Stuffing Money Into Mattresses In Argentina
MADELEINE BRAND, host:
This is Day to Day. I'm Madeleine Brand.
ALEX COHEN, host:
And I'm Alex Cohen. In a few minutes, meet a Colorado rancher whose turkeys are so delicious, you have to sign up for one seven months in advance.
BRAND: But first, let's check in with another economy that's on the ropes, Argentina's. People there who have money have nowhere to put it, and some are literally stuffing their mattresses with cash. Anil Mundra reports from Buenos Aires.
ANIL MUNDRA: With the rest of the world gripped by economic anxiety, it's business as usual in Buenos Aires. Not that all is well in the Argentine economy, but Jose Dapena, head of the finance department at the University of CEMA, says that this is a country where economic crises happen a lot.
Dr. JOSE DAPENA (Finance Department, University of CEMA): Not all the time, but every seven years.
MUNDRA: It almost seems that the boom and bust drama is a trait of the Argentine personality. The economy here is likewise a bit histrionic, even if the economists aren't. Juan Luis Bour is chief economist at the Foundation for Latin American Economic Investigations.
Mr. JUAN LUIS BOUR (Chief Economist, Foundation for Latin American Economic Investigations): Argentina usually has economic cycles that are much more wide than international cycles.
MUNDRA: That amplification has been visible in the stock market, but Argentina's stock exchange is small and doesn't account for its whole economy. Argentina has been relatively insulated from the global financial crisis because it wasn't much invested in the complex financial instruments that imploded in the U.S. The problem really comes second hand, when demand for commodities declines worldwide, says professor Dapena.
Dr. DAPENA: An international recession that makes that foods, soya and oil, is getting less demanding, and prices are going down. And much of the government income comes from taxes on exports of these kind of exportations.
MUNDRA: So, to keep its revenues and to keep goods inside the country, the Argentine government has tried to tax some food exports, up to 50 percent. That's a potentially big revenue stream since Argentina has been one of the world's leading exporters of grain and meat for a century.
But it's not big enough to cover an even older Argentine tradition, debt. Extreme debt was one of the causes of Argentina's first financial crisis in 1890. Still today, foreign debt is about three times as big as foreign cash reserves.
Dr. DAPENA: That's why the government needs to get some collateral from internal resources. If we don't have money, we need to get access to the money or the savings of the people.
MUNDRA: The Kirchner administration proposed last month to nationalize all of the private pension funds, much of which are invested in federal bonds anyway. So the government is hoping to take back its own debt.
(Soundbite of people shouting)
MUNDRA: Despite the thousands protesting outside the Capitol Building, the Senate passed the measure on November 20th. Argentines feel that the government leaves them no safe place to take their money. No one trusts the Argentine banks, and no one trusts the peso.
So, Argentines save their money the old-fashioned way, go down to the foreign exchange bureau, buy U.S. dollar bills, and stuff them under the mattress or maybe in the closet.
Ms. CHRISTINA RACHNER: Like, hide them between the jeans and sweaters and (unintelligible) pockets or in between - yeah, pockets.
MUNDRA: That's Christina Rachner(ph) describing what she did in the last crisis. Now, she works at a PR firm and has a little more money, and anyone with means keeps their cash in a foreign bank account to protect it from the always high inflation in Argentina.
Abraham Gack(ph) directs Plan Phoenix, an economic task force at the University of Buenos Aires. He says that inflation isn't the biggest problem facing Argentina.
Prof. ABRAHAM GACK (Director, Plan Phoenix, University of Buenos Aires): (Through translator) Inflation in an important issue. We have to address it. The main problem we have in Argentina is the unjust distribution of income, the enormous gap between those who earn more and those who earn less.
MUNDRA: But inflation and inequality might be closely related in Argentina. Some economists are now saying that, for the first time since the last crisis, high inflation is pushing many people here into poverty by making basic goods unaffordable.
(Soundbite of cart)
MUNDRA: Daniela Robles(ph) pushes a cart down a posh block of Buenos Aires, collecting paper and plastic to resell to the central recycling plant. She says she only recently had to resort to this.
Ms. DANIELA ROBLES: (Through translator) Because I never found any other work, and I managed to get this.
MUNDRA: After the 2001 crisis, the number of people scavenging for recyclables exploded 10 fold, as many people working in factories and shops were are laid off. Forecasts are uncertain, but some economists thinks something like that could happen again. Argentina could find itself in a very unusual and very dangerous situation - sky-high inflation with rock-bottom economic growth. For NPR News, I'm Anil Mundra in Buenos Aires.
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