The Argentine’s Nightmare: Waking Up to Find All Your Assets Worthless
A nightmare:
You are wealthy. Your wealth was inherited--oil, cattle, agribusiness--and you have built on it. The only oddity of your position is that all your assets--bank accounts, stocks, real estate, even the art your grandfather brought from Europe--are managed by someone else. Over the years, you have disagreed with some of your partner’s decisions, but your confidence has never wavered.
One day, you get your monthly statements and discover that you are missing 30% in every account. Your partner is not in his office, but his secretary agrees with your guess that one investment went sour; you’ll recover it next month. But next month, another 10% is missing. You put in one call to a lawyer and another to the bank: You insist on co-signing all future drafts.
With 40% of your assets missing, it’s hard to enjoy life. Of course, you’ll still eat well and live handsomely, but a terror grows inside. Where could the money have gone?
Next day, you go to the bank, and while you are there, a wire comes from Switzerland: Your partner has withdrawn 10% from an account there. You are furious and fully terrified. This has to be stopped!
After a sleepless night, you resolve to convert all the assets that are left into cash. You are at the bank when it opens. Too late. Overnight, the rest has gone.
You are the people of Argentina, and the partner is your government.
We have visited Argentina three times in the past two years. We are well acquainted with more than 100 people there, most of them relatives. They represent the spectrum of financial, political and professional possibilities, and have generously introduced us to many aspects of Argentine society--banking, publishing, the army, fine arts, business, the judiciary, horses, charities, architecture, auction houses and the fountain from which the wealth springs: the land, in all its rich variety.
We don’t know or claim to understand life in the villas miserias that ring Buenos Aires. But we do know some unemployed and underemployed, and some who live by their wits with no hint of security.
Last month we spent an extraordinary two weeks in Argentina--two weeks of riding in a fast car headed directly at a wall. Everyone in Argentina is now poorer than they have ever been, with the exception of a few gamblers who have been winning fortunes on the high wire of speculation. The money is evaporating, in the fascinating and horrible process called hyper-inflation, and evaporating with it are security and the society itself.
Buenos Aires is a beautiful and bustling city. On the surface, life seems to go on as always, but pervading everything is the anxiety of a people suddenly caught in a room where the lights have gone out. No one knows what is coming next, but it seems to be coming quickly.
Both the tango and the surrealist literature of Borges and Sabato embody the country’s contradictions. There has always been a dark and tragically self-destructive side to the coin of Argentine life, and the coin has turned over from time to time to show that face. Now it is spinning in the air, and it is impossible to escape the feeling that it is going to hit something very hard very soon.
The horror stories of Weimar Germany are being re-enacted now in Argentina. Price jumps are on the order of 30% or 50% or even 100% at a time, and the prices of everything change nearly every day; they change even as you wait in line at the supermarket.
The abstract concept that currency’s value depends on collective trust in the government is painfully concrete in Argentina today. That trust has evaporated. No one believes that the outgoing government of Raul Alfonsin can cure the inflation, and few think that the incoming Peronist regime of Carlos Saul Menem will do much better.
Everybody blames somebody else. A tiny fraction of Argentines pay their taxes. There is no capital reserve in the government’s coffers. The rich have long since moved most of their portable assets out of the country; the horrendous external debt that underlies this crisis is reputed to be dwarfed by the privately held assets in Argentine hands in Switzerland, the United States and Uruguay. But who can blame them? Since Juan Peron disbursed the national treasury 40 years ago to buy popularity, people with assets have been careful not to lose them to the government.
In this decade there has been a struggle to re-establish democratic rule, and everyone is proud of the peaceful presidential election May 14. A week later, the euphoria over the election had given way to urgent discussions about how to bring the country back from fiscal collapse.
Prices were spiraling upward and the exchange rate against the dollar was in free fall. Two years ago the austral was at about three to the dollar. By last February it had fallen to 17; on May 17 it was just over 100 to the dollar. Outside the exchange houses on Corrientes and San Martin, crowds of people hypnotically watched the blackboards quoting the constantly changing rate. Each time it went up or down, dozens of people rushed into each exchange house to turn bags and even briefcases full of australes into dollars, dollars into australes.
On Friday, May 19, the dollar opened at 140, climbed as high as 210 in some exchange houses, and finally closed at 170. The instability that other countries have suffered in decades was compressed into hours, even minutes. The government announced that the following Monday and Tuesday were bank and exchange holidays. Congress and both outgoing and incoming executive authorities spent the weekend trying to work out new austerity measures with which to retrench. As the government extended the bank and exchange holiday day by day over the next eight days, the economy ground to a halt.
We could no longer obtain australes, but the dollar was accepted virtually everywhere for significant purchases. One could buy shoes and books and expensive meals for dollars but had to scrape to find australes for taxis, groceries, newspapers, etc. We could have bought a car with dollars, but we had to walk most places for fear of running out of our few australes.
With the banks closed, it was difficult for anyone to find enough money to function. Half the businesses we walked past were closed. For months, as interest rates fluctuated in the range of 50% to 200%, it has been impossible to make any rational financial plans.
In supermarkets, hoarders were buying as much as they could afford. Once, we waited in a checkout line for 40 minutes; the delay came both from the number of people in line and the store’s trouble in keeping up with minute-by-minute price hikes and the shortage of bills with which to make change.
One Sunday, a cousin drove us out of the city in his car to meet his brother, who is second in command of a tank regiment. We spent most of the day enjoying a bountiful barbecue, and toward sunset we went to see the tank base. Two of our cousin’s subordinate officers proudly showed off their armor and told us that a contingent was always on full alert and could roll in four minutes. Nobody said so, but it was clear that there was no external enemy for whom they were in such a state of readiness.
The day before we left, a state of siege was imposed on the country, giving the police wide authority to make arrests and suspending guarantees of personal rights. Four bombs either went off or were disarmed in Buenos Aires, and in Rosario and elsewhere there were repeated sackings of supermarkets by large and determined groups of people. Many saw in that episode the return of the subversive left, the same element whose appearance in the mid-1970s sparked the terrible decade of military repression now known as the Dirty War.
The day we left Argentina, a dozen relatives were swarming about as we loaded our luggage into a cousin’s car. Someone lightly pointed out that we were violating the state of siege’s ban against congregating in the street. The goodbys ended abruptly and the cousins walked away quickly.
At the airport we sat drinking coffee with the three who had come to see us off. They unapologetically pocketed the sugar from the table, explaining that sugar had gone up 300% in price in the last two weeks. They treated us to the coffee, though they were visibly short of money. It was a terrible wrench to leave them behind in the chaos.
We love these people and their country. We fear for the day when struggling for something to eat will overcome the struggle to preserve their fragile democracy. This is a disaster just as real and pressing as any from natural causes. It just isn’t as dramatic to the outside world--yet.
