Life in Argentina's free-fall economy
How three families in this once-rich country are dealing with the financial crisis
(Page 2 of 5)
As their little enterprise slowly grew in the 1970s, they saw the return of Juan Perón to the presidency, the rise to power of Perón's second wife, Isabel, and a military coup that ousted her.Skip to next paragraph
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During the 1980s, despite the Falklands War with Britain, and 3,000 percent inflation that triggered looting and food riots, the bagmaking business endured, and even prospered. Mr. Guichané was able to leave his other job to make bags full time. Trezza did the same, and soon the couple had a bag factory in Lugano, a Buenos Aires neighborhood with street after street of small manufacturing companies.
By the 1990s, the Guichanés' factory had grown to 20 employees, and had exchanged the original manual machines for several automated ones. The country was on a roll. An open-market economy racked up a 50 percent growth rate until late in the decade.
When a nearby salesroom came up for sale, the Guichanés borrowed $138,000 to buy it - with the peso equal in value to the US dollar - by putting their home up as a loan guarantee.
When Argentina's recession hit four years ago, bag sales began to ebb, and the Guichanés workforce dropped to 10 employees.
But the biggest blow came last month, when a newly installed President Duhalde, inheriting empty government coffers and a banking system with nothing near the dollars or dollar-equivalent pesos Argentines had put in savings, declared the end of convertibility. The peso was officially devalued to $1.40 to the dollar, the parallel market quickly taking the peso to less than 2 for 1.
Argentines were stunned. They generally earn in pesos, but 80 percent of their debt is in dollars. Suddenly, the difference matters.
People who had deposited dollars in savings wanted dollars back, but the government said there were none. They would have to accept pesos - but when they will gain access to their money is still being decided.
The government also initially said that dollar loans over $100,000 would not be honored at 1 for 1. That meant the Guichané family, whose salesroom loan was to be paid off in 2003, would have faced additional years of payments - at a time when business continues to fall. The nightmare of losing everything, home and factory now looks quite real.
With the country at a near economic standstill, many people already on short fuses have done more than jangle keys to express their anger. A group of protesters torched a congresswoman's house and car. A group of lawmakers meeting in a cafe were jeered and threatened by passersby until they retreated to the safety of the Congress. A former Supreme Court justice was reportedly surrounded and heckled in an upscale shopping mall until police could evacuate him. And - in a stunning commentary on a country once known better than the American Midwest as the world's breadbasket - armies of the poor have invaded suburban markets to pillaged for food.
Twenty-eight Argentines have died, mostly the victims of police repression, since protests began Dec. 19.
The government has since announced that all loans will be "pesofied" on an equal basis, but street protests continue. And the Guichanésremain vigilant.
"We've crossed one hurdle to confront others," says Trezza, with little relief in her voice. "There's talk of indexing loans to inflation, and other things I don't even understand that could leave us in uncertainty."
With credit frozen and foreign suppliers shutting off supplies, many businesses have closed.
"The whole country has stopped," says Guichané, as he drives through the once-buzzing manufacturing district near his factory, now eerily quiet. "That was a cookie plant, there they made paper plates, that one had something to do with textiles," he says pointing right and left. Almost all are now closed and carry for-sale or for-lease signs.
With their country on its knees, Argentines could still heed the siren of a blame-it-on-the-foreigners populism. They have turned to patriarchal saviors in the past when uncertainty and economic decline threatened.
Juan Perón - who ruled with his famous wife, Evita, for a decade after World War II by shutting out the world and coopting the masses of urban and rural poor - is the best-known example of this brand of leadership. Argentina's largest political party still carries Perón's name unofficially and displays vestiges of the Peronist idea of Argentines more as subjects than citizens.