Argentina, like Winston Churchill once said of Russia, is “a riddle, wrapped in a mystery, inside an enigma.”

The country is hard to understand, harder to explain and impossible to predict. Its bursts of economic growth and progress are consistently interrupted by fits of frustration every decade or so.

Over the past 50 years Argentina has seen 17 years of recession and another 17 of hyperinflation, according to a recent Deutsche Bank report.

In 1913 Argentina was the world’s 10th richest nation. In the U.S. in the 1930s people used to describe an exceptionally wealthy person as “rich like an Argentine.” But since then Argentina has stumbled in and out of trouble, failing to capitalize on its vast natural resources and educated population.

Between 1950 and 2003, Argentina’s per capita gross domestic product actually shrank 19% to US $3,760 from US $4,656. In the same period, Chile’s per capita GDP rose 173%, Mexico’s jumped 201% and Brazil’s soared 269%. Though these three nations’ growth started from a much lower base, they all made consistent progress while Argentina declined. Clearly, something went wrong.

What? (more…)

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Inflation in Argentina will almost certainly get worse this year, a prominent U.S. economic official said Tuesday.

In a speech about the “stunning” fiscal problems facing the U.S. government, Thomas M. Hoenig, president of the U.S. Federal Reserve Bank of Kansas City, said Argentina’s inflation problems are about to get worse.

Hoenig cited Argentina as a warning to the U.S., whose own fiscal problems are so serious that it could face “hyperinflation” in the years ahead if it doesn’t get its finances in order. Hoenig said the U.S. government needs to reign in its fiscal problems voluntarily so that harsh measures aren’t imposed on the country by an even worse economic reality a few years from now.

“An example of both the political pressure that can be exerted on the central bank, as well as the inflationary consequences of debt monetization, is currently playing out in Argentina. The president of Argentina recently forced out the Governor of the Central Bank because he would not transfer reserves held at the central bank to repay Argentinean debt. Inflation in Argentina is currently running near 8 percent and will almost certainly increase.”

In reality, Argentine inflation is running much higher than 8%, according to virtually all economists here and abroad who study the problem. The 8% figure is the official inflation rate reported by the government statistics institute, Indec. (more…)

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Despite its many otherwise amazing attributes, Argentina is not a particularly tech friendly country.

For tech-geeks, early adopters and innovators, Argentina can be a frustrating place to live because it constantly lags behind developed countries – and even some developing nations – in terms of innovation and the adoption of new technologies.

This isn’t to say, of course, that Argentina has no innovators.

Indeed, quite the opposite is true. Just look at what Santiago Siri is doing over at Popego and at Meaningtool. He’s not only adopting new technologies, he’s creating them.

And yet, as Malcolm Gladwell elegantly noted in his book Outliers, geniuses and innovators aren’t born into a vacuum. They’re most often raised in social contexts that nurture their talents, and provide them with the means necessary to stand out.

Given this basic axiom (let’s assume it’s true just for argument’s sake), you’d think the government, which recently asked Congress to raise taxes on tech products, might consider doing exactly the opposite. You’d think it might consider doing everything possible to lower barriers to the acquisition of new technologies. (more…)

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The number of homes sold in the City of Buenos Aires in July plummeted 38.73% from the same month a year ago, the public notaries association, or “Colegio de Escribanos,” said Monday.

Sales fell just 1.9% from the previous month (June).

Exactly 4,199 homes were (formally) sold in July, compared with 6,853 a year ago. The total value of of the homes sold was almost 1.2 billion pesos (US $311 million), down from 1.5 billion pesos a year ago.

That puts the value of the average home sold in July at 285,409 pesos (US $74,132). That’s pretty close to the average price of US $72,402 in 2000, when the peso was pegged 1-to-1 to the U.S. dollar.

In other words, average property values have changed little in dollar terms over the past decade. But in peso terms, they’ve shot up 294%.

In order for residents of the city to have been able to keep up with the dramatic peso-based rise in prices, their salaries would had to have risen at a higher rate than inflation every year since 2002, when Argentina devalued its currency and let the peso “float” against the dollar.

But that hasn’t happened. Salaries have risen by a much smaller percentage, meaning that when it comes to buying property, most Porteños are notably worse off now than they were a decade ago.

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Wish you had million pesos? You can, and it’ll cost you only a few bucks!

