number of Argentines, more than
half, live below the official poverty line. More than one in five no longer have jobs.
"We've had our
highs and lows, but in statistical and human terms, this nation has never
faced anything like this," said Artemio Lopez, an economist with Equis
Research. "Our economic problems of the past pale to what we're going
through now. It's like the nation is dissolving."
The Suffering Middle
Class
Every Argentine, no
matter the social class, has a crisis story. Amalia Lacroze de Fortabat, 80,
one of the country's richest women, was forced to offer up paintings by
Gauguin, Degas, Miro and Matisse at a Sotheby's auction in May. For many of Argentina's well-to-do, the sale was the ultimate humbler, a symbol of decline in
international stature.
Those suffering most,
however, are the ones who had less to begin with.
On the morning of her
59th birthday, Norma Gonzalez woke up in her middle-class Buenos Aires home,
kissed her husband on the cheek and caught a bus to the bank. There, before a
stunned teller, the portly redhead, known by her family and friends mostly
for her fiery temper and homemade meat pies, doused herself with rubbing
alcohol, lit a match and set herself ablaze.
That was in April.
Today, Rodolfo Gonzalez, 61, her husband, keeps a daily vigil at the burn
center where his wife is still receiving skin grafts on the 40 percent of her
body that sustained third-degree burns. She had no previous record of mental
illness, according to her family and doctors, and has spoken only once about
that morning.
"She just looked
up at me from her hospital bed and said, 'I felt so helpless, I just couldn't
take it anymore,' " Gonzalez said. "I can't understand what she
did. It just wasn't Norma. But I suppose I can understand what drove her to
it. It's this country. We're all going crazy."
Argentina long had
the largest middle class, proportionally, in Latin America, and one of the
continent's most equitable distributions of wealth. Much of that changed
over the last decade as millions of middle managers, salaried factory workers
and state employees lost their jobs during the sell-off of state-run
industries and the collapse of local companies flooded by cheap imports.
Initially, Rodolfo
Gonzalez was one of the lucky ones. An engineer for the state power company,
he survived the early rounds of layoffs in the early 1990s when the company
was sold to a Spanish utility giant. His luck changed when the company forced
him out in a round of early retirements in 2000.
He was 59 and had
worked for the same company for 38 years. Yet he landed a part-time job, and
with his severance pay safely in the bank, he and his wife thought they could
bridge the gap until Gonzalez became eligible for social security in 2004.
Then came "El
Corralito."
Literally translated,
that means "the little corral." But there is nothing little about
it. On Dec. 1, Domingo Cavallo, then the economy minister, froze bank
accounts in an attempt to stem a flood of panicked depositors pulling out
cash.
Most banks here are
subsidiaries of major U.S. and European financial giants that arrived with
promises of providing stability and safety to the local banking system. But
many Argentines who did not get their money out in time -- more than 7
million, mostly middle-class depositors, did not -- faced a bitter reality:
Their life savings in those institutions, despite names such as Citibank and
BankBoston, were practically wiped out.
Virtually all had
kept their savings in U.S. dollar-denominated accounts. But when the
government devalued the peso, it gave troubled banks the right to convert
those dollar deposits into pesos. So
the Gonzalez family's $42,000 nest egg, now converted into pesos, is worth
less than $11,600.
As the family had
trouble covering basic costs, Norma Gonzalez would go to the bank almost
every week to argue with tellers and demand to see a manager, who would never
appear. As prices rose and the couple could not draw on their savings, their
lifestyle suffered. First went shows in the Buenos Aires theater district and
dinners on Saturday night with friends. Then, in March, they cut cable TV.
Around the same time,
the Gonzalezes' daughter, Paula, 30, lost her convenience store. Separated
and with two children, she turned to her parents for support.
The Gonzalezes had
been planning for 18 months to take Norma's dream vacation, to Chicago to visit a childhood friend. After the trip was shelved as too expensive, she
seemed to break.
"I can't explain
it, and maybe I never will be able to," Rodolfo Gonzalez said. He added:
"But maybe you can start to figure out why. You have to wonder: Is all this really happening? Are our politicians
so corrupt? Are we now really so poor? Have the banks really
stolen our money? And the answers are yes, yes, yes and yes."
Scavenging Urban
Trash
"There is not
enough trash to go around for everyone," said Banrel, one of
the participants in the cattle massacre. Rail-thin, he normally passes his
days combing the garbage-strewn roads around the Las Flores slums in Rosario, a city of 1.3 million residents 200 miles northwest of Buenos Aires and long
known as "the Chicago of Argentina."
