Nation’s fall from Grace: Chronicling Argentina’s economic boom-to-bust

But it’s a country that crashed like no other on earth. In an unprecedented fall, Argentina went from ranking among the world’s top economies to one at the very bottom of the list. Today, economists simply roll their eyes at the fate of Argentina, which is now a developing country.

Until the middle of the 20th century, such a scenario was simply unimaginable. While wars raged — first in Europe, and then across the world — life was still splendid for the Argentine upper class, who built grand villas and factories. The country’s moneyed class acquired horses and summered in Paris — where they could splurge on the latest fashions.

Argentina’s economy was consistently growing by some 5% each year. And beyond having the highest per capita income in the world, the country also possessed a seemingly endless supply of raw materials and natural resources such as water, gas and oil. Argentina also made a fortune exporting meat, grain and leather to war-torn Europe. The nation, the 8th-largest territory on earth today — and containing all climate zones — was also once a breadbasket, with ideal conditions for agriculture.

At the end of World War II, the Argentine peso was considered one of the most stable currencies in the world alongside the British pound and the US dollar. At that time, Argentina was the wealthiest and most influential country in the region, far ahead of Brazil. Its elegant capital, Buenos Aires, was immortalised as “la reina de la plata” (“the queen of silver”) in the lyrics of the great tango singer Carlos Gardel.

Yet, behind all the glittering facades, Argentina’s decline was already well underway. It had much to do with the man who won the 1946 presidential election — and who was invoked by many of his successors — whether liberal, conservative or moderate — in subsequent decades: Juan Domingo Peron. The former general promised Argentina a third path between capitalism and socialism and thus laid the economic foundation for the misery of the decades ahead.

The Peronist guiding principle was profligacy. And then, when nothing else worked, to go into debt, print money and let inflation gallop. By 1949, Peron had tripled state expenditures and by the time he was pushed from power 1955, he had doubled the number of state employees.

But nothing symbolised Peron’s economic madness more than the purchase of Great Britain’s ailing railway system: 150 million GBP ($487 billion today) for expensive junk equipment and 43,000 kilometres (26,720 miles) of rail that was neglected and in disrepair. Fireworks were set off, church bells rang, shrill locomotive whistles could be heard everywhere: The disaster was celebrated as a national triumph. By the time a few years had passed, Argentina had slid into its first deep economic crisis.

Nevertheless, in 1967, foreign debt only totaled $8 million, but then massive borrowing began. The primary drivers were Argentina’s military dictatorship (1976-1983) and the nonsensical 1982 Falklands War — not only was the war badly lost, it also cost the military government its hold on power. Hyperinflation soon became the new buzzword in Argentina, ultimately forcing the country’s first post-dictatorship president, Raul Alfonsin, out of office in 1989.

Between 1992 and 1999, state expenditures rose a full 50%. By 2001, Argentina’s mountain of debt had reached a mind-blowing $160 billion, and in December of that year, the country declared bankruptcy. Five presidents came and went within two weeks. Argentina has been unable to recover ever since: Plans laid out by the International Monetary Fund (IMF) have often caused more damage than good and Buenos Aires has been abandoned by investors scared off by lack of legal security.

The country is ruled by presidents who, when it comes to financial policy, always do exactly the opposite of whatever their predecessor did. And citizens often see the state as a mere cash cow to be milked — and to which nothing is owed.

Today, Argentina, which has all the ingredients needed to be a prosperous nation and which was uttered in the same breath as the US one century ago, now carries a staggering $323 billion in debt.