Argentina's Unusual Approach Leads to Big Gains

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Argentine President Nestor Kirchner, delivers a speech.

Argentine President Nestor Kirchner speaks at a ceremony marking the first drilling of the Argentine oil company Enarsa in the oil strip of the Orinoco river in Venezuela. Juan Barreto/AFP/Getty Images hide caption

itoggle caption Juan Barreto/AFP/Getty Images

Argentina is back from the economic brink of 2001 that drove half the population into poverty and ruined the country's credit.

President Nestor Kirchner, who could seek re-election this fall, is widely acknowledged as having guided South America's economic sick man back to health.

The president's dose of orthodox medicine and not-so-orthodox intervention has also deepened his reputation as a maverick.

Nine million people in Argentina still live below the poverty line, Kirchner tells his countrymen — but that's half the number who lived in misery five years ago.

And there are definite signs that the economy is sizzling in this land of steak: Trendy restaurants attract global-trotting gourmands. Elegant hotels hum with smartly dressed guests and harp concertos. Locals and foreign tourists alike flood the outdoor markets on a sun-drenched Sunday.

Analysts say Kirchner's button-down fiscal conservatism has built a $40 billion surplus. A cheap peso has made Argentine goods attractive overseas, and high taxes on soaring exports have filled the country's coffers. Inflation is creeping into the double digits, but subsidies on utilities have tapped down the price of power.

The formula borrows from the Left and the Right, and makes the Argentine President difficult to politically peg.

Pollster and political analyst Enrique Zuleta Puceiro chuckles, "When you ask him 'are you from the Left or from the Right?' [Kirchner] says, "No, I'm a Peronist!," referring to the party started by Argentina's fabled President Juan Domingo Peron.

A "Peronist," Puceiro says is synonymous with ambiguity: "Neither the right, nor the left, always trying to preserve the center. And the Argentinians always play that kind of game."

But there is nothing middle-of-the-road in Kirchner's attitude toward international lending institutions. His decision to repay the IMF debt in a single ten-billion dollar payment fixed him in the public mind as a bold man of action. Economist Pablo Rojo says poking the much-loathed lending institution in the eye was just shrewd politics.

"That was essentially a political coup for him to gain popularity ... An expensive one but Argentina could afford that because it was in a moment when the international prices of our products were up and the government was collecting a lot of money from our tax exports," Rojo says.

The IMF episode also established Kirchner as a scrappy combatant willing to make the hard decisions to secure Argentina's economic independence. Political scientist Sergio Berensztein says Argentines find in Kirchner a classic Latin American "caudillo" or strongman capable of walking the country back from the economic abyss.

"Because democracy is too noisy, too messy, it takes a lot of time to get things done. So in the middle of the crisis—that's what you want — you want a strong hand, quote, unquote 'solving problems.'"

Kirchner has also used a strategic alliance with Hugo Chavez to relieve his country's burdens. The Venezuelan leader has provided oil and bought some 3-billion dollars of Argentine debt.

But Kirchner has also sided with the United States on Iran. Argentina's prosecutors recently fingered Iranian officials for the bombing of a Jewish Cultural Center in Buenos Aires in 1994.

Political analyst Felipe Noguera says when Kirchner gives Chavez space to assail President Bush, as he did at an Argentine stadium in March ... it's mostly political theater.

"President Kirchner allows President Chavez to play the anti-Bush card in rhetoric. But in practice," Noguera says, "the real relationship between Argentina and the US in many business relationships and so on is on a pretty strong sort of footing – so I think it's a bit of an act."

Pollster Enrique Zuleta Puceiro says that President Kirchner wants to occupy the middle ground knowing that while both presidents Bush and Chavez carry baggage in the region, their respective countries get high marks –

"We don't want to cut the relations with the United States: They want to have relations despite the fact that Bush is there. They want to have relations with Venezuela – a very rich country – despite the fact that Chavez is there," Puceiro concludes.

