As Argentina goes, so go the Americas
As we walked the streets here, we pondered our many conversations with Argentines about their nation's prolonged economic crisis. We passed news racks full of headlines pummeling politicians for robbing the country. But we couldn't help noticing stores filled with people buying high-priced furniture and clothes, and classy restaurants packed with diners feasting on sumptuous steak filets.
How to explain these contradictions? The truth is that Argentina faces a severe financial crisis, deep alienation of the public, and a political culture that blames the politicians but not the voters. Poverty has increased, but Argentina remains a well-educated country of middle-class expectations. Crime has increased, but people still do business.
Argentina's congenital problem - and that of most of its South American neighbors - is its volatility. Since the region's first debt crisis in the mid-19th century, boom- bust cycles have raised expectations and dashed them.
But this time around, the downside has a more serious dimension, and the US is making a grave mistake in acting as if Argentina's chronic crisis has bottomed, or that it can be isolated from South America's.
Argentina has been unable to break loose from its economic crisis in part because its leaders haven't made the hard decisions to close banks and reduce deposits without clear support from the US and the International Monetary Fund. Argentina and the international community have each been waiting for the other to move first. Meanwhile, Argentina's economy has contracted by 12 percent, as salaries have dropped by 44 percent, dragging its neighbors down and making investors wary.
If Argentina were unique in South America, other countries could relax. But the continent is on edge with the war in Colombia, escalating polarization in Venezuela, sharp decline in support for Peruvian President Alejandro Toledo, polar populists running for president in Ecuador, and political stalemate in Bolivia.
Argentina has the continent's second largest economy. With it ailing, the region has hoped the largest economy - Brazil's - would lift the others. But the election of Luiz Inacio Lula da Silva as president of Brazil adds uncertainty. Brazilians have voted for fundamental change, but the markets and Brazilian capital may vote differently, and Lula's supporters may be no more patient than foreign investors. If Brazil's economy spirals down, then all of South America would follow. Chile's sustained growth could not begin to offset the genuine crisis that the entire continent would face.
Where is the US in all of this? Focusing on Iraq and homeland security. Where are Latin America's leaders? Buenos Aires witnesses daily demonstrations of popular anger, but the politicians postpone decisions, concentrating on the election scheduled for next March. "Que se vayan todos" - out with everyone - is the Argentine refrain, but who then will lead?
It's time the US looks South. In the past decade, this has been the fastest-growing US export market, and if negotiations for a Free Trade Area of the Americas (FTAA) succeed by 2005, US trade prospects would brighten. If the economic crisis worsens, it could fracture democracy and spawn new security crises.
What is to be done by the US?
• Make clear publicly its determination to help Argentina the moment the government approves a credible financial and banking plan. But it also has an obligation to identify what should be in such a plan.
• Invite President-elect Lula and his economic team to Washington for discussions and to indicate US support for his efforts to reduce significantly Brazil's poverty and inequality.
• Ask the Organization of American States to host a special meeting on Venezuela to permit its president and leaders of the opposition to explain their strategy for healing the country's democracy.
• Complete negotiations for a free trade agreement with Chile and accelerate talks for an FTAA, but in a way that is responsive to concerns of Democrats in Congress on labor and environmental rights.
• Deepen integration with Mexico (and Canada) to demonstrate that a poorer nation can rise to the economic level of the first world in a free trade area.
These steps will demonstrate more forcefully than anything the Bush administration has yet done that the US is committed to the future of South America. Failure to lead would have devastating consequences for the region and the US. The end of the cold war brought hope that democracy and market economics would lift Latin America. How tragic it would be if the region fell backward now. The US needs to act in the Americas.
• Kiplin Pastor, a junior at the University of Pennsylvania, is studying this semester at the University of Buenos Aires and Torcuato di Tella. Robert Pastor is vice president and professor of international affairs at American University in Washington, D.C.