It may have been the food, the people, the chance of hiking in Patagonia, or the prospect of mastering my Spanish. But I certainly didn’t choose to spend eight months in Buenos Aires for its economic advantages. Yet, I found myself surprised. While, according to the government, my dollar was worth less than ten pesos, I could safely and legally get over fifteen pesos on the street by exchanging with “Dólar Blue”, a rate based on outsourced bonds backed by a hard currency. But halfway through my time in Argentina, the allegedly corrupt President Cristina Fernández de Kirchner was replaced by Mauricio Macri. On his first day in office, Dólar Blue was gone and with it, the superiority of my dollar.
But somehow, I was glad. From my 12th story apartment, I remember hearing the city erupt in exuberant cheers and chanting in the middle of the night as Macri solidified his presidential candidacy. A host of political and economic changes was right around the corner for Argentina, and the rest of South America was following suit. These adaptations have emerged primarily from the expansion of accessible trade strategies and political reform.
This was a step in the right direction for Argentina, a country that had been plagued by corruption, poverty, socialism, and inefficiency while still licking its wounds from the infamous 1976 military coup. Until recently, debt hovered like a dark cloud over the nation, inhibiting attempts to stop inflation and discouraging anything but a protectionist stance on global trade. But with the payoff of almost $10 billion in January, Argentina liberated itself from defaulted bonds held predominantly by New York hedge fund “vultures”. This was the start of significant change for the country that warranted a visit in March from Obama himself.
Admittedly, Obama accomplished little more than closing every major downtown street, sipping the traditional yerba maté, and farcically attempting the Argentine tango. He was there less than two days, but who can blame him? Golfing isn’t popular in Buenos Aires, after all. But something good can be said of his visit. Finally, the country can boast more than its soccer legends and connection to the Pope. Hopeful for the future, Argentina claims significantly improved US-relations, better than they ever experienced under the twelve-year Kirchner dynasty. And though it is too early to fully tell, the economy appears to be healing. One must admit the nation has come a long way since the Dirty War, and it appears these are just a few of numerous implemented changes that have begun to reap benefits for Argentina.
In early May, Mercosur, a sub-regional trading bloc comprised of Argentina, Brazil, Paraguay, Uruguay, and Venezuela, met in Brussels with the European Union. The movements initiated in that meeting were monumental. The main goals are to boost trade and investment for the nations involved by cutting import tariffs and expanding market access and to remove barriers to tourism and migration. There has always been mutual interest in these agreements, with the EU’s superior economies backed by hard currency and Mercosur’s globally competitive agricultural market, but finally the concepts that were previously rejected on the basis of protectionist ideologies are being discussed and, for the most part, accepted and implemented.
Despite the infamous Zika virus, tourism is a potential savior for Brazil, a nation constantly battling the growing prevalence of its favelas. The home of Carnaval, the world’s biggest annual party, and the 2014 World Cup, Brazil is now finishing preparations for the fast approaching 2016 Rio Olympics. But the biggest promise lies in their recent government activity. The suspension and probable impeachment of President Dilma Rouseff has led to the empowerment of government individuals who are open to trade talks with both the EU and the United States.
Safe to say, the “south-south” strategy of primarily trading within South America is no longer a priority for these formerly gridlocked nations.
However, not all is promising. Venezuela, the only Mercosur country absent in Brussels, has perhaps hit rock bottom. With the world’s highest inflation rate, unimaginable levels of crime, and hundreds of billions of dollars lost to alleged embezzlements, the bolivar, the Venezuelan currency, lost 99 percent of its value in the past four years according to the black market, a surprisingly more accurate scale for its evaluation than the real market value. The government is to blame. Riddled with corruption and high-level theft, it has put the country in desperate need of a populist revival. Yet despite the abundance of their rich natural resources, especially oil, Venezuela only seems to be rapidly deteriorating. Vigilante interference with the law, lootings, violence, and the withdrawal of untouchable elites have escalated. According to Matt O’Brien of the Washington Post, “there has never been a country that should have been so rich but ended up this poor.” But even for their neighbors who have managed to hold it all together, there are still obstacles.
Brazil’s upheaval is far from over, and it has not brought solely positive results. The interim president, Michel Temer’s cabinet is undergoing a serious investigation after purported conspiracies to conceal corruption were divulged. Minister and advisor to Temer, Romero Jucá has indefinitely relinquished his position after a taped phone call recording his plans to impeach Rouseff for ulterior motives was leaked. In the Brussels negotiations, Brazil is facing a cautious Argentina, scared that the swift rise of liberation policies will cause the Brazilian economy to flood their static car market. And after learning that Brazil has one million reported robberies per year, the fifth highest rate in the world per capita, I had flashbacks to my iPhone being snatched out of my pocket in April on Ribeiro Street in Rio de Janeiro. Makes sense.
Don’t get me wrong. For all its faults, Mercosur is comprised of countries making strides and paving the way for others to do the same in their wake. And it doesn’t take an international economist to know that, the way things are heading, America could soon have a chance to join the emerging and presumably lucrative markets. But if it comes to that, are we ready?
Theoretically, the United States should seek to liberalize and expand its trade wherever it is legal, fair, and self-beneficial. And Christian Americans should encourage this. But our Latin American markets are obsolete. Take, for example, the iconic Californian company, Apple Inc. Buying an iPhone 6 in Venezuela costs $47,678, or 300,000 bolivars. Hardly understandable, even given the horrendous state of their economy. But what about Buenos Aires, the thriving capital of South America’s largest economy? An iPhone there still costs up to $3,500, more than triple what it costs in the States. Why? Not surprisingly, an Argentine protectionist industrial policy enacted in 2009 was meant to increase both the median wage and decrease unemployment. And it did, to a degree, but not without consequences. Massive tax cuts were offered to domestic production while tariffs destroyed those unwilling to cooperate, such as Apple, of course, who would benefit from freer trade.
However, situations like these are already improving, and if they continue on the path forged in the past few months by lifting barriers to trade, the United States should modernize and streamline its Latin American trade agreements or lose a seat at the table.
And when it comes to situations like Venezuela, why should we as Christian Americans so far removed overly care about such hardships? As the world’s greatest power dedicated to freedom and security, the United States should continually endorse and uphold the economic freedom of all, that is, the fundamental right of every person to control his property and possess freedom to work, consume, or produce at liberty with the state’s protection devoid of obstruction. Where this is clearly violated, not only should we care, we should act, using soft or economic power when possible.
It’s time we opened our eyes. The United States can continue to enjoy a central role in global trade, but it must be proactive. Expanding our trade will not only be self-beneficial, but it will offer a helping hand to those fighting to shake off the past and move forward.
Ryan McDowell is an intern for Providence. He is studying Business Administration and Economics at Pepperdine University.
Photo Credit: Argentinian currency by José María Pérez Nuñez via Flickr.