Whether navigating the arch-enemies of the Americas, or battling inflation at home, Kirchner governs as if the specter of economic doom were at the door. But Former Economic Minister Roberto Lavagna says it carries the seeds of creeping autocratic rule.

"The dynamic of the situation pushed the government to be more and more intrusive, more and more dedicated to control, sustaining the idea of only one way to think and only one way to analyze the situation and if you don't accept this way you become an enemy," Lavagna says.

Lavagna is widely regarded as the architect of Argentina's recovery early on. He was ousted by Kirchner, according to some reports, over inflation. Lavagna opposes government price controls on such things as beef, contending they create distortions in a free market.

The country's cattlemen agree. Some analysts even suggest that price controls on beef have created shortages because producers have elected to leave their cattle in the field, waiting for better prices.

Rancher Carlos Brown says government quotas have also cut in half the amount of beef that can be sold for export.

"We should be exporting over a billion dollars [worth of beef] but that amount has fallen sharply," Brown says, adding "Argentine beef which is known for its quality is losing export opportunities."

Economist Pablo Rojo says a ban on beef exports over the long term would be disastrous. "Because a lot of people invested in that industry believing that the international prices would increase and Argentina would take profit of this situation, etc, and they are under-performing now," Rojo says.

But President Kirchner insists on telling his countrymen, "We're not out of hell yet." For the 27-percent of the population living below the poverty line, his words ring true.

However, the grace period granted Nestor Kirchner to cure the country's economic ills, while growing shorter, does not seem to have expired yet.

Opportunities Fuel Argentina's Economic Rebound

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Textile worker Celia Martinez i

Celia Martinez got the political education of a lifetime when she and about 50 co-workers fought to appropriate Brukman's Textile Factory from its owners in the years that followed Argentina's 2001 economic collapse. Julie McCarthy, NPR hide caption

itoggle caption Julie McCarthy, NPR
Textile worker Celia Martinez

Celia Martinez got the political education of a lifetime when she and about 50 co-workers fought to appropriate Brukman's Textile Factory from its owners in the years that followed Argentina's 2001 economic collapse.

Julie McCarthy, NPR

A Maverick Reputation

Argentine President Nestor Kirchner, who could seek re-election this fall, is widely acknowledged as having guided South America's economic sick man back to health.

Argentina GDP growth chart

For four straight years, Argentina has posted growth exceeding 8.5 percent. Lindsay Mangum, NPR hide caption

itoggle caption Lindsay Mangum, NPR
Ricardo Lubieniecki holds one of his company's boots. i

After being forced into the export market, Ricardo Lubieniecki's Buenos Aires-based boot company has seen booming growth in the past four years. Julie McCarthy, NPR hide caption

itoggle caption Julie McCarthy, NPR
Ricardo Lubieniecki holds one of his company's boots.

After being forced into the export market, Ricardo Lubieniecki's Buenos Aires-based boot company has seen booming growth in the past four years.

Julie McCarthy, NPR

Six years after an economic meltdown drove more than half of Argentina's 38 million people into poverty, the economy has stormed back.

For four straight years, Argentina has posted growth exceeding 8.5 percent, a recovery that looks more like the emerging markets of Asia than of South America.

Booming exports are driving Argentina's economic revival. Economist Pablo Rojo says 60 percent of exports are in the agricultural sector and are guaranteed to hold as long as Asia's appetite for soy and other commodities does.

"I'm very optimistic concerning the short term, because we have excellent international conditions, excellent international prices, very low interest rates in the world, and open access to international markets," Rojo says.

A depreciated Argentine peso — the currency went from one to the dollar before the crisis to three to one after it — has made Argentina's goods relatively cheap and thus attractive overseas.

Overseas Opportunities

It has opened an entire new world for one Buenos Aires boot maker.

