Argentina's Farm Crisis: I say “Basta”, meaning “Enough”

Mahatma Gandhi once noted that “an eye for an eye makes the whole world blind”. In the United States we say “two wrongs do not make a right”. The grueling, 3-month-long fight between President Cristina Fernandez de Kirchner and Argentina’s powerful farmers is a prime example of what happens when these principles are ignored.

And the most interesting thing is that Argentina is undergoing its best economic situation in decades, yet because of this stalemate the mood in the streets is one of gloom and doom. "This is the most gratuitous crisis in Argentine history," political analyst Rosendo Fraga noted. "We've never seen a crisis during such favorable world conditions. ... What the president needs to do is resolve this dispute with the farmers today and immediately start rebuilding her support."

So what has the recent stalemate between the government and the farmers created so far?

Well there are over 200 routes cut off in the country, no commercialization of grain, food and fuel shortages, increasing inflation, a rise in interest rates, the Central Bank’s foreign reserves have depleted more than U$S 1.5 billion the last few weeks.

Consumer confidence has decreased by 24% over that of last year. Domestic consumption has lowered by 20%. Real wages are now stagnant at best, and poverty and income inequality are on the rise. A recent poll, take last month by the University of Belgrano found that 69 percent of people in the capital, Buenos Aires, thought another crash was "very probable". Public services costs are on the rise; the national debt is a larger percentage of the country’s GDP than that of 2001, the year of Argentina’s last sovereign default.

This situation has, in turn, led to financial, economic and political uncertainty.

So what does the government intend to do? The Economist noted that rather than moving to correct the problems, the Kirchners have simply “whitewashed the effects of inflation” by cancelling the publication of official poverty statistics. The Economist’s Intelligence Unit has also observed that Cristina has continued her husband’s “commitment to a weak currency policy... and to heterodox measures such as price caps, cross-subsidies and export taxes”. On June 10th Argentina updated the method by which it determines its Consumer Price Index. According to this new system every time a product’s price rises too sharply, it will simply be removed from the index on the theory that consumers will switch to other goods after being deterred by the new cost. Yesterday, after months of blocked highways and food shipments coupled with peaceful demonstrations the Kirchner government responded with police brutality and arrests.

So what is going to happen? Your guess is probably as good as my own. One thing remains certain in Argentina: anything is possible. I personally say: “basta”, meaning “enough”. Instead of continuing its policies of handing out wasteful welfare state handouts and redistributing the wealth, Argentina should look to a combination of real and meaningful economic reform, better monetary policy and limiting the role of government. Until that day, Argentina’s former days of glory will remain ever out of reach.

But that is just my opinion. What do you think?