Casey on Argentina and Today's Evita
by Louis James, Editor, International
by Doug Casey:
Doug, we've had a lot of people write in with questions about Argentina
since the government moved to nationalize
YPF. First, I have to tell readers that we saw la presidenta
going off the deep end some time ago and sold all the Argentina
plays in our portfolio. But you live there, have invested there,
and are a famous contrarian – so what do you think? Is the market's
understandable reaction to the expropriation overdone, making it
time to buy, or would you still stay out of Argentina plays?
I'd first like to distinguish between living in a country and investing
in a country, which are two totally different things. As a general
rule, I'd say that right now I have very little interest in investing
in companies doing business in Argentina – though I've got to say
that the Argentine stock market is yielding about six percent in
dividends and selling at about eight times earnings. That makes
it one of the cheapest markets in the world. It's been heavily discounted
due to corruption, government stupidity, and a generally poor business
So is that discount appropriate or overdone? I suspect that Argentine
companies are in no danger of being nationalized, so they might
be excessively discounted. On the other hand, the folks behind the
curtain, pulling the levers on the machinery of the state in Argentina
are clearly fools or knaves – I'm not sure any business is safe
Unfortunately, that's true. Argentina's politicians have been just
terminally stupid ever since Juan
Perón. Even though he was a criminal personality, an overt admirer
of Mussolini, and openly sympathetic to Hitler, Perón has become
such a cultural icon that you can't do anything in Argentina today
without at least calling yourself a Perónist. It's rather like in
the US, where, if you don't think that FDR
was a hero for getting the US out of the Great Depression, you're
persona non grata. Perón is Argentina's Roosevelt.
former president Nestor Kirchner – late husband of Cristina, the
current president – was a total disaster. All of his policies were
completely wrong-headed and destructive, but he had the good luck
to get elected just as the commodities boom got under way, and demand
for Argentine agricultural and mineral products soared. That paid
for a lot of social spending and made him look like a hero, even
though everything he did was the exact opposite of what needed doing.
This is true
of Cristina too, but she's actually outdone her husband in implementing
economically suicidal policies. Every single week, her government
does something that's bizarre, counterproductive, or absurd. The
most recent and serious blunder, of course, was the nationalization
of YPF – but just a few weeks ago, her government tried to ban the
importation of books. It wasn't because they cared what was in the
books, it was part of the effort to limit imports in general.
I read about that – the excuse was that foreign printers might use
ink that could be dangerous. I remember thinking that was crazy,
and she does seem to check into hospitals a lot...
They had to back down on the books. That would have been just too
much, to deprive a very literate country of about 85% of books in
Spanish and almost 100% of those in other languages. Although it
would have been a boon for Kindle – something they probably didn't
even think about. But importing anything to Argentina is a huge
hassle these days.
YPF actually make no sense on any basis. She says she did it because
the company didn't invest enough in Argentina – but there's a reason
for that: the current regime has made it very dangerous to conduct
any sort of productive business in Argentina. As a result of its
policies, Argentina has gone from being self-sufficient in oil and
gas – and an exporter – to being an importer. She's telling everyone
that nationalizing YPF will result in more investment in Argentina
and hence more production, but that's a fantasy. Like any national
oil company, YPF under its new management is going to be horribly
inefficient and riddled with graft and corruption. If they do somehow
generate any earnings, they'll just be wasted by the government
on social programs that buy votes but don't make any lasting improvement
in the country.
YPF started out as a parastatal in the '20s, so the company has
always been a political football. Under Perón it accumulated scores
of thousands of unneeded employees. In Argentina they're called
"gnocchis," after the heavy, doughy, inexpensive pasta that kind
of just lies on your plate and does nothing. In fact, Argentines
traditionally eat gnocchi on the last day of each month, partly
because it's cheap and money is short at month's end and partly
because it's a joke about useless government employees. The average
guy in Argentina is well aware of how corrupt the system is. It's
why Argentines are always making jokes about themselves – lots of
On the other
hand, there's an explanation for these actions other than insanity.
Rumor in Argentina has it that when Nestor was first elected, the
Kirchners had a net worth on the order of ten million dollars. That's
not a lot for a governor...
[Chuckles] Yes, what a couple of slowcoaches; any self-respecting
Latin-American politician ought to have been able to abscond with
at least a hundred million.
[Laughs] Yes, at least a hundred million. Over his entire term,
Menem is said to have walked away with as much as $15 billion.
Why should anyone settle for less?
So you're suggesting that maybe she's not crazy, but rather a successful
political entrepreneur who may yet set a new record at enriching
herself at the expense of the people she claims she's trying to
Far be it from me to accuse any serving political figure of possible
impropriety. Just because her policies are stupid from the point
of view of the people of Argentina, that doesn't mean they are not
very intelligent from her point of view at the apex of the political
food chain. But it's not just Argentina; it happens all around the
world, though perhaps most visibly in Latin America and Africa.
