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Argentina Savings

Opinion Editorial
January 2, 2003

By Mike Krause

The three young guys, all early thirties, are in Mexico to open a restaurant. The start up money is their combined life savings. They have a good location in a busy international tourist town on the Caribbean coast and are highly motivated. If this fails, they will have to start over, again. If this sounds like a testimony to the entrepreneurial spirit, it is — but with a twist.

They are from Argentina. Their life savings, which they are lucky to even have their hands on, is worth a shocking eighty percent less than just a few years ago. They are economic refugees and if this venture fails their sole current option is to join some of their fellows scrapping it out in the illegal job market. Going back home, at least for the foreseeable future, is not an option.

While it is still the case that Mexicans — both legal and illegal — flock to the U.S. for a chance at a better life, Argentineans are making their way to Mexico to escape the economic decimation in Argentina, a nation run into financial ruin by its own government.

Last year, Argentina set a new world record by defaulting on an astonishing $95 billion in bond payments to private lenders. This November, Argentina defaulted on $805 million of World Bank debt repayment, (they did make their interest payment of $70 plus million). And most recently, in December, they announced they would miss another World Bank debt payment of over $700 million.

Argentina is now trying to swing an International Monetary Fund (IMF) bailout. Seeking money that in all likelihood it won’t be able to pay back to cover the World Bank loans it can’t pay back.

Put simply, Argentina borrowed more money than it can pay back, and since government has no money except that which it takes from its citizenry, it is the population that has been stuck with the bill. A little more than a year ago, the government froze the savings accounts of those unlucky enough to have put their money in a bank.

The result has been double-digit unemployment, reaching a 50% in some regions. Reuters has reported that half the population can no longer afford basic food staples. The restaurant guys in Mexico seem to be some of the lucky ones.

It’s not quite a crisis for Mexico. The Mexican immigration police aren’t blanketing the Southern borders looking for Argentineans crossing over in the dead of night. In fact, those who come with enough cash to start a business are a net job gain for Mexico. The law requires 90% of employees to be Mexican nationals.

So how do Mexicans feel about this? Well, there are jokes making the rounds that begin, “A Mexican and an Argentinean are sitting in a bar.” Mexican complaints about the Argentineans working in Mexico illegally ring hollow, considering the number of Mexicans doing the same in America.

Many Mexicans empathize with the Argentine illegals. All Mexicans remember their own nation’s economic meltdown nearly a decade ago the de-valuation of their own money, being a nation at the mercy of world lenders and the empty rhetoric of the own politicians who ravaged the treasury.

One Argentinean, a sharp young guy hoping to parlay his tri-lingual skills into a job as a teacher, and thus the coveted working papers told me, “It’s the politicians we all know their money is safe in their offshore accounts, what do they care.” He smiled and shrugged his shoulders, “That’s Argentina.”

And what do the politicians think about all of this? One Argentinean Cabinet Chief recently told reporters, “If we reach a deal with the IMF, Argentina will start paying its debts again: “We assume responsibility as a country, but what we are saying is the bureaucracy at the fund (IMF) has promoted the policies that put us in this situation”.

Yea, those darn world lending institutions, always expecting governments to pay back their loans.


Copyright (c) 2003, Independence Institute

INDEPENDENCE INSTITUTE is a non-profit, non-partisan Colorado think tank. It is governed by a statewide board of trustees and holds a 501(c)(3) tax exemption from the IRS. Its public policy research focuses on economic growth, education reform, local government effectiveness, and Constitutional rights.

JON CALDARA is President of the Institute.

MIKE KRAUSE is Senior Fellow at the Independence Institute. He is currently living in Mexico.

ADDITIONAL RESOURCES on this subject can be found at: www.i2i.org

NOTHING WRITTEN here is to be construed as necessarily representing the views of the Independence Institute or as an attempt to influence any election or legislative action.

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