6 April 2016

Argentina – friend, not foe

By David Chadwick

President Macri’s move to settle Argentina’s debts and bring his country back into the international community should be the first step in the renewal of one of the world’s most successful trading alliances.

One hundred years ago Argentina was the eighth richest country in the world, and British foreign investment helped to propel it there.

Between 1900-1914, 33% of all Argentina’s Foreign Direct Investment (FDI) came from Great Britain. The traces of this trade remain visible in both countries. Harrods opened its only overseas branch in Buenos Aires in 1914, its distinctive storefront is still visible despite the shop’s eventual closure in 1996. Similarly, the Canning Club, a lavish private gentleman’s establishment based in St James’s Square, was formerly known as the Argentine Club. Its founders were wealthy businessmen who had made their fortunes in Argentina.

Argentina’s attractiveness to foreign investors meant that for each of the four decades prior to World War One, its economic growth outpaced that of the US.

One of the New World’s two leading lights, Argentines had been smart. They had formed a productive economic alliance with Great Britain, the world’s contemporary economic titan.

Argentina was a land of economic opportunity and its coffers swelled accordingly.

Whilst often portrayed as a simple colonial relationship, the British exchange was mutually beneficial. Argentine railway and tram lines all reaped the rewards of an influx of cash. Culture benefited too: Argentina’s three mains sports football, polo, and rugby, were all British imports; and Hereford Bulls still produce that most staple ingredient of the Argentine diet – steak.

But eventually the New World realised the Old World’s time was ticking by. Inter-American FDI between Argentina and the US replaced cash inflows from Britain, whose funds had been diverted to an arms race and were never to return to the same levels.

Slow relative economic decline set in after the end of the first world war. The demands of the allied war effort had handed an enormous boost to the US’s manufacturing sector, while the overly agriculturally-dependent Argentine economy ploughed nowhere fast.

Far more fatal was the emergence of President Juan Peron in 1946-1955, whose socialist dependency theories stunted economic growth and gave birth to an Argentine persecution complex: blaming self-inflicted domestic problems on the international community.

Until Peron’s ascension to power, Argentines had been the pioneers of Latin America. His rule sucked the blood out of the country. Its people became detached from Western realities. Withdrawal from the international market places followed. Consequent economic stagnation sank the country.

Eventually the economy drifted so far off course that the military decided enough was enough and took matters into its own hands. The saddest period of Argentina’s history was about to begin.

Having already cast democratic procedures aside, Argentina’s armed forces decided that torture and murder were suitable means for dealing with the country’s left-wing. Socialists were thrown from helicopters, babies were assigned new parents, and intimidation through kidnapping was common: over 30,000 Argentines, known as the ‘desaparecidos’, disappeared in under a decade.

None of this fixed the economy. Fast running out of ideas, the military decided on one last throw of the dice. A diversion. They had two options; war with Chile over the disputed Beagle canal, or with Britain over the Falkland Islands. Consequently, young Argentine males were conscripted and dispatched to Port Stanley. Many expressed their surprise upon arrival, when they discovered that the residents had not been clamouring to be saved— as they had been led to believe in Argentina — but were in fact more British than the British, right down to the red post boxes.

Less surprising, many of the young and poorly-trained Argentine conscripts were eager to keep out of harm’s way; they hadn’t volunteered to put their necks on the line.

In a resounding victory, the war was won, and the Argentine military relinquished power. Britain’s bold and effective response had brought democracy back to life in Argentina. Over the following years, a series of politicians enacted the reforms Argentina’s economy desperately needed.

But by the 1980’s the spirit of the enterprising Argentine had been lost. The reforms were introduced too quickly for a people who still needed weaning off the Peronista teat.

Argentina lurched from economic crisis to economic catastrophe. Its people sought consolation in their charismatic Peronista, President Christina Kirchner, who made everything better by telling them that they were special, and only poor because the nasty Western world had conspired against them to make it so.

With Macri’s election, for the first time since the Falklands’ War, Argentina is governed by a centre-right politician with no links to the Perons.

Britain should offer President Macri all the help it can offer to restore a successful partnership and help him to bring the land blessed with the some of the world’s finest riches (steak, wine, and the big hearts of its people), back to its former prosperity.

David Chadwick is a CapX contributor