People starve while politicians make themselves fabulously wealthy
– and enjoy the power trip too.
Here in the
US, politicians tend to be more cautious and often wait till they're
out of office to collect their payoffs. Take Clinton. There was
the time when Hillary made something like $99,457 in "profits" trading
cattle; it was one of the most transparent payoffs I've ever seen.
My only question was how the other $543 found its way to her purse.
And it was quite funny when Bill was soliciting donations to cover
his legal fees over the Monica scandal. He knew he'd be getting
tens of millions in speaking fees, directors' fees, book contracts,
and sweetheart investments, among other things. I'd guess those
two are worth 100 extra-large now. In the Third World, there's not
enough trust nor capacity for delayed gratification to wait until
one is out of office. Anyway, a hundred million is really just pocket
change for those who get to run a country these days. Hardly worth
the aggravation of getting elected.
Peanuts. But by "intelligent" you mean that for a parasite that
achieves such success qua parasite – not that such destructive
parasitism is actually an intelligent choice for a human being...
If a parasite grows without moderation, it eventually kills its
host and hence itself. That aside, such behavior is unethical, meaning
that it coerces and damages others, which creates enemies and opposition.
That can get the parasite-in-chief tied to a stake in front of a
firing squad well before the host succumbs to the parasite's destructive
Well, Argentina has quite a history of coups... as does every other
country in Latin America. And, for that matter, most every country
in the world throughout history. Lots of firing squads.
Do you think that Cristina is actually the defining force of her
government? She sort of inherited a mantle – and a political machine
– from her husband, taking over when he died. Do you think these
crazy-looking ideas and policies are actually hers, or is she just
a mouthpiece for that machine?
Well-connected people I know in Argentina say that she's quite a
powerhouse herself. She may or may not have much raw IQ, but she's
very politically intelligent – a great manipulator of other people.
That's the essence of being successful in politics in any country.
So you think she actually believes something along the lines of
what she says? It's her thinking that calls the shots in her government?
Well, I wouldn't call it "thinking" as such; it's more of a reflexive,
gut reaction to events. She says she has an economic model, but
it's ludicrous to posit a model in which it makes sense to ban books,
nationalize industries you've made less profitable, threaten the
British with war, debase the currency at a prodigious rate, and
so forth. It's really just ad hoc populism with a strong
dose of fascism thrown in. She's modeling herself after Evita.
really scary are the people around her. This is typical of almost
any government, however. Look at the people who were around Clinton.
Look at the people who were around Bush, from Cheney on down. Look
at the people around Obama. The people just under the maximum leader
are usually much more dangerous than the actual numero uno.
I'm not an expert in Argentine history, but this may be the worst
crew Argentina has ever had – or at least as far back as Perón.
That's a pretty high bar.
Yes. [Laughs] It really is. You know, it's dangerous enough saying
negative things about politicians in the US, the way things are
evolving. It's really a bad idea in a Latin-American country. I'm
not sure it's actually in my interests for us to be having this
all kinds of evidence for what I'm saying. Take Aerolíneas, the
national airline, which was nationalized in 2008. It's used as a
piggy bank and loses something like $700 million a year.
side is that these people are in office mainly to enrich themselves.
So far, they have not shown much of the harsher authoritarian tendencies
associated with nationalist-socialist governments, nor the growing
obsession with controlling people we see in the US. Fortunately,
on that front, they are also much less competent at such things.
I knew a man who used to say, "Thank God we don't get all the government
we pay for." Unfortunately, we seem to be getting a lot more of
it in the US lately.
Indeed. Government incompetence is one of Argentina's many charms.
It's really a pity those in charge are hell-bent on milking the
place to death economically, because it's by far one of the nicest
places to live in the world – by many measures. But economic foolishness
has been a hallmark of Latin-American governments from day one;
nothing new on that count.
Can you expand on that? Aside from the investment question, that's
the other thing people ask about: Are you crazy to live in a place
run by maniacs?
Well, as I just said, the quality of life is tough to beat. It's
important to remember that through all the economic chaos, bank
crises, hyperinflation, and so on, the government has never seized
private land. That's never been a problem in Argentina. And it's
unlikely to ever happen, because it's a huge country – the eighth-largest
in the world – but has a fairly small population, only 40 million.
In fact, land redistribution all over the world is passé,
simply because the world is moving into cities. Nobody except farmers
and lifestyle-conscious rich folks really want to be out in the
the troublesome news comes from Buenos Aires, a relatively small
province, although it contains about 40% of the country's population.
