TIME Economics

What Everyone Gets Wrong About Argentina

Argentina Seeks to Skirt U.S. Ruling by Paying Bonds Locally
Axel Kicillof, economy minister for Argentina, speaks during a news conference in Buenos Aires, Argentina, on Wednesday, Aug. 20, 2014. Bloomberg—Bloomberg via Getty Images

Grossly oversimplified versions of history are regularly used as econ class morality tales

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I woke up a couple of weeks ago to an Argentina that had, against its will, defaulted on its sovereign debt. For those unversed in international finance terminology, that basically means a country is failing to make payments due to bondholders. These situations are often accompanied by economic chaos, but, fortunately, the day was anti-climactically lacking in catastrophe. The New York Times wondered if we were in denial.

Not a chance. National headlines proclaimed imminent disaster, while the minister of economy’s announcement of failed negotiations received reality-TV-worthy audiences. Every conversation since has hinged on the “default,” and whose fault it is. Government officials have taken flak for parsing definitions of default, but they have a point: more than broke, Argentina is caught in a judicial Catch-22. This isn’t denial, but it is uncharted territory. In Buenos Aires, where I have lived most of my life, some people have taken to calling the unique situation a “Griefault,” in honor of the New York judge, Thomas Griesa, who got us into this mess.

To make a long story short, after Argentina’s history-making default in 2002, the country successfully renegotiated terms with 93 percent of its bondholders, and has been meeting those obligations. But “hold-out” hedge funds in possession of some of the bonds demand full payment and convinced Judge Griesa to force Argentina to pay them in full if anyone was going to be paid at all. That is an untenable solution for Argentina’s government, which points out that the vast majority of bondholders agreed to renegotiate terms on condition that no one else get a better deal – which is what the New York court asked Argentina to provide the hedge fund plaintiffs. In the end, a deal that maximized the interest of almost all parties is how being held hostage by a small number of bondholders. (More detailed explanations of the convoluted story can be found here and here.)

Maybe when you’ve already lived through every sort of default, devaluation, inflation, hyperinflation scenario imaginable (all that and I am still only 31!), you start developing a thicker skin. You follow and opine on arcane financial developments with passion generally only reserved for our national soccer team during World Cup season. Competing inflation indices and their differing methodologies are legitimate dinner conversation fodder here. I can hardly understand my credit card statement, but I have spent the past month in heated debate with friends about obscure debt-restructuring contract clauses governed by New York law.

Our history also leaves us with a healthy fear of economic instability, because it eventually affects every aspect of our life and everybody around us, even if the immediate effects of “default” haven’t yet had an effect on people’s day-to-day lives. Though the jury is still out on exactly how it will affect individuals, the decline in international credibility caused by a default would reduce access to foreign credit for provincial and private enterprise, as well as lessen foreign investment in the country. These could cause a downturn in the general economy. Argentina has mostly been locked out of international capital markets for more than a decade, so what’s really a shame is that all the painstaking economic reconstruction over that period in this country of 40 million people is now in jeopardy.

Beyond its financial travails, Argentina remains stuck in the tiresome role of case study and cautionary tale to the rest of the world. Argentina is the smart teen who went off the track, the high school pothead parents warn you about.

Grossly oversimplified versions of Argentina’s history are regularly used as econ class morality tales: one of the early 20th century’s wealthiest countries that failed to develop, the International Monetary Fund poster child that blew up, the country that in 2002 committed the most spectacular sovereign-debt default in history and, now, the country that somehow was forced into another default by a judicial order.

But these vignettes are more interested in making the point that Argentina detonated its unbelievably bright future through some intrinsic character flaw than including all the relevant details about Argentina’s history. A Roger Cohen op-ed in the New York Times last February is fairly illustrative of the genre: they always start with a lamentation of what we could have been. The author compares our wealth 100 years ago to Sweden, France, and Italy. Then, tragedy strikes. He argues it came in the form of Juan Perón, who shaped “an ethos of singular delusional power.” That’s pretty dismissive of a thrice-elected president whose party continues to win democratic elections and define national politics to this day. Imagine talking about FDR that way.

The clichés about Argentina – surely you’ve seen the musical – make for a good finger-wagging, “Don’t-be-like-Argentina” admonition that might keep impressionable countries in line, even if they say very little about Argentina’s reality. The caricature is predicated on flashes of fact: export riches, a wealthy elite, and massive immigration. Left out are the thornier questions of political culture, adverse international trading patterns, Cold War realpolitik and the like. Researching why Argentina couldn’t be more like Canada is like trying to figure out why a tadpole failed to develop into fish.

Yet, the misguided and dismissive commentary from abroad is mirrored by Argentina’s own domestic obsession with identifying the “wrong turn” in our history – a more nuanced sport than the one played at our expense by outsiders, but equally corrosive.

The never-ending quest for the source of our decline is nothing but a red herring. There’s no moment when our golden future came tumbling down, because the whole story is a fairytale. Alejandro Grimson, an Argentine anthropologist who explores this misguided belief, places the roots of Argentina’s delusion of grandeur and European-ness in the beliefs of Argentina’s 19th century elites who were, indeed, fantastically wealthy, although nobody else was. “As time passed, this idea took root, that Argentines had a magnificent destiny that we had not been able to reach, for some mysterious reason or through the fault of one group or another. Each decade we were further from that illusion,” he writes in his book on Argentine myths. A sense that we were powerless to stop this loss took hold even though Argentinians helped contribute to the decline by supporting a weak democracy, a trigger-happy military, and a polarized, highly politicized society.

And this is our own form of exceptionalism. American exceptionalism is predicated on the idea that Americans are number one; Argentine exceptionalism is predicated on the idea that we should have been number one, but were robbed (or blew it, depending on how you want to play the game).

Buenos Aires boasts impressive French-style façades and a tremendous cosmopolitan culture, making it easy for outsiders to continue being fooled, assuming we’re a nation comparable to Sweden. Argentina’s history and trajectory start to seem less exceptional and aberrational when you compare it to its neighbors: Brazil, Chile and Uruguay, though of course each country’s history has its own unique circumstances.

But no one, certainly not a people known for its quirky attachment to hyperbole, wants to be just another “normal” country. As Grimson argues, if we can’t be the best country in the world, we’re determined to make the case that we’re somehow the worst. And, of course, we’re quick to be offended when outsiders start making the same case and playing our “how-could-this-all-have-gone-so-wrong” game.

I myself refuse to keep playing. No matter what some New York judge says, and no matter what we could have, should have, might have been in the imagination of certain pundits, the Argentina I know is making its own future, with all the contradictions and difficulties endemic to democracy and our history. We’re not the French or the Swedes by a long shot – but that’s a good thing. I think we’re way better.

Jordana Timerman, a Buenos Aires native, is a member of La Fábrica Porteña, a Buenos Aires policy platform. Her work has also appeared in The Atlantic’s City Lab, Foreign Policy, and The Nation. Ms. Timerman’s father, Héctor Timerman, is the foreign minister of Argentina.The views expressed in this piece are purely her own. This piece originally appeared at Zocalo Public Square.

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