Some of my former posts made references to either the development of my understanding of the Argentinian culture and business environment; or to the changes I experienced while living there; but for this final post, I would like to delve into one conclusion I am just starting to formulate: without a historical context of a culture you are not part of, making political, social or economic assumptions could be very harmful for a foreigner entrepreneur.
I couldn’t really make sense of the political and economic decisions that the Argentinian government had been making for the last couple of years. This inward looking growth by currency-exchange control, import restrictions and tariff increases didn’t make much sense to me. I asked around; got some basic context—but it was clear I was missing many subtleties. I was missing the night stories passed from generation to generation that are so ingrained and ubiquitous that could be ignored during a summary. Why making the same mistakes from the past?
According to the general field of Economics, a liberal economic order can be seen as a public good. And although the liberalization of an economy should benefit all groups in society; special groups who enjoy sector-specific protections will attempt to maintain a closed economy in order to continue receiving these benefits. For this reason, the policymakers in charge of implementing a state intervention must be agnostic to current winners who may become losers. That does not seem ground-breaking knowledge. Nonetheless, as many of us are aware and based on human psychology, gains and losses are not weight equally. This is the reason why future losers have a bigger incentive to engage in collective actions against an open economy, while prospective winners, still uncertain about their payoffs, remain disorganized.
Argentina faced the deepest political crisis in 1976 after the Malvinas War, so it suddenly moved to a radical liberalization of the economy later that year. Argentina had a deep de-regularization of the banking industry in 1977 that resulted in high debt in the early 1980s, another hyperinflation, and a big crash. Why does this keep happening again and again? When would it stop?
I do not really have an answer and although I decided to take a class about Latin American Politics and Policy-making at the Harvard Kennedy School of Government to get a better understanding—it is still very early in the semester for me to make a conclusion. The only thing I can say is that even though Argentina is signaling a move towards an inward looking growth—it is important to understand two important factors: (1) the country does not have a high foreign debt and (2) its strong democracy could certainly repair the damages. It is true that current economic policies may not look very optimistic, but it also certain that there is a whole political and economic system behind those policies that as long as they get fixed, the engine will keep moving.
“A new Argentina, a new age about to begin
A new Argentina, we face the world together
And no dissent within”
– From Evita, "A New Argentina"