Castles in the Sand: A prediction of more economic turmoil in Argentina

Here is a news article from the The Development Executive Group that popped into my inbox this morning. Unfortunately it predicts more economic turmoil for turmoil-ridden country. Headlines shouting out “Farming Crisis” have been staring me in the face from the Financial Times and The Economist alike, the last few weeks. Yet it’s with trepidation that I even begin to embark on understanding the complexities and , for some, the irrationality that seemingly forever embeds Argentine macroeconomic policies. But it has to be done…

But anyway here's a nice easy analogy for Argentine economics to get us going.

"Argentina is like a kid who makes a really good sand castle at the beach, takes
a lot of care in building it just right, then steps on it himself. Things have
been good recently. Now we have to put a question mark on everything."

-- Taxi driver Jose Luis Baldini, 60, voicing a bleak notion that has become conventional wisdom for many in Argentina here: Good times never seem to last. Today's Argentina is not gripped by crisis but rather by the fear of crisis, the Washington Post reports. Several strikes by farmers, furious over government policies, have sparked concerns about lasting damage to the economy. Many Argentines have been exchanging their pesos for dollars, forcing the government to dip into its surplus to keep the currency stable. Consumers, told that their government faces a shortage of natural gas, are bracing for blackouts. As recently as February, the government had been buying up vast quantities of dollars to keep the peso's value artificially low -- a strategy designed to boost exports and domestic investment. But after the farm conflict began, Argentines traded millions of pesos for dollars and forced the government to flip its strategy: It's now dipping into its USD 50 billion reserve fund to prop up the value of the peso, the Post reports. "The government right now is fighting the people who bring the dollars into this country, namely the farmers," said Alejandro Marino, 49, a lawyer in Buenos Aires. "Despite what the government is saying, there are clear signs that there will be a shortage of dollars here one day."

Global Development Briefing - Castles in the Sand