How Argentina survived economic meltdown
- 11 July 2011
- From the section Latin America & Caribbean
The economic turmoil in Greece and beyond has provoked painful memories for many Argentines who suffered their own financial and social crisis 10 years ago.
Argentina defaulted on a debt of US$132bn (£82bn; 93bn euros). The peso, which had been strictly tied to the US dollar, lost two-thirds of its value overnight, and the banks refused to let investors withdraw their own money.
There were daily protests, often violent, with demonstrators bashing pots and pans in what became known as the cacerolazo. Five presidents came and went within a few weeks.
Tens of thousands of businesses closed, unemployment rocketed, huge numbers of people fell below the poverty line while anyone who could get their money, and often themselves, out of the country, did so.
Monica Gugliemini, who worked in the financial sector in Buenos Aires at the time, said she remembered months of great uncertainty.
"No-one knew what was happening or what was going to happen," she said.
"I remember the silence on the streets when the government announced its new economic measures. No-one knew what to do. Then there was pandemonium."
She works now in a haberdashery store and watches events unfolding in Greece with interest.
"Argentina's was a more independent crisis," she said, "while Greece is tied up with the European Union."
Argentina has largely recovered and moved on from those traumatic days but many feel it is a fragile recovery.
"There is still capital flight," said Monica. "Only now people don't physically leave the country - they change their pesos into dollars instead."
Economist Federico MacDougall agrees.
"Argentina escaped the crisis for two main reasons," he said.
"Firstly, because of the rapid and strong rise in the price of soya which tripled its value in the four years from 2002. That boosted funds to the economy in general and the state in particular.
"And then there were political measures - some effective and some not so effective."
Marcela Ricca lives in a small agricultural town west of Buenos Aires which is now reaping the financial benefits of the boom in soya production.
But 10 years ago, she says, many people only survived thanks to government work programmes and by setting up their own networks of barter, known as Redes de Trueque.
"You'd offer whatever you had," remembers Marcela. "You might repair a washing machine and get six eggs for it. Or do somebody's accounts and they'd fix your car."
The scheme engendered great solidarity and only fell apart when the political parties hijacked it, Marcela says.
She also remembers the proliferation of alternative currencies in circulation.
The devaluation of the peso meant there were not enough bank notes to meet demand so some provincial governments printed their own.
The most widespread was the Patacon which was printed by the Buenos Aires provincial government.
Retailers would post signs on their shop windows advising shoppers which currencies they accepted.
Employees would arrive at work to find the gates padlocked and that the owners had fled, often stripping the workplace of anything they could sell.
With no alternative, some took control of the premises and set up workers' co-operatives, many of which survive and flourish today.
The most high profile is the Bauen hotel in the heart of downtown Buenos Aires.
The workers hold regular meetings, the management rotates and the chambermaids and waiters all have an equal say in the running of the business.
There are also glass and confectionary producers, shoemakers, balloon manufacturers and more.
They work with one another in a framework forged during their formative years but now operate, some more successfully than others, within the more traditional, capitalist system.
The Bauen hotel, for instance, is in a constant legal battle with the original owners who fled when times were tough but now want to recuperate a prime site in the heart of the bustling city.
Mr MacDougall says the biggest losers in the crisis, who have still not fully recovered, were the main political parties which lost their way and became fragmented, and the lower-middle classes who often lost everything.
A popular story circulating at the time of the crisis was that one of the bigger shanty towns in Buenos Aires put up a large sign reading "Welcome to the Middle Classes".
The winners were exporters and anyone involved in the tourist industry.
Thousands of foreign visitors came, and still come, attracted by many things, but especially by the lower prices.
This in turn sparked a building boom with hotels being constructed to meet the rising demand. Foreigners also bought cheap land and property.
Argentina defied the International Monetary Fund (IMF), firstly by ignoring advice on implementing austerity measures, then by clearing its debt. The IMF is still spoken of with scorn by many Argentines.
The break with the IMF, according to Mr MacDougall, meant that Argentina fell off the radar of most foreign lenders and investors.
As a result, Argentina simply hasn't been able to borrow large amounts that need paying back.
"But," he said, "the day the price of soya drops, the impact will be strong and immediate."
It may be some consolation to those Greeks facing economic difficulties that thousands in Argentina understand and sympathise with their plight and that they at least managed to emerge from their crisis.