Shifting the Blame: The Argentine Condition

On 10 April, the UK and Argentina summoned each other’s ambassadors to resolve the newest development in a centuries old dispute: The Falklands Islands. The UK claimed the Islands in 1765, and Argentina has pushed a claim since the 1830s. The have argued over who the archipelago belongs to since. The issue escalated into military action in 1982 when Argentina occupied the islands and were then pushed out by British forces in what the BBC calls a “brief but bitter war.”

Image courtesy of Heretiq, © 2006, some rights reserved
Image courtesy of Heretiq, © 2006, some rights reserved

Since the Falklands war, the issue has cooled, but never quite died as Argentina continues to insist that the islands are theirs. The dispute has rekindled in recent years after the discovery of oil in the region and allegations that the UK spied on Argentina over fears that the Argentines would attempt to reclaim the Island again. Argentina has threatened to prosecute oil companies on that grounds that they are doing so in Argentine waters, which is why Argentine President Cristina Kirchner summoned the UK’s ambassador on the 10th.

So why is Argentina so insistent on pushing their claim on the Falklands? In real terms, Argentina has no real chance of actually gaining the territory through diplomatic or military means, and a recent referendum of the inhabitants on the island showed almost unanimous support for remaining a part of the United Kingdom. There isn’t much economic or strategic value to the Islands for Argentina either, the fledgling oil sector in the region has yet to discover how much oil can be extracted, and the famously sheep-based economy of the Falklands would be a miniscule contribution to the comparatively massive Argentine economy.

Kirchner’s pursuit of the Falklands is hardly a new political tactic in Argentina. She is far from the first government figure to use the age-old Argentine tactic of blaming their problems on the outside world in lieu of dealing with the economic and political issues at home. The longstanding disagreement over the Falklands coupled with the oil makes it a perfect emotional target for the Argentine public, who are perpetually critical of Kirchner for her economic policies and allegedly dictatorial behavior.

The actions of the Kirchner administration bear some resemblance to the military Junta that ruled Argentina during the Falklands war. The military dictatorship was also faced with economic stagnation and, seeking to distract the public from the economic difficulties and the ongoing Guerra Sucia (Dirty War) with those that opposed the regime, decided to resurrect the issue of the Falklands which culminated into the war. This backfired spectacularly on the Junta, leading in 1983 to the first democratic elections in a decade.

Both Kirchner and the Junta used the Falklands as a point of national pride to distract from underlying economic and political problems. The issue with distracting from the economic problems especially is that the tremendous potential in the Argentine economy should be their national focus, not a bit of land off the coast.

Argentina should be an economic giant on paper. It boasts a highly literate and educated population along with a diversified economy that is one of the largest in Latin America and within the top 30 in the world in terms of purchasing power parity. They have had a strong manufacturing sector for decades and are rich in resources and land for the agriculture sector. These are all the right ingredients for a strong and healthy economy, but the Argentines have been let down by political struggle and poor handling of the economy that has led to periods of prolonged stagnation.

Argentine saw some economic growth after a financial crisis in the early 2000s, they successfully cut down on the widespread poverty and unemployment that was causing significant unrest. Despite this growth the country has struggled in recent years. In July 2014 Argentine defaulted on its debts for the second time in 13 years. The bonds issued before the 2000-2001 economic crisis and default were too expensive for Argentina to pay and so they requested that holders of the bonds instead swap them for newer bonds of lower value. American hedge funds that held a significant portion of the debt refused this offer and U.S. courts blocked Argentina from paying other bondholders until deals were reached with the holdouts. The details of the debt crisis are less indicative of the Argentine condition than Argentina’s reaction to it. They referred to the hedge funds as “Vultures” and ultimately viewed them as responsible for the debt crisis, rather than, perhaps, Argentina’s inability to pay back the debt it issued.

Kirchner will almost certainly avoid the mistakes of the Junta and not pursue any military conflict, but her insistence on dragging the Falklands into the news calls into question her administration’s ability to lead Argentina to the economic success that it is very capable of becoming. In addition the insistence with which the Argentines blame the most recent debt crisis on the creditors rather than themselves points to an underlying inability by the government to confront the economic issues holding them pack.

Argentina is one of the many Latin American countries with an enormous potential for growth if they put serious concerted effort into ironing out their economic issues. The language of Kirchner and the future leaders of Argentina needs to diverge from nationalist rhetoric about the Falklands or western investors undermining Argentina, and instead focus on bringing Argentina into its rightful economic position in the world.

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