Where's the beef? How Argentina humbled a once-mighty economy.
A murder mystery in Argentina, a country that a century ago rivaled the US as the richest in the Americas, has spotlighted its political and economic missteps. This year's elections could offer an alternative path.
Buenos Aires — Until a few years ago, both of the meatpacking plants in the industrial town of Florencio Varela, on the outskirts of Argentina’s cattle belt, hummed with activity.
One served the domestic beef market. The other, Latigo S.A., butchered cows for export. Today, Latigo’s facility is a pile of rubble, its kosher salt baths, one of the few rooms still partially intact, hanging precariously over cratered concrete and rebar.
"It makes me sad and nostalgic,” says Emiliano Gamallo, the plant’s purchasing manager for six years before it closed down, with the loss of 500 jobs. “It also makes me angry,” he says, kicking at the debris where his office used to be.
In the 1930s, Argentina was the world’s top exporter of beef. It lost that crown in the 1950s, but until 10 years ago it still ranked third. Today it has fallen to 13th, largely as a result of government meddling in the industry. In 2006, Argentina tripled export tariffs on beef to 15 percent, and in a separate move that same year suspended all beef exports for about six months.
Unsurprisingly, thousands of cattle producers have quit over the past decade, cutting down herds and shuttering slaughterhouses big and small.
Argentina’s shrunken beef industry speaks to a wider malaise in a country that has for decades squandered much of its natural advantages through shortsighted policies. At the turn of the last century, Argentina appeared destined for success. It was one of the wealthiest countries in the world, blessed with natural resources and a well-educated population. Instead it became a byword for economic mismanagement and political crises. In 2001, it defaulted on $82 billion in bonds, the biggest sovereign default in history, and then stiffed foreign bondholders again in 2014. From the expropriation of pension funds to runaway inflation, the nation continually belies the potential it once seemed to have.
For much of this period, Argentina has swung between democracy and dictatorship. In October, voters will go to the polls again. President Cristina Fernández de Kirchner is constitutionally barred from standing for reelection. And given her unpopularity in the wake of a scandal surrounding the death of a public prosecutor here, her successor is likely to forge a different path. Some prospective candidates are already touting pro-business platforms, in contrast to Ms. Kirchner’s protectionist approach. Still, they face the tough challenge of winning over foreign creditors, tackling choking inflation, and restoring faith in the judiciary.
"No country is condemned to success or failure,” says Rosendo Fraga, a political analyst in Buenos Aires. Yet, since World War II, Argentina’s political leaders have consistently failed to convert opportunities into sustained economic success.
Marred by a blockbuster scandal
Kirchner’s final year in office has been marred by a scandal that, even by Argentine standards, is a blockbuster.
On Jan. 18, public prosecutor Alberto Nisman was found dead in his apartment with a point-blank gunshot wound to his head. The next day he was to present evidence of an alleged conspiracy by Kirchner and her associates to cover up Iran’s alleged role in the 1994 bombing of a Jewish community center here.
At first his death was deemed a suicide, but many Argentines cried foul.
The incident has highlighted deep-seated distrust in political elites accustomed to riding roughshod over legal niceties.
"The underbelly of Argentina has been revealed,” says Maria Esperanza Casullo, a political science professor at Argentina’s National University of Río Negro.
The scandal has shined a light on divisions within the Intelligence Secretariat (SI), a spy agency founded in 1946. Kirchner blames rogue SI officials for giving Mr. Nisman false information that led to his death, and has proposed an overhaul of the agency.
"This story is even too complicated for a Hollywood movie,” says Dario, who gave only his first name and was buying a bottle of water outside the city zoo. He says reforming the SI is important but that it misses the larger point of justice. Reforms “won’t tell us why Nisman’s dead,” he says.
Nisman’s death highlights a list of unresolved scandals, perhaps the most glaring of which is the bombing itself, the worst terror attack in Argentine history. The case languished in the 1990s, and the first judge to investigate the bombing was impeached in 2003 for bribing a witness.
For Sofia Guterman, whose daughter Andrea was one of 85 victims of the 1994 bombing, Nisman’s death was a kick in the gut.
"We’ve lost any chance of justice,” she says.
Her living room brims with photos of Andrea, a kindergarten teacher who died when she was 28 years old. Ms. Guterman has tried to hold on to Andrea’s memory in any way she can. She has self-published five books about Andrea since the attack; one is full of her childhood drawings.
Argentina’s courts offer limited recourse to citizens. The Supreme Court was established in the 1860s, and for the first 8-1/2 decades always had five members, says Mr. Fraga, the political analyst. Judges were never removed. But since 1947, politicians and dictators have either packed the court or eliminated it altogether 10 times, robbing it of judicial autonomy.
In late February some 300,000 people marched silently against the nation’s damaged justice system. It was meant to be a nonpartisan march – no political banners and speeches – organized by public prosecutors calling for a full investigation into Nisman’s death. But it exposed the growing rift between Kirchner and the judiciary.