Once you get out into the other provinces, it's a different world
– like going back in time, to a quieter, more peaceful age. But
even in Buenos Aires, none of this stuff affects you directly; it's
just background noise. BA is sophisticated, cosmopolitan, has a
relatively low crime rate for a big city, and the government leaves
you pretty much alone.
I dunno, Doug, if the new government rules prevent you from taking
out more than 1,000 pesos a day from an ATM, that could get pretty
Not for me – I don't have an ATM card.
No cell phone, no ATM card – you're quite the caveman for a technophile.
True. True. But you don't want to have a bank account in Argentina
anyway – that would be asking the fox to guard your chickens. This
is why lots of European banks have lots of informal representatives
in Argentina; they facilitate financial transactions for foreigners
and rich Argentines. This is something else Cristina has come down
on, and the many Swiss and other bankers in town have had to close
down their offices and either move across the river to Uruguay or
disguise themselves as brokerages. It's an inconvenience. But on
the other hand, credit cards work fine, and large transactions are
still typically conducted in cash – which is to say briefcases full
of the stuff. There are, unfortunately, not too many countries where
that's still true.
Okay, so, for good living, you've got great wines, pretty countryside,
secure land title, etc. If your income is derived abroad – not in
Argentine pesos – could this political and economic chaos make living
in Argentina cheaper?
Yes. Financial chaos is the friend of someone who has assets outside
the country. Life is not currently as cheap in Argentina as it was
a few years ago – at the height of the last economic crisis, it
was probably the cheapest country in the world. It was so cheap,
it was embarrassing. One thing that's absolutely in the cards is
that Cristina and crew are going to destroy the currency... nothing
new here – they've done it almost as many times as Brazil since
WW II. Argentina will collapse economically again – that's baked
in the cake at this point. The government now controls the exchange
rate, with the peso officially at 4.30 to the US dollar, but domestic
inflation is running at about 25 percent per year. Prices in pesos
have been rising much faster than the peso has fallen in forex,
so at some point, something has to give. Argentina is not expensive,
but it's not currently a major bargain. That will change when the
"something" does give, and Argentina will become a bargain again.
foreigners will take advantage of it then, just as they didn't during
the last crisis, which was the best time to buy in recent years.
People from abroad saw Argentines banging pots in the streets on
TV and decided to stay away in droves. It was very convenient for
those of us who did visit. There were no cars on the road. There
were no lines nor reservations needed at restaurants. Everything
was cheap as dirt.
In the long
run, of course, these crises are very bad things. They destroy livelihoods
– and lives. Each event is a scythe mowing down another swath of
the middle class.
That just shows
what a fantastic and wealthy place Argentina was a hundred years
ago, as things have gone downhill since then – especially over the
last sixty years – and it's still a great place to hang out. It's
my favorite place in the Western world to spend time.
Short version: you wouldn't want to invest in most businesses operating
in Argentina, but you still love it as a place to hang your hat?
Yes. People sit at home and watch blatherings of talking heads on
CNN about some far-off place like Argentina, and they imagine they
know what's going on. They don't. They should get on a plane and
go see for themselves – few places are as great as the travel shows
make them out to be and few are as bad as the peddlers of bad tidings
on the news shows make them out to be. Remember that journalists
have a pecuniary interest in sensationalizing everything. Sure,
Cristina's government is probably one of the dumbest in the world
today, but you can still enjoy the best steaks – accompanied by
some of the finest wines in the world – in peace and comfort, in
a beautiful setting, for relatively little. It's a nice place.
Do you think Argentina is stuck with Kirchnerism until it crashes,
or is there any chance of Cristina and her cronies getting voted
The way things are going, the crash could well come before the next
election. If that happens, I would expect Cristina's gang to be
voted out – but that doesn't mean that whoever replaces them would
be any better. Just as I keep saying about the US: After Caligula,
we'll get a Claudius, and people will think it can't get any worse,
but then we'll get a Nero. I expect the same thing in Argentina.
But it's possible
that things could get so bad that someone rises
to power who actually makes things radically better. It happened
in New Zealand. In the mid-1980s, nobody would have guessed that
New Zealand, which was becoming the shallow end of the gene pool,
would see a socialist by the name of Roger
Douglas rise to power and act with a lot of common sense. He
fired two-thirds of government employees, got rid of import duties,
and cut the income tax by 50 percent. New Zealand went from being
a tired backwater to quite an acceptable place in a very short time.
If it could happen in New Zealand, it can certainly happen in Argentina
I met Maurice
McTigue, who was a minister in that government. He told me how
that socialist government did something no liberal government could
have done: they cut subsidies to farmers. Not for ideological reasons,
but simply because they had no money. These were massive subsidies,
and the farmers cried foul and proclaimed their doom, but once forced
to find new markets for their products, they actually did – and
found better ones and made more money. Maurice told me that he'd
come to the conclusion that subsidies make farmers poor.
