A Constant Feeling of Crisis – By Max Chafkin
Found via Simoleon Sense.
Think the U.S. economy feels shaky? Try doing business in Argentina, where corruption is the norm, regulations are absurd, inflation is rampant, and financial crises are a dime a dozen (11 cents next month).
On the day his country exploded, Santiago Bilinkis stayed at home and watched the riots on television with his wife and infant son. It was painful. In Buenos Aires, one of the world's great cities, looters were attacking grocery stores. Bilinkis's bank account—along with every other account in the country—had been frozen by executive decree three weeks earlier. Argentina was out of money.
This was December 20, 2001, a Thursday. That afternoon, several people were killed by police in front of the executive office building, known as the Pink House, and President Fernando de la Rúa resigned and fled the capital in a helicopter. In the days that followed, Argentina would cycle through four more presidents and default on debts totaling $155 billion. Unemployment would soar to 25 percent, and local governments, unable to pay their workers, would simply invent and print their own currencies. It was the beginning of the worst financial crisis in Argentina's history—and by some estimations the worst peacetime financial crisis in the history of the world.
Not that Bilinkis was surprised. His country had been spending far more than it collected in taxes for as long as he had lived, and paying for the shortfall by printing money or borrowing from international investors. Although he was only 31, Bilinkis had already lived through two coups, one bloody political purge, and 15 years of hyperinflation. Whereas the rest of the world treated financial crises as one-off catastrophes, Argentines looked at them like seasonal floods and prepared accordingly. You stocked up on U.S. dollars and canned food, and you waited for the crisis to pass. The general rule of thumb was one financial crisis every 10 years. It had been 11 years since the last one.
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The meltdown of 2008—which nearly destroyed the world's banking system, sent the United States into its worst recession in 80 years, and put half of Western Europe on the brink of economic collapse—barely registered in Argentina. Andy Freire, Bilinkis's co-founder at Officenet, told me that he finds it hard not to laugh when his American friends complain about their problems. "Retail sales fall 5 percent in the U.S., and people say it's a major crisis," Freire says. "Our sales went down 65 percent in a single month. That's a crisis."
I'd come to Argentina to find out what we Americans might have to learn from entrepreneurs like Freire. Argentina is one of the toughest business climates on earth, and, in some circles at least, a cautionary tale for U.S. policymaking.