Just head to Viamonte 981, en el microcentro, and you’ll find a coin and stamp collectors shop, where you can become a millionaire in a few minutes.

Argentina’s historic experience with hyperinflation is well known and has been studied by economists around the world.

In July 1988, inflation, as measured by the consumer price index, peaked at 196.5% on a monthly basis, making today’s annoying 1% monthly inflation seem soft and cuddly by comparison. (more…)

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For better or worse, Argentina has never been a good place to buy electronic items.

Shoppers, bargain hunters and antique collectors always find much to love about Argentina’s quality leather items, arts and crafts, jewelry, and outstanding services such as tango lessons and music classes, among other things.

But if you happen to want something, say, like a big HDTV, you’re out of luck.

For decades successive Argentine governments have stymied imports and heavily taxed novel or hi-end consumer goods like cutting-edge TVs based on the supposition that doing so will a) raise revenue and b) induce manufacturers to produce such items here instead of in Brazil, China or South Korea.

Such policies have had limited success, inspiring some companies to assemble similar items here. But for the most part, the effort to keep hi-end products out has done just that. It has kept Argentina’s lower and middle-class families from easily accessing the kind of hi-tech products that have become common in the U.S., Europe and Asia. (more…)

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I just returned from 10 days in the U.S., so thisay not be news to any of you. But tonight, for the first time since I came to Argentina in 1995, a local bank charged me a $3 fee to withdraw cash from an overseas bank. The fee is in addition to whatever fees my bank charges in the U.S.

I withdrew the money from a “Link” network at a local branch of Banco de la Ciudad. I haven’t had a chance to test other banks or see if Banelco (Link’s competitor) is also charging a fee.

The fee would seem to be an easy way for local banks to make more money at the expense of foreigners. But it’s not year clear what the motivation behind the new fee is. According to Argentine Central Bank officials, ATM regulations here are largely determined not by the government but by just two private companies, Link and Banelco.

These companies are responsible for imposing what many people feel are unreasonably low limits on cash withdrawals from foreign banks. The limits, which vary from person to person and bank to bank, usually hover around 300 pesos per transaction. (The limits often confuse tourists accustomed to withdrawing much more cash, leaving them unable to pay for certain cash-only transactions.)

“We don’t have anything to do with imposing those limits,” a Central Bank official recently told me. “You need to talk with those companies to get more information.”

My transaction limit, for example, is a mere 370 pesos. Most visitors or foreign residents here can surpass the limits by taking out multiple transactions. But each one has its cost, and now that cost appears to have risen substantially. Link’s fee was almost exactly $3 (11.46 pesos as seen in the photo above), regardless of the amount withdrawn. When I tried to take out just 20 pesos, the fee was still $3.

Needless to say, the new fees will increase the cost of getting cash in Argentina. And needless to say, The Argentine Post will be contacting Link, Banelco and, again, the Central Bank, to figure out why this is happening.

If you’ve had any experiences with this, please post a comment and share your feedback.

UPDATE: In a statement, Banelco said both it and Link last month started charging a US $3 commission on every cash withdrawal using foreign cards. The companies, which work as networks representing Argentine banks, said the practice is the same as has been applied in other countries “for more than a decade.”

However, for the reasons mentioned above (the withdrawal limits and the discriminatory application of a fee only on foreign cards) , the commission doesn’t seem comparable to those charged in most countries. Banelco declined to answer questions about this or discuss the motives behind the new fee.

However, Banelco said both it and Link have raised the withdrawal limits to 1,000 pesos (without a daily limit) for the Cirrus network and 1,000 pesos (with a daily limit of 3,000 pesos) for the Visa Plus network.

I’ve tried using both networks and in neither case have I been able to reach the 1,000-peso limit. Instead, my limit seems to be around 930 pesos.

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Despite widespread predictions for a worsening outlook, Argentina’s economic doldrums may be reaching a floor, according to a recent series of data released Monday by Torcuarto Di Tella University.

In a report that tracks the performance of distinct “leading economic indicators,” the university highlighted data indicating there is a 38% probability that the current negative economic trend will turn around within the next six months. That’s up substantially from a measly 18.7% a month ago.

The university cautioned that the economic indicators are “inconclusive” and that it’s still too early to say a recovery in on the horizon. Still, things seem to be looking better today than they did a month ago.

