What is really going on in Argentina? - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 8 October 2013
What is really going on in Argentina? A  A  A

Gualfin, Argentina

Forget about your leaders
But watch the parking meters

- Bob Dylan

If you've been watching this space, you know that your leaders have been wildly successful. No, of course not at creating peace and prosperity, or bringing a recovery. But at their main mission - transferring wealth, power, and status from 'the public' to themselves - they have done a great job.

The trouble with American voters is that they lack enough cynicism to understand what is really going on. The pols say they are trying to boost jobs or make the world safe from terrorism and the poor voters believe them. President Obama, for example, says he aims to give 'the average hard-working American' a better future...or to improve his health care...or help him find a parking place. The typical citizen gives him the benefit of the doubt. If the programs don't work out...well...at least he's trying.

He should come to Argentina - a country second to none in cynicism. Which is to say, the typical Argentine taxi driver has a clearer idea of how politics really works than a typical professor of government at a prestigious American university.

"Oh, it's getting exciting now," said our taxi driver. "Poor Cristina. She claims that we have the best economy in the world. But she's lying. Every time I go to the store things are more expensive...and I'm not making any more money."

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You will not find the truth about what is happening in Argentina by listening to a speech from the president. Instead, watch the taxi meters. We took a 15 minute taxi cab ride to the in-town airport. The fare was 35 pesos. This seemed like a lot. Two years ago, the same taxi ride would have been only 25 pesos.

But in the intervening period, the peso has gone down faster - against the dollar - than cab fares have gone up. Two years ago, Buenos Aires was relatively expensive. Now, for a person with dollars in his wallet, it is cheap again. At the official exchange rate, 35 pesos is equal to about $6.50. But the unofficial exchange rate is 10 to the dollar. So, to us - as long as we exchange our money on the black market - the cab ride cost only $3.50.

We just arrived come from Europe. In English, $3.50 won't even buy a subway ticket. The equivalent taxi ride would cost at least $20. As for Paris, forget it... In the first place, you wouldn't be able to find a cab. You'll have to call one. The last time we did this the cab already had $12 on the meter before we even opened the door.

"I'm just a cab driver," our Argentine philosopher-cum-taxi driver continued. "I get paid - not very much - for taking people from one place to another. I even have a meter on the cab so there's no question about how much you pay.

"What does Cristina [Cristina Fernandez Kirshner, Argentina's president] get paid for? Lying to us. Stealing our money. Generally making a mess of the economy.

"But at least she puts on a good show. You turn on the TV and there she is...with more lies.

"The amazing thing is that everybody knows they are lies. We all know the cost of living is going up 3 times faster than she says. We all know the country is headed for bankruptcy. We all know she's just printing up funny money to pay her bills.

"But nobody cares about that. She's just doing her job. Just like you and me. My job is to drive a taxi. Her job is to lie to me."

We are no strangers to cynicism. But our taxi driver had so much of it, he could have given it out all day and still have enough left.

Later on, we met our favorite economist in Buenos Aires, Rob Marstrand. Rob has plenty of cynicism too. After all, he is a former banker from London. He likes living in Argentina:

"Now, it's great. Because the quality of life is actually rather high - at least if you get paid in dollars or pounds. You eat well. You can have a nice apartment. And you get a good laugh every time you turn on the news."

Like many expatriates in Buenos Aires, the part of Rob's brain that does quick math calculations is expanding. He is paid in one currency. He keeps score in another. He pays his bills in a third. And he trades between the three of them at different, variable rates, depending on whom he is dealing with.

When you ask the price of an apartment, for example, the answer is usually - it depends. How much will you pay in dollars? How much in pesos? How much at the official rate? How much at the "blue" rate? And how much will you say you paid? Typically, you pay some officially, at the official rate. The rest you may pay 'under the table' in dollars. You may have to show up at settlement with a big suitcase full of cash or make a transfer to a bank account in Miami.

"It's all very exhilarating," says Rob. "If you like doing math. I had to set up a spread sheet to keep up with it."

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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