I very much doubt it, although I sent the nuanced sarcasm.Originally Posted by jon1959
The debt levels, currency collapse and destruction of foreign exchange reserves tell me they are on their way to oblivion. The world economy is heading to trouble, and the damage has been done to Argentina for far too long. Mainly by Peronists, but equally by the Right. De La Rua was a capitalist who tried to dollarise. From memory he was late 1990s. But the economy went into a vicious downward spiral and the ATMs could not dispense cash. Bank runs leading to disaster. Macri, a capitalist, had the right ideas a few years back, but was too timid. As a result of his timidity confidence was lost on him too. The Left wing Personists have been a disaster every time since the 1950s. Mafia, corruption, debt blowouts, hyperinflation - an utter disaster every single time.
To make this situation easy for the average man to understand, I would equate Argentina to a decent quality aeroplane, fundamentally. Flying into a vicious storm, it loses 3 of it's four engines, and the support staff are drunk or focused on thieving the food and drink, and looting the sales kitty, and calling the pilot the cause of all the problems. With all those distractions, the odds of even the best pilot making it are nothing short of a miracle.
What to do? Here is my take. Milei and Macri propose dollarization. In theory fine, as it was sort inflation by reducing money supply, and reduce the "currency trust" issue to foreign. But Argentina does not have enough FX reserves, and where will the dollars come from? It would cause a deflationary spiral, mass unemployment and civil strife. Singapore and Panama are often quoted as examples of countries who have successfully dollarized, or created a dollar peg in the FX markets. But they are not on the scale of Argentina, so it is impractical, unless Argentina had huge gold / FX reserves - which it does not.
I think the only way out for Argentina is to stiff the IMF and lenders to eliminate their debt, like Iceland did after the GFC. I am against this as it creates another default. But their ace in the pack is the Vaca Loca energy field. If they can get private help in to exploit that huge gas field, they could create a sovereign wealth fund, and start again with debt at zero. Foreign lenders will forget it for a while. They always do. Evidence of that is foreign markets now lend to Greece, whereas in 2014 with the hoo-haa iwht Yannis Vourifakis lenders wanted 15-20% a year to lend to them. Lenders soon forget, until they reach 70-80% of debt-to-GDP and lenders dig out the history books again. But for Argentines, they now have energy to add to soya and beef for export markets. Fundamentally, it can be a rich country.
Argentina's problem I think is cultural. There are just too many welfare dwellers and lazy buggers used to 80 years of cheap handouts. If someone else is doing well you can guarantee the "till dippers", who cannot resist dipping their hands in the till, will come after it. Like Chile having one of the best private pension funds in the world, until the Left wing "till dippers" nationalised it all after the last election. I think it is in the Latin blood. All Latino countries have a tendency to lean towards "till dipping" other people's money. So let's suppose Milei did dollarize, stiff the debt holders, or created a sovereign wealth fund like Norway. Even if it did work, you can guarantee that Peronist "till dippers" will come back at some point. "Let dip a little". Then "Oooh that worked, let's dip in a little more". There is always a reason. A justification. An easy convenience to dip their greasy, sweaty hands in the till again. Suddenly, the perennial short-termist (but cumulative) lack of discipline and repeated tendency to dip in the till keeps going more and more until the money is gone and they are back to huge debts again.
Argentina is a superb country. I love it. But "till dipping" will always ruin it. Until the people stand on their own two feet, grow up and mature, and keep financial discipline and strength of character - like Norway or the Asian countries, it will always end up in trouble.
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