Debt and Economic Woes in Argentina: Is Collapse Looming?

Argentina Grounds President’s Plane

Argentina Orders Crew to Quit Libertad Ship Held in Ghana



Argentina is a country that should be a lot better off than it is.   They’ve got great farmland, tons of mineral resources, access to big enough markets and a fairly well-educated and savvy populace.   At the beginning of the 20th Century Argentina was one of the richest nations in the world and Buenos Aires was considered one of the most elegant cities in the world, “the Paris of the Southern Hemisphere”.    You can still see the evidence of the city’s past grandeur in its stunning architecture, although time and neglect has certainly taken it down a few notches.

Argentina experienced major economic upheaval in 2001, following the crash of the American stock market and they’ve never completely recovered to the same level as they were before the crash.  There was a pretty big socioeconomic divide between rural and urban Argentina, but overall there was a large middle class that more or less had a first world standard of living.   For more on the 2001 crash, Fernando “Ferfal” Aguirre wrote a preparedness-minded book on his experiences during that period (The Modern Survival Manual: Surviving the Economic Collapse) and there’s a good documentary on Youtube:

Anyways, things have been heating up down there again.   Before 2001, the Argentine Peso was pegged 1:1 to the US Dollar.   It went to 4:1 after the collapse and I think it stayed somewhere in the area of 3:1 in the following decade.    Today it’s five pesos per dollar.   They’ve also put currency controls in place that make it so that pesos can’t leave the country in order to avoid massive capital flight.   A guy I know that was down there in the past couple of months said that there’s definitely something in the air down there these days.

I’ve noticed two stories in the news over the past couple months about Argentina.   In October their naval training vessel ARA Libertad was seized in as it docked in Ghana as collateral for the nation’s creditors.   The other involves Argentine President Cristina Kirchner grounding the state airplane Tango 1 (think Air Force One) and taking a charter plane to make a few trips around the world in order to keep it out of the hands of Argentina’s creditors.      The ARA Libertad isn’t just any old ship; it’s largely ceremonial and used to train naval cadets from Argentina and other nations.   Technically it’s a warship, but it’s mission is more diplomatic than anything and it’s supposed to be a symbol of pride for Argentina.     It’s kind of a cool looking ship:

Libertad 1
As far as Tango 1 goes, I’m sure it’s a very nice plane but it would be a real kick to the balls for any state for their leader to have to hitch a ride home after getting their plane snatched away from them.   Both of these events have to be very demoralizing to a country that can never seem to stay ahead of the curve.   I wish them the best of luck down there, but it doesn’t look good.

I think these stories from down south are notable to us because it goes to show that past performance doesn’t always guarantee future results.   Who would have believed back in Argentina’s glory days as one of the world’s wealthiest nations that someday one of their ships would be seized in an African port as collateral on debt?    It also shows that actions have consequences and sometimes the piper has to be paid.   If you owe people money, it will come back to bite you in the ass one way or another.   Another theme in these stories is that although the head of state might more or less rule the roost in their own country, there’s only so much they can do outside of their borders.  There’s no “they can’t do that to ….!” here  because yes “they” can.

Although there are some fundamental differences between the US and Argentina, I think it is an interesting case to follow because it is an example of what an advanced, modern economy looks like when things really go sour.   We’re well over our heads in debt but hopefully we can pull our heads out of our asses before we end up in a situation where we have to worry about having assets seized abroad like Argentina.