Cambio, cambio, cambio

The Argentine peso lost a quarter of its value over the last month. It’s down 40 per cent from where it was a year ago, and is 6 per cent of where it was in 2008. In regional towns, queues 200+ deep form in the early hours of the morning awaiting the opening of their local bank. While on every street corner in Buenos Aires, shifty looking hombres mutter “cambio, cambio” at passers-by, offering black market currency conversions.

While the Australian economy is boasting a 27 year record run of growth, the last time the Argentine economy had five consecutive years of positive GDP growth was 1974. The World Bank’s data API defaults to “thousand per cent” when making a chart about Argentina’s inflation rates (currently 27 per cent). Interest rates are currently 40 per cent.

Argentina’s economy is riddled with eye-popping regulations, constraints and controls that seem juxtaposed with its status on the OECD’s fringe. Individual consumers for example, are limited to importing no more than five items a year, with each item worth no more than $US 1000 per item. International purchases are met with a 50 per cent tax. Sites like Amazon and eBay are prohibited from delivering to the customer’s door, rather consumers are required to go to a customs office and sign a declaration. Suffice to say there’s no Amazon Primo.

Despite these measures – or maybe as a direct consequence thereof — four of Latin America’s six unicorns were birthed in Argentina.

Three of which are local versions of international giants. There’s MercardoLibre, the region’s answer to eBay; Depegar the local Expedia; and OLX, South America’s Craigslist. One has to wonder if the success of these companies is due to smart decision making that leverages knowledge of local conditions, or because they’ve had the inside run of a shielded market. MercadoLibre was able to take off, for example, after eBay agreed not to compete on the continent for at least five years

While in crises, the government has made important moves in its drive to “normalise” the country and has ambitions to see Buenos Aires become a technology hub.

Its perhaps fitting that the Global Federation for Competitiveness Councils (GFCC) hosted their annual summit in Buenos Ares this past week.

Since 2010, the GFCC has produced a set of Global Competitiveness Principles — a guiding framework “to assist counties, regions and cities to become more competitive, grow their economies and become more prosperous”. The Global Competitiveness Principles emphasize key competitiveness drivers such as investment in research and development; education and training for all citizens; sustainable and responsible development of natural resources; strong IP rights; open trade; and a stable, transparent, efficient and fair environment for business investment, formation and growth.

For an economy like Australia, the GFCC Principles sit somewhere between motherhood statements and policy endorsement. But for the “make-believe economy” that once described Argentina — inflation of 30-40 per cent officially covered up by the Government, a wildly overvalued peso, taxed exports and banned imports, free energy and transport, and a central bank that printed money to the tune of 5 per cent of GDP — they’re revolutionary.