Corruption plagues Argentina: In addition to the alleged Iran conspiracy, Kirchner is under investigation for alleged money laundering at her family-owned hotel chain (she hasn’t commented publicly on the allegations). The sitting vice president was charged last summer for using his influence as economy minister to ensure government contracts went to a company he allegedly controlled. Last year Argentina ranked 107th in global corruption rankings by Transparency International, tying with Djibouti and Indonesia.
Kirchner clashes with opponents
Kirchner and her predecessor and husband, Néstor Kirchner, who died in 2010, have governed Argentina since 2003 with a history of interventionist economic policies. Imports and exports have been restricted or heavily taxed in an effort to keep prices low at home and to shore up foreign reserves.
Since taking office in 2007, Ms. Kirchner has regularly thumbed her nose at the “enemy,” which includes anyone from her political opponents to the International Monetary Fund and the United States. She’s also clashed with elements of the media, as well as the agriculture and beef industries, which have bristled at her meddling.
"Imagine, in the last 12 years we’ve been bombarded with tales about how great our country is. We are told problems are caused by other people, not Argentina,” says Eduardo Diez, executive director of the Argentine American Dialogue Foundation. “The government doesn’t have any problems, and they aren’t responsible for anything. For some, that’s all they hear. And so they believe it.”
At another slaughterhouse outside the capital, workers dressed in white uniforms and matching hats throw animal waste into a giant dumpster. Even here, where cuts of beef are destined for the national market, the slaughterhouse often closes for days at a time because of a lack of cattle. Some 30,000 cattle producers have left the livestock industry over the past decade, with many ranches converting to more-profitable crops like soybeans, of which China is the biggest buyer.
Mr. Gamallo, the slaughterhouse administrator, says that Kirchner’s export taxes didn’t work because beef prices continued to rise at home, along with the price of other foodstuffs.
Inflation is running above 20 percent, according to government figures, and as high as 30 or 40 percent, based on private estimates. The government has kept interest rates low and printed money to bankroll social programs, while trying to prevent capital flight via stringent controls. Still, Argentina’s foreign reserves are dwindling and its borrowing options are limited, given last year’s default.
Faced with ever-rising prices, Argentines have little incentive to save. Instead they buy durable goods like cars or TVs. In 2014, less than half of Argentines said their salary was enough to cover household expenses, according to Vanderbilt University’s AmericasBarometer poll.
It also means industries that have been affected by Kirchnerism, as the Kirchners’ philosophy is called, will need time to recover if the next administration changes tack and promotes freer trade.
Miguel Schiariti, president of the Chamber of Industry and Commerce of Meats and Derivatives, says the government’s policies have been shortsighted. “They speak of defense of the table, but they’re just taking advantage,” Mr. Schiariti says, referring to the government’s rhetoric on protecting families and helping the poor. “If the policies do change, it will be a long process to recuperate what we’ve lost. It’s not like a factory where you can turn the lights back on and start producing.”
For the beef industry, he estimates between five and 10 years would be needed to raise new cattle stock and fatten existing cows before sending them to be slaughtered. He also wants to see fewer export restrictions. “Most in the industry are just hoping they stay above water until Dec. 10,” when the next administration takes office, he says.
Staying in power indefinitely
Imagine if US Democrats and Republicans merged into a single party, and stayed in power indefinitely. That’s more or less the case in Argentina. Since the restoration of democracy in 1983, the Peronist party has been in power for the last 23 out of 32 years – a far cry from a robust two-party system.
And from one Peronist presidency to another, policies have swung from neoliberalism in the 1990s to the interventionist approach of the Kirchner era.
Far from ending Peronist presidential hopefuls’ chances, Kirchner’s low ratings allow other party members to distance themselves from her faction.
The poor economic performance won’t affect all Peronists, says Ernesto Calvo, an associate professor of government at the University of Maryland. “It’s a flexible brand name. Many in Argentina think [Carlos] Menem was a lousy president [1989-99] and don’t think he has anything to do with Kirchner, despite both being Peronists.”
Argentina’s opposition remains weak and poorly organized. Its governing record is shaky: The past two non-Peronist presidents failed to finish their terms after presiding over equally dire economic hardships.
We don’t have a consensus inside our society of where we want to go and how to reach that point,” says Mr. Diez. “We’re very reactionary.”
Selling hand-wrapped cookies outside her squat, concrete home, Marina Palacios says she plans to vote for Kirchner again this year, seemingly unaware that the president’s name won’t be on the ballot.
High commodity prices in the latter half of Kirchner’s first term allowed her to invest more heavily in subsidies such as transportation and energy, and cash transfer programs to poor families, a program from which Ms. Palacios benefits. It’s not a lot of money – Palacios collects about 600 pesos ($70) a month – but it dulls the pain of inflation.
The Peronist base of mostly poor, working class, or immigrant voters makes up roughly 20 percent of the electorate. That alone is more than the runner-up to Kirchner got in the 2011 election. Many point to the power of incumbents in Latin America – no sitting president has lost in the past decade – for the Kirchner streak, even if one transition was from husband to wife.
Kirchner supporters have referred to the past 10 years as Argentina’s “winning decade.” The opposition sees it as a loss.
"Both of them are probably right,” says Bernardo Martín, standing next to one of the capital’s wide boulevards, flanked by dazzling belle epoque architecture. “Maybe everything’s just been wasted.”