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Argentine Malaise: The Bill Arrives For Bad Economic Choices

How did the Argentine economy arrive at a point of complete exhaustion, asks Brazil's leading daily. Here's a checklist of the errors made over the past decade.

At a standstill, in Cordoba
At a standstill, in Cordoba

- Editorial -

SAO PAULO — The peso’s plunge in value is just the latest symptom that Argentina’s economic and political model of the past 12 years is close to exhaustion. The country suffers from a growing scarcity of hard currency, particularly dollars, and it remains cut off from international financial markets since it defaulted on its debt in 2001-2002.

Government interventions — including controls on prices and foreign commerce — have driven away investment. Argentina counts solely on foreign commerce to acquire other currencies and pay for what it imports, but now this revenue source has been drying up. Slow global growth since 2008 has limited both the price and quantity of exports, while government intervention is restricting production capacity. Inflation, which is high and rising, causes costs to climb, which badly affects the country’s commercial balance.

Since the end of 2010, Argentinian reserves in hard currency have fallen 43%. To avoid a stronger dip in reserves, the government imposed new restrictions on trade and on the purchase of dollars. Such measures have driven inflation higher, causing Argentines to spurn the peso, creating a frantic demand for dollars.

Indeed, inflation is the root of the problem, and it is fueled by economic policies that are either extravagant or untenable. Argentina has had a budget deficit problem since 2009. It spends too much on salaries, social benefits, energy and public transport subsidies. And although the deficits are rather small, they are financed by inflation, maintaining economic growth above Argentina’s means. The country’s Central Bank finances the government, on top of playing the role of a development bank.

Excessive spending produces inflation, making Argentina less competitive and leading to a scarcity of dollars. And if devaluation is seen as among the solutions to the problem, it will actually achieve nothing if inflation continues to rise, because it cancels out any competitive gains.

It seems greater control of public spending and interest rate increases are unavoidable. This would eventually mean a policy of temporary recession, of salary restrictions and welfare spending, which would of course cast doubt on the pact that has kept intact the Peronism of the Kirchner presidencies since 2003 — first Néstor Kirchner and now his wife, Cristina, who has been president since 2007.

Argentina was very successful at overcoming the crisis of 2001-2002. It didn’t, however, have the capacity to see that some adjustments were necessary, at least from 2009 onward. Fiddling with economic policies now won’t solve the huge imbalances that have been accumulating since then.

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Inside Copernicus, Where All The Data Of Climate Change Gets Captured And Crunched

As COP28 heats up, a close-up look at the massive European earth observatory program 25 years after its creation, with its disturbing monthly reports of a planet that has gotten hotter than ever.

A photo of Sentinel-2 floating above Earth

Sentinel-2 orbiting Earth

Laura Berny

PARIS — The monthly Copernicus bulletin has become a regular news event.

In early August, amid summer heatwaves around the Northern Hemisphere, Copernicus — the Earth Observation component of the European Union's space program — sent out a press release confirming July as the hottest month ever recorded. The news had the effect of a (climatic) bomb. Since then, alarming heat records have kept coming, including the news at the beginning of November, when Copernicus Climate Change Service deputy director Samantha Burgess declared 2023 to be the warmest year on record ”with near certainty.”

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Approaching the dangerous threshold set by the Paris Agreement, the global temperature has never been so high: 1.43°C (2.57°F) higher than the pre-industrial average of 1850-1900 and 0.10°C (0.18°F) higher than the average of 2016 (warmest year so far). Burgess, a marine geochemistry researcher who previously served as chief advisor for oceans for the UK government, knows that the the climate data gathered by Copernicus is largely driving the negotiations currently underway at COP28 in Dubai.

She confirmed for Les Echos that December is also expected to be warmer than the global average due to additional heat in sea surfaces, though there is still more data to collect. “Are the tipping points going to be crossed in 2023,?" she asked. "Or is it just a very warm year part of the long-term warming trend varying from one year to the next?”

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