Is the Economy in Argentina Looking Up?

 

 

Which country is the most economically free? Which is the best for entrepreneurs? Is it Argentina?

Last week we touched on job opportunities in the Southern Cone of South America. Many of our readers are retirees with established, independent, ongoing income. But an increasing number of readers are families that need to establish a livelihood.

In fact, we believe that in the precarious times we are in, even retirees would do well to establish more than one stream of income.

We here at Four Flags Journal are in that category and trust us! WE are thinking about it and taking some steps in that direction, considering some of the craziness going on. We have long believed that a wise goal is to establish several streams of income. That way, if one implodes, through no fault of our own well . . . all of our eggs were not in that basket. We have other baskets, so to speak.

Last week we dealt with job opportunity in our area. What we included in that article is true pretty much across the board in this part of the world.

And what about Argentina? The least stable economy here is Argentina. However, Argentina recently had a Presidential election and, wonder of wonders, the population removed the Peronists from office and installed a business man, Mauricio Macri, in the Pink House. For this reason, we are hopeful of more stability here. Mauricio Macri is a welcome change from the politics of Juan Peron.

The Peronist government subsidized so many things. Even the utilities have been subsidized. We admit that we have loved our $5 a month gas bill all this time. But at the same time we do know that someone has to pay the difference between that and the real cost. And the government has no money except what it takes from somewhere else, since governments produce nothing of value. So they have to find a source of cash OR just print up what they need. Only printing money to cover everything causes inflation. The population still has the same money, only it won’t buy much because of rising prices. Read on and you will understand what we mean.

Argentina’s inflation is double digit and has been for a long time. So THAT is where the money is coming from for the difference–at least in part–out of the citizens’ pockets in that their money buys less and less. People don’t recognize that loss as a hidden tax–but it is exactly that. So in the end they pay, while they give credit to the government for their subsidies. They can’t seem to connect the dots.

If people could just understand that, then that $5 a month gas bill takes on a different hue, doesn’t it?  In other words, the money has to be either taxed or stolen in the form of inflation. So in the end, nothing is free. It’s an illusion to think otherwise.

The word that we have here is that even the so-called indigenous people, who have subsisted in the mountains for generations, are coming down to benefit from the free housing and the welfare checks. Sadly the movement is so serious that the skills of generations are being lost.

You just can’t get away from the need for honesty. Honest finance. Honest politics. Honest work. Because anything else has fallout.

One more example and this is not only Argentina. It happens anywhere that socialism reigns. The former president had the challenge of financing all the “benefits.”  But how to do that and still keep the people happy? It’s a challenge!

As you know, the farmer has less productive years and more productive years, depending on weather, prices of commodities and other things. He makes up for the down years with the more  productive years. I don’t know about you but I wouldn’t want to be a farmer! It takes a real businessman to be a successful farmer.

In Argentina they had a few years of bumper crops of soybeans and high soybean prices. The country prospered from soybean exports. One of our much-admired friends here, an Argentina business man, was in the business of exporting soybeans. When the soybean crop got so good, the then-president, searching for a source of finance, viewed those soybeans with glee and put a 35% tax on the profits. We think it even went to 40% there for a while.

Here’s the fallout that often politicians, and those who benefit from the “benefits” don’t get. You have to have  money to pay for the subsidies. People who work for subsidized companies still expect to get paid, the lights at the factory have to be paid, and so on. Nothing is free. So the government desperately looks around for cash. And Wallah! The soybean farmers were raking in the profit. So we will tax the profits on the soybeans.

But farmers are businessmen. They are not going to risk their capital and labor if their profits are being skimmed off. So they didn’t. The soybean market crashed. The entire country was hurt financially, and my exporter friend, a business person of the quality we think are much needed in Argentina, was just sick of it and picked up and moved to Canada. So not only was the country affected by the tax on soybeans, Argentina lost one more productive man. The story of Argentina’s life. The story of socialism.

An economy only prospers when those who can be productive–are–and people can enjoy the fruits of their labor. Take it away and give to the non-workers and you will not have a prosperous nation. It’s just a principle of finance.

But politicians like socialism because it buys votes for them with OPM (Other People’s Money).

President Macri has removed the subsidies from the utilities so no more $5 a month gas bill here at Four Flags Journal. He took the tax off the soybeans. He also removed the subsidies on the subway, amid other measures.

We are located in a high end neighborhood in Buenos Aires amidst professional people and, to our surprise, many who supported Macri are now angry. One of them lately told us, “I HATE Macri!” We said, “Why? Because of the subsidies?! “Yes!” was the response.

These are people well able to pay for their utilities but they are like teenagers, spoiled all their lives, who turn into brats!

For our part, we see clearly what the President is trying to accomplish and so far, we support him. Although he went into politics in recent years, he is a businessman and we think that he understands finance. Which is knowledge of which most career politicians seem to be bereft! And not only in Argentina! It’s like a disease that assaults politicians almost everywhere!

We don’t know if Macri will be successful but we think it bears watching. If he is, we think things are going to change for Argentina. As we have published before, a hundred years ago Argentina was so prosperous it was neck and neck with the U.S. as to which would be the leading country. Opportunity abounded in Argentina. While many from Europe were going to the New World to the north–to America–the “land of opportunity,” the same thing was happening in South America, for the same reason. That is, in part, why the population here is European.

Argentina was close to being a world leader. And there is no reason that it shouldn’t be. Argentina is both a beautiful and wealthy country in natural and people resources. Many astute thinkers that we know in Argentina think that Juan Peron’s election and control in Argentina in the long ago is what not only stopped Argentina from going to the top but has nearly destroyed the country–turned it from First World to Third World. Our opinion is that people who don’t realize that the same thing could happen in the U.S. are just not thinking! What happened here can happen there.

As for Argentina, we are paying close attention.

For now Argentina would not be our choice for business.  Although there are successful American businesses here, things are a lot easier elsewhere. Just to give you an idea, Argentina is rated 124th on a list of 185 countries for economic freedom. However, if you are retired, or if you have an online business, personal freedom is great. But in our opinion there are a lot of debilitating regulations otherwise for now. Maybe that will change.

In any event, we do think that change may be in the wind there are other countries in the area that are better. If you have outside income or an online business, Buenos Aires is a great place to live. But there are other countries that are more economically free

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Stay tuned for more . .