Argentinas Collapse Hits Miami Hard In Trade Employment
Written by Elisa Llebry on June 27, 2002
By Elisa Llebry
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The economic collapse of Argentina not only has affected export levels between that country and Florida but has added to Miami’s unemployment.
Until February, Argentines were the only Latin Americans who didn’t need visas to enter the US, mainly because of their nation’s solvency, experts said.
Today, unrest caused by an unemployment rate of almost 25%, the default of $141 billion in external debt and the inability of people to withdraw money from banks cast a shadow over the future of Argentina’s trade relations with Miami.
"It is true that the political and social uneasiness could have affected the whole picture," said Luis Riccheri, consul general of Argentina for Florida and Puerto Rico. "But once you have – and that is what we are looking forward to – a more stable situation, things could get better.
"The current political situation should not strain trade relations with the US."
However, a report by Enterprise Florida Inc., the state’s economic development organization, shows that since last year Argentina has lost its place as one the Florida’s top five exporting destinations in South America. During the first quarter 2002, only $102.21 million reached Argentina compared with $446.73 million during the same period last year – a decrease of 77.12%.
Miami’s trade industry was not the only one that felt the repercussions of a declining Argentine economy. In February, after two years of successful branding in Latin America, Miami-based Pan-American Sports Network, a satellite and cable television operation, laid off 285 employees.
"Argentine cable operators were 50% of our revenue," said Penelope Torres, former affiliate sales operations manager. "But when the new president froze the money, we were unable to receive any funds.
"We had about $8 million coming in each month. After the Argentinean economy collapse, we started to lose a couple of million dollars per month."
PSN filled for bankruptcy March 1 and is liquidating its assets. Although other factors accelerated the downfall of the pan-regional sports channel, the main reason was that 80% of revenue came from cable operators and 20% from ads, half of which were generated in Argentina, Ms. Torres said.
Lack of support from new governments is a problem that affects Latin American economies in general, said George Cvejanovich, associate professor of political science and international studies at Barry University.
"Because of corruption and inability of the major political interests to agree on where they want to go in the future in terms of a detailed plan, when there is a change in government they try to meet short-term benefits engaging in too much corruption or getting themselves in too much debt to meet the immediate short-term," Dr. Cvejanovich said.
Martin Redrado, secretary of international economic relations for Argentina, said one main obstacle to economic growth in Argentina is the erratic nature of its foreign policy.
"Given the current systemic crisis, the challenge is to develop permanent international policies that would generate predictable positions to increase our presence in the world," Mr. Redrado wrote in La Nacion.
On the other hand, Consul General Riccheri said that to understand the complex economic equation of Argentina, its origin must be carefully examined.
"Many governments in the past 40 years were suspected of engaging in corrupted situations, but it takes two to tango," Mr. Riccheri said. "Corruption is always there, but it is a two-way street. There are the ones that are giving the money for corruption and the ones receiving it. Sometimes you have to look upon many people, many countries and many situations in big institutions that were involved one way or another in this."
"Corruption is a problem in Argentina, but it not the determining factor of the recession," said Osvaldo Agatiello, an international economic and legal consultant to foreign organizations in Miami. "The problem is that it has an economic model that does not work because it produces less than what it spends."
In December 2001, Argentina had a Gross Domestic Product of $300 billion and was among the top 20 countries in the world in income per capita. Until the beginning of this year, its currency was 1-to-1 with the US dollar. Today, the Argentina’s flagging economic growth calls for negotiations with the International Monetary Fund.
In Mr. Cvejanovich’s view, "resisting the temptation of overspending" during times of prosperity or "substituting it with strategic long-term financial planning" is the key to promote a sensible economic balance and recover the trust of the international banking community.
"The problem is when they have good economic years, which they had in the past 10 years, instead of using those increase gains for the future, they end up consuming them," he said.
Another difficulty in Argentina’s quest to revive commercial transactions with Florida is a widespread skepticism among financiers regarding the government’s ability to honor its financial obligations.
"The lines of credit from the banks have been declined because we have not gotten a clear message from the government as to how the exports are going to be paid," said Clemencia Tobon, president and CEO of Eastern National Bank in Miami. "The commercial balance between Argentina and South Florida has been affected tremendously because of this."
In line to be paid are both private and public creditors as well as international organizations. The external debt totals $141 billion. Among the many creditors are the International Monetary Fund, the Interamerican Development Bank and the World Bank.
Experts agree that the Argentinean crisis is as complex as the solutions it requires due to the presence of international banks.
"Traditionally, the government and the legislation have protected trade transactions to facilitate commerce among countries. In Argentina, by law when a bank gets involved, these transactions are no longer a priority to be paid," Ms. Tobon said.
Some economists agree that Argentina should take advantage of the 70% devaluation of the peso to pursue aggressive exporting to the US, using Miami as the port of entry.
"We are expecting exports from Argentina to the US through Miami to increase because now the currency has gone down dramatically," Mr. Riccheri said. "In a few months, the dollar per peso exchange has gone from 1-to-1 to a 1-to-3.5."
"Their products are very competitive now because of the devaluation," Ms. Tobon said. "Before they explore that possibility, they have to answer questions.
"Is the manufacturing sector still in a position to continue producing enough to export? Are they going to continue exporting with little finance? Are banks in Miami willing to continue trade transactions?"
Argentina’s consul general here says he has been working hard to address some of those questions.
"I have been in contact with World Trade Center Miami, Enterprise Florida, the people of the Florida Department of Commerce, the Free Trade Zone people. They are all ready to improve this situation in the near future," Mr. Riccheri said.
"It is going to take a long time to resolve Argentina’s current situation," said Mr. Agatiello, deputy assistant secretary of economy of Argentina in the 1990s and a member of the Argentine-Florida Chamber of Commerce. "The IMF is in Buenos Aires now negotiating the first part of an agreement that could take more than a month.
"The magnitude of the situation is unusual for a country that has not entered a war or faced a natural catastrophe," said Mr. Agatiello, a former member of Argentina’s foreign debt negotiation team at the central bank. "More than half of the population lives below the poverty line, especially people who reside away from urban centers."
Ms. Tobon, former president of the Florida International Bankers Association, said banks in Argentina are taking the needed steps to pay correspondent banks.
"I don’t know what is going to happen in the future," Ms. Tobon said. "What I do know is that until the government or the central bank of Argentina make a decision and send a clear message to the banking community, we are not going to do anything."