If Banrel finds
enough discarded plastic bottles and aluminum cans -- about 300 -- he can
make about $3 a day. But the pickings are slim because competition is fierce.
The misery villages, as shantytowns
such as Las Flores are called, are becoming overcrowded with the arrival of
people fleeing desperate rural areas where starvation has set in.
About 150 new families arrive each month, according to Roman Catholic Church
authorities.
With more people in
the slums, there are fewer plastic bottles to go around. Banrel said he was
getting desperate that day when he joined the mob on the highway.
His family of three
-- his wife is pregnant with their second child -- had been surviving on a
bowl of watery soup and a piece of bread each day. He earned at least $40 to
$60 a week last year working construction. With that gone, and with food
getting more expensive, he said, "You can't miss an opportunity, not
around here."
"Am I proud of
what we did?" he added. "No, of course not. Would I do it again? Yes,
of course. You start to live by
different rules."
Reality of Rural Hunger
For some rural
families, the crisis has gone further. It has generated something rarely seen
in Argentina: hunger. In the province of Tucuman, an agricultural zone of 1.3
million people, health workers say cases of malnutrition have risen 20
percent to 30 percent over the previous year.
"I wish they
would cry," whispered Beatriz Orresta, 20, looking at her two young
sons in a depressed Tucuman sugar cane town in the shadow of the Andes. "I would feel much better if they
cried."
Jonatan, 2, resting
on the dirt floor behind the family's wooden shack, and Santiago, the
7-month-old she cradled in her arms, lay listlessly.
"They don't act
it, but they're hungry. I know they are," she said.
Orresta can tell.
Jonatan is lethargic. His lustrous brown hair has turned a sickly carrot
color. Clumps of it sometimes fall out at night as Orresta strokes him to
sleep. Santiago hardly seems to mind that Orresta, weak and malnourished herself,
stopped lactating months ago. The infant, sucking on a bottle of boiled
herbal tea, stares blankly with sunken eyes.
Six months ago, the
boys were the loudest complainers when their regular meals stopped. Orresta's
husband, Hector Ariel, 21, had his $100 monthly salary as a sugar cane cutter
slashed almost in half when candy companies and other sugar manufacturers in
the rural enclave of Rio Chico, 700 miles northwest of Buenos Aires, were stung by dried-up credit and a massive drop in national consumption.
Ariel now earns just
over $1.50 a day, not enough for the family to survive. The peso's plunge has
generated inflation of more than 33 percent during the first seven months of
the year, more than double the government's projection for the entire year.
Goods not in high
demand, such as new clothing, have not gone up significantly in price, but
staples that families need for daily subsistence have doubled or tripled. The
last time inflation hit Argentina -- in the late 1980s, when it rose to a
high of 5,000 percent -- the unemployment rate was half the current 21.5
percent and most salaries were indexed to inflation. Today, there are no such
safety nets.
"I could buy
rice for 30 cents a kilo last year," Orresta said. "It's more than
one peso 50 now."
"At least we
will eat tonight, that's the important thing," she said, stirring an
improvised soup.
The concoction, water
mixed with the dried bones of a long-dead cow her husband found in an
abandoned field, had been simmering for two days. The couple had not eaten in
that time. It had been 24 hours since the children ate.
Orresta, like most
mothers in her village, started trimming costs by returning to cloth diapers
for her two young boys when the price of disposable ones doubled with
inflation. But then she could no longer afford the soap to wash them, and
resorted to reusing the same detergent four or five times. The children began
to get leg rashes.
By late January, the
family could no longer afford daily meals. A month later, Jonatan's hair
began turning reddish and, later, falling out. Although he has just turned 2,
Jonatan still cannot walk and has trouble focusing his eyes.
Orresta stopped
lactating in April. But the price of powdered milk had almost tripled by
then, from three pesos for an 800-gram box to more than eight pesos. At those
prices, the family can afford 11 days of milk a month. The rest of the time, Santiago drinks boiled maté, a tea that also serves as an appetite suppressant.
"You know, we're
not used to this, not having enough food," said Orresta, with a
hint of embarrassment in her voice.
She paused, and began
to weep.
"You can't know
what it's like to see your children hungry and feel helpless to stop
it," she said. "The food
is there, in the grocery store, but you just can't afford to buy it anymore. My
husband keeps working, but he keeps bringing home less and less. We never had
much, but we always had food, no matter how bad things got. But these are not normal
times."
Michael J. Panzner
Editor, Financialarmageddon.com
Michael J. Panzner is a
25-year veteran of the global stock, bond, and currency markets and the
author of Financial Armageddon: Protecting Your Future from Four Impending
Catastrophes, published by Kaplan Publishing.
|