Ricardo Lubieniecki owns the small footwear factory that his father founded 80 years ago. A bit of a showman, Lubieniecki entertains visitors in his showroom, interspersing stories of his success with Yiddish renditions of tunes from Fiddler on the Roof. "If I Were a Rich Man," seems apt, as does the lyric, "Sunrise, sunset, swiftly fly the years."

The boot business that Lubieniecki runs with his son Danny has swiftly grown at an annual 30-percent a year for each of the past four years.

Formerly a garden-variety boot store that outfitted local factory workers and jockeys, El Resero boot company has found a new niche as a provider of high-end riding boots to clients around the world. Customers from France, the United States, South Africa, Britain and Bahrain are clamoring for his footwear.

Lubieniecki says he never exported until Argentina's market collapsed along with the economy in 2001. To survive, he ventured overseas, seeking out industry expos and introducing his craftsmen to Europe's best designs.

"In crisis lies opportunity," Lubieniecki says. "Now you can take advantage of a crisis – in this case, an export market that forces you to improve your quality and to emulate the best.

"And we're no fools," he adds. "We know how to copy the best in the world."

In the rear of the showroom, a small team of employees hand-crafts the boots that sell for $100 a pair and up. The company that Lubieniecki's economist son Danny helped go global is now operating at full capacity. Working 50 hours a week, employees earn up to $500 a month.

"Staying small" is the secret to the company's success, Lubieniecki says.

Employee-Controlled Production

There are other pockets of economic ingenuity popping up in Buenos Aires.

In a six-story building across town, a no-nonsense female work force wrested control of the Brukman Textile Factory from its owners. Now as an employee cooperative, the factory continues to churn out fine suits for men.

Seamstresses in blue smocks work under fluorescent lights in a room crammed with sewing machines and neat piles of navy and brown pinstriped sleeves. Experienced fingers stitch pant legs into suits.

The phenomenon of employees taking over their workplace began in 2000, when owners ceased production, stopped paying wages, and filed for bankruptcy.

Celia Martinez, a leader of the employee fight for the takeover, recalls a fateful night in December 2001 at the start of Argentina's precipitous slide. The women were in a deep dispute with the owners, who had slashed their pay to little more than bus fare.

"They offered us 100 pesos and a suit and said, 'There's no money.'" Martinez says. "We said, 'How is that possible when we were making 200 suits a day?' Finally, one of the Brukman brothers threw the keys to the factory at us and said – 'Okay, if you think you can run this place, you try it!'"

What began as a simple demand for back wages escalated into a worker takeover. The women's struggle for the textile plant became the symbol of the recuperated factory movement in Argentina.

Ten-thousand employees now control the production in 180 companies, from ceramic firms to printing presses.

At Brukman's, the women feverishly filled orders and fought eviction. Millions were losing their jobs, and a stake in the factory was their only chance for survival.

When authorities dispatched armed guards to lock the facility down, the women mobilized a tent city that drew international attention and gave them the political education of a lifetime.

"I was a housewife, and this was my first job," Martinez says. "But neighborhood assemblies, leftist parties and the militant students inspired us. I learned about Marx and Trotsky, and workers' control."

'We Want Everything'

After years of legal maneuvering, the women acquired the factory and some of its old debts. They've doubled their salary to about $80 a week. Dishonest salesmen have cheated them. They still struggle to stay afloat. But Martinez says that old clients stayed loyal.

"Many people came to us out of affection and solidarity with our fight," she says. "It was extremely empowering to be your own boss."

Labor experts say the biggest challenge for recuperated factories is getting credit, because many of them are stuck in legal limbo. Angry workers say their hard work and organization staved off greater instability for the country and they continue to demand recognition as permanent owners.

The battle-hardened seamstresses of Brukman's predict more labor unrest before Argentina's fragile recovery is through. The struggle has only enlarged their ambitions.

"As women, we don't just want the bread, we want the roses, too," Martinez says. "Today it's a factory, tomorrow it's a better salary and better health care. And for our children — a good education."

"We want everything," Martinez says.

That's an ambition no one dared dream just five years ago.

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