Right; they had no choice. I'd like to think the same thing is possible
in Argentina. There actually is a substantial classical liberal
presence in the country, people who understand basic economic realities
and who could step in with the right ideas, especially if commodities
turn cyclically downwards, leaving the country with absolutely no
choice but to change.
You're not just showing a bias because you love the place, are you,
I might be, but the fact is that governments all around the world
are headed in the wrong direction. Since World War II, people all
around the world, even in "the land of the free and the home of
the brave," have come to see the state as both father and mother,
protector and caregiver. At the cultural level, it's become universal
now, especially throughout Europe and North America.
we've lost the intellectual battle. Socialism and fascism have won,
and the average person has been totally corrupted in his values.
We can see that in people's cries as we get deeper into the Greater
Depression; they want nothing more than for the state to kiss everything
and make it better.
It's rather ironic. If the battle for the hearts and minds of the
people has been lost, it also seems true that the battle in the
field of economics has been won. Keynesianism has been disgraced.
Even socialists and central planners seem to understand that markets
are necessary – if you destroy the price system, you fly the economy
blind, and massive decreases in prosperity follow. Even the Chinese
say they have "market communism" now.
That's true, but hardly the only contradictory thing in our topsy-turvy
world. We won't know how it's all going to work out for this period
of history until the global economy really collapses. I think that
will push a massive reset button, accompanied by the full regalia
of chaos: riots, wars, the works. Life will look quite different
on the other side.
Is there a point at which Argentina can get oversold?
Yes, sure. I'll buy absolutely anything in any place, if the price
is low enough.
What would "low enough" look like?
It'd look like when I was recommending New Zealand in the '90s –
that's when it was about the cheapest nice place in the world, as
Argentina soon will be again. But for equities, it's too early to
buy Argentina – I don't think it's bottomed yet, nor will it until
the next elections. After the current insane policies cause the
Argentine economy to hit a brick wall, and the current crew have
been tossed out, that would be the time to look for investments.
The sensational headlines at the time will keep the masses out,
so it should be a real buyer's market.
know I have a lot of money in Argentina right now, so I should add
that it's all in real property out in the prettiest parts of the
provinces away from the capital. I have no fear of expropriation.
Overall, I'm actually not worried about Argentina. What's happening
now is par for the South-American course – things like this have
been going on for a hundred years, and people know how to get back
on their feet, pick up the pieces, and get going again.
So, there's a light at the end of the tunnel?
Argentina should, or at least could, turn a corner and improve radically
in a few years. But I'm less hopeful for the US. Both Obama and
Romney are bad news. But conditions are going to be way beyond anyone's
control. And I'll bet the US elections of 2016 will bring an authoritarian
ex-military type, some charismatic general. So the worst is yet
to come in the US.
Mr. Cheerful again – and we didn't even get 'round to talking about
It's the way it is. Those who want to look down on Argentina for
its madness would do well to remember that Cristina has not cornered
the market on sociopathic behavior. No place is exempt. You can
run, but you can't hide.
But if you
want to end on a happy note, I'll say that of all the places in
the world I've been, and can think of to be now, I'd still rather
be in Argentina than just about anywhere else.
And for investing?
Colombia is probably the most interesting place to invest in Latin
America today. The people in charge understand markets and the place
is on a sharp learning and growth curve.
The Colombian president told the press the other day that business
was welcome in Colombia, saying, "We don't expropriate here!"
Exactly. Though, as a contrarian, I have to say that Venezuela is
looking more and more interesting. Its stock market is even cheaper
than Argentina's, yielding about eight percent, and selling around
six times earnings, last time I looked.
And there's a definite catalyst for change looming in the future?
That's right: Chávez has terminal cancer. But these are dangerous
waters – it may be hard to imagine, but whoever replaces him could
be worse than Chávez. And even if it goes well, it could take years
for Venezuela to improve. It's an interesting spec, but only for
the most patient speculators, and those with money they can laugh
Sounds a bit ghoulish to speculate on a man's death.
None of us get out of here alive, and his number is visibly coming
up. More, he's an unethical maniac whose policies have wrought more
damage than can ever be accurately accounted for. That would include
loss of lives. I won't shed a tear when he graces our world with
his departure. It makes more sense to care about the people of Venezuela
and not care about the psychopath who's ruining it. The place will
need foreign injections of capital and ideas. I'd invest for profit
– but it would also be the best thing a foreigner could do to actually
help the people.
Very well then, there's looking on the bright side. Thanks for your
time and insights.
You're very welcome. And I'm anxious to get back to Argentina. I
really enjoy the place.
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sporting estate in the beautiful province of Salta. Residents and
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