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DAVID KRUSE

By Staff | Mar 21, 2014

Argentina has likely had the longest sustained period of economic decline of any nation that once “had made it.”

The Economist noted that shortly after the turn of the last century, the Argentine economy had grown faster than the U.S. economy for four decades. Its GDP was larger than Germany’s, France’s or Italy’s, attracting immigrants like the U.S. today.

At that time, Buenos Aries was described as the Paris of this hemisphere, rivaling New York.

I have been to both New York and Buenos Aries in the last 15 months. I saw human scavengers pilfering through the Dumpsters set in front of the hotel entrance for their convenience ahead of the pigeons in Argentina.

You won’t see that in New York. The streets are not safe in the best neighborhoods in Buenos Aries. New York’s Central Park is Camelot by comparison.

All the good things about Argentina are talked about in the past tense. They still tango there, and I am surprised that my lessons have not made YouTube.

Argentine agriculture is struggling. The Argentine government, which is starved for hard currency, essentially confiscates 35 percent of the soybeans produced by farmers there as a source of dollars.

Farmers get devalued pesos when they sell so they keep as many soybeans in a bin as they can rather than hold domestic currency that is devalued by 30 percent inflation. When I toured farms there, soil types were not that much different than here in northwest Iowa, but are not well-drained as farms are here.

They lose large amounts of production to flooding and wet soils, but cannot afford to put the infrastructure in place to control it. They have no tile in fields because their ownership and management structure is so diluted no one can justify the cost.

They will not invest in tile collectively so that they all lose money collectively. They adopt no-till, use silo bags for storage and implement low-input farming practices that purposely do not achieve maximum productivity in deference to lower costs.

As the government steals 35 percent of their production before taxes, the government could afford a larger investment in Agriculture, but of course I am only joking.

That is not going to happen. If they raise a big crop it is because the weather was really lucky.

Most government farm policy has been directed at maintaining cheap food domestically using protectionist means to keep the population from revolting at the ballot box.

The Argentine government is corrupt in that it lies incessantly about its GDP, its rates of inflation and unemployment with no respect for property rights trying to protect itself to avoid revealing the emperor is naked.

Argentina is enough of a democracy that its relentless decline can really only be blamed on the people’s resistance to political and economic reforms that were necessary to put it on a different track.

No one did anything to Argentina to cause this; it’s entirely self-inflicted. The Argentine people have continued to elect economically illiterate populists that tell them what they want to hear.

They do the same thing always expecting a different result. Argentina has always strived hard to do whatever is the wrong thing and, instead of learning from it, would try a different wrong thing to avoid doing what is right. They are stubborn about it.

In 2001, Argentina defaulted on its foreign debt that is still playing out in courts with creditors. If U.S. courts, where this is being litigated, rule that Argentina has to pay old claims, Argentina said that it will create a “catastrophe” causing it to default again on its current debts.

Payment would deplete Argentine reserves. They suggest this will harm the global economy – but the investor attitude is more like, “so what else is new?”

The case is expected to be decided by the U.S. Supreme Court in April.

The U.S. is not getting along well with Argentina moving its NASA weather station and Antarctic operations to Chile while U.S. cruise ships no longer dock in Argentina, because of “fees” charged by port authorities.

They haven’t come to understand that when they screw someone they only get to do it once. What it shows is that they are so desperate they still try to get you that one time.

When in Buenos Aries, there was a street demonstration against Monsanto. Argentine farmers brown-bag their seed stiffing Monsanto of royalties.

So it seems odd that after you steal from someone that you then protest, portraying Monsanto as the bad guys. Seed companies stopped providing them new seed varieties and new technology. If they don’t like Monsanto seed, why do they pirate it?

The Economist compared Argentina to Australia in that both countries “have lots of commodities, a history of immigration and remoteness from big industrial centers.”

Yet Argentine GDP was only two-thirds that of Australia between 1929 and 1975. Somebody wasn’t working very hard and it looks to me that they are still trying to find a way to avoid it.

After a century of somehow getting by, no one there remembers how it works anymore to know anything different.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

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