Di Tella’s survey is somewhat similar conceptually to a widely watched U.S. report published by the Conference Board. You can see Di Tella’s survey for yourself here.

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In another sign that the economy may be in much worse shape than government officials seem willing to admit, companies said their need to hire workers in April fell 48% from the same month a year ago.

Demand for workers also fell almost 12% from March, according to a new labor demand survey by Torcuarto Di Tella University.

A lot of companies are laying off workers or cutting back on hours. But the government is pulling out all the stops to a) prevent firms from firing workers; and b) prevent information about layoffs from becoming public. In some cases, companies are told that if they lay off workers, they will have to deal with vigorous inspections from federal tax officials.

In others, Labor Ministry officials use stringent regulations to delay layoffs for months on end by forcing firms to engage in “conciliatory” negotiations with employees unions.

Businesses naturally complain about the local labor market, saying that the high cost of hiring employees makes them think twice before hiring them. Whatever the benefits or impediments of local labor laws, Argentina seems to be avoiding, for the most part, the mass layoffs that are slamming developed markets.

You can see more about the local jobs market at WSJ.com here and read the survey itself (in Spanish) here.

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Argentina’s economy, which is almost certainly already in a recession, is unlikely to recover soon and will probably be in a recession throughout 2009, according to a recent series of data released by Torcuarto Di Tella University.

In a report published Monday that tracks the performance of distinct “leading economic indicators,” the university highlighted data indicating that there is just an 18.7% probability that the economy will recover within the next six months.

“This result indicates that the recession will continue throughout 2009,” Di Tella reported.

Di Tella’s survey is somewhat similar conceptually to a widely watched U.S. report published by the Conference Board. You can see Di Tella’s survey for yourself here.

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In an ironic case of do DO WHAT I SAY BUT NOT WHAT I DO, the Argentine government on Wednesday slammed the International Monetary Fund for underestimating Argentina’s economic data.

In a three-page statement, the Economy Ministry cast aspersions on the IMF’s competence, saying the multilateral lender has a long history of incompetently measuring and forecasting key statistics like economic growth. The criticism came just hours after the IMF released its World Economic Outlook, which forecasts that Argentina’s economy will shrink by 1.5% this year.

As I reported here, the 195-page Outlook contained a one sentence footnote noting that private sector economists believe the government underestimates certain economic data like inflation. Argentine media have reported widely on apparent efforts by the government to get the IMF to exclude this footnote. But what appears to have most bothered the government, which has long badmouthed the IMF, is the Outlook’s contention that Argentina will have a recession this year.

“Since Argentina abandoned convertibility (in 2002), the IMF has systematically underestimated Argentina’s economic growth rate and the current accounts surplus in our country,” the Ministry said. “Between 2003 and 2008 the IMF underestimated annual GDP by an average of 2.4 percentage points each year.”

What the Economy Ministry didn’t say is that the government itself has underestimated economic growth since 2003. As one savvy observer noted:

“For the same period, the government’s forecasts were lot more inaccurate. The government has been projecting 4% real GDP growth (it is written every year in the government’s budget) and then growth was anywhere between 7% and 9.2%, so the government itself it is “systematically” underestimating the country’s growth by 3 to 5 points. That is worse than the IMF!”

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The number of homes sold in the City of Buenos Aires in February plummeted 53.6% compared with the same month a year ago, the public notaries association, or “Colegio de Escribanos,” said Monday.

Sales fell only 2% from the previous month (January). February 2009 sales were the lowest since Argentina’s 2002 economic meltdown. They were also the lowest that month since at least 1999.

Just 2,519 homes were (formally) sold in February, compared with 5,426 a year ago.

The total value of of the homes sold was 617 million pesos (US $167 million), down from 1.3 billion pesos a year ago. That puts the value of the average home s0ld in February at 245,038 pesos (US $66,586).

Real estate agents say the housing market here is not crashing like it did in Miami, where prices plummeted and real estate moguls lost fortunes. But realtors do expect both sales volumes and prices to decline in the months ahead as Argentina’s economic slowdown deepens.

Prices have risen almost constantly since the 2002 crisis. That year the average price of a home sold in the City of Buenos Aires was just 65,113 pesos, or a jaw-droppingly cheap US $17,693 (in current dollars).

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