Land of Messi and Peronism discovers limits of populism

29 Jan 2014 | Tony Leon | Original Publication:  BDlive

Argentina’s defiance of the economic laws of gravity invited its isolation from world financial markets, hastened disinvestment and provoked civil unrest, writes Tony Leon

IN LATE September 2012, on my last day in residence as South African ambassador to Argentina, I took a farewell stroll down the tree-lined boulevards of Recoleta, a suburb of Buenos Aires. I noticed the empty display windows in one of its up-market emporiums.

Argentinian President Cristina Fernandez

Fashion retailer Louis Vuitton — a favourite of Cristina Fernandez de Kirchner, the handbag-wielding president of Argentina — had just announced it was closing its doors. Its exit from the country, following fast in the departure of other international luxury brands, much loved by local fashion aficionados, was the latest scene, back then, of what I dubbed the long-playing melodrama: the Crisis of Cristinanomics.

Sixteen months ago, and not for the first time either, Argentina was heading over an economic cliff as the population raced to dump pesos for dollars and a zealous government fought back through draconian exchange controls, bullying tax-intrusive measures, manipulating economic data and import-suppression measures.

In an article I wrote on my return here for the Financial Times, I noted an eerie parallel between Argentina then and the apartheid government at its nadir in the 1980s.

Although, of course, Argentina had none of the racial policies then in place in South Africa that isolated this country, its stubborn pursuit of eccentric economic policies suggested some parallels. Its defiance of the economic laws of gravity invited its isolation from world financial markets, led to a dual currency in which arbitrage and round-tripping — not investment — became the names of the game, all of which hastened disinvestment and provoked civil unrest.

I was also struck how South Africa back then and Argentina more recently were increasingly detached from the world and determined to defy it, either because of racially repugnant policies or outlier economics respectively.

In the intervening period since my return, the Argentine government managed — despite political defeats in Congress, the ill health of its president and continuing investor and consumer unhappiness — to more or less avert total meltdown. In the same period, underlying the disconnect between its fantastic human capital and its poor governance, it gave to the world some outsize individuals: the first non-European pontiff, Pope Francis, football supremo Lionel Messi and the Queen Consort of the Netherlands, Princess Maxima.

Two factors helped pull Argentina back from the cliff in 2012, which strike some uncomfortable chords with South Africa today: surging growth in China (Argentina provides it with 40% of its soya bean imports) and the rapid printing of dollars by the US Federal Reserve through its programme of quantitative easing. Higher, though risky, Argentine yields provided a carry interest market for the adventurous. But with both those trends now reversing, and investors exiting emerging markets with great haste, Argentina took a huge hit. It was not alone, as the battered rand, the shrinking Turkish lira and the diminishing Brazilian real reflected.

But, on a swelteringly hot day last Thursday, Argentina led the field with the dubious distinction of posting the largest fall in a single day of any (emerging or other) currency, as its peso fell an astronomical 15%. Over the week, it fell about 18%, its sharpest descent since the country posted the biggest single sovereign debt default back in 2002.

And that default, with its consequential debt obligations, fuelled the need to preserve dollars, which in turn led to drastic remedies, ranging from "haircuts" for foreign bond holders, nationalisation of foreign companies without agreed compensation, extreme protectionism to deter imports, fudged or manipulated financial statistics, and associated maladies. But this in turn led to the country being excluded from vital foreign credit markets, and incurring the extreme displeasure of the International Monetary Fund.

Broken air-conditioners and lifts in the capital city hardly helped the mood last Thursday, which was well captured in the headline of the fiercely independent Buenos Aires Herald: "Official Exchange Rate: $8.10; Temperature 34 degrees; Unofficial Exchange Rate $12.10, real temperature, with humidity, 46 degrees!"

That headline, aside from reflecting the uncomfortable weather, was shorthand for another phenomenon well remembered here from the days of the "Rubicon rand", the uneasy existence of two parallel local currencies. In Argentina’s case, it is more acute. Its "blue" or black-market rate of exchange, always a more realistic reflection of the currency’s worth, traded at about a 40% differential from the official rate. The latter was propped up by the central bank’s determination to buy up dollars to prop up the country’s currency. But as a particular nemesis of Argentina, former British prime minister Margaret Thatcher, once famously observed: "You can’t buck the markets."

And the proximate reason for the peso’s vertiginous collapse was the central bank’s announcement that it would stop intervening in the market to defend the currency (a wise policy long practised over here). Necessity was the mother of virtue in Buenos Aires: its foreign reserves had drastically diminished due to the triple headwinds of central bank dollar purchasing, tapering by the Federal Reserve and stagnant commodity prices for its world acclaimed agri-exports.

But another realistic and historic spectre hangs over Argentina: the fear and reality of hyperinflation. With the government hitting the printing presses to fund its populist vote-winning social handouts and subsidies, inflation is reckoned to be about 28%, although the official, and discredited, figure places it at about a third of that. Dollar retention was thus a key reason to prop up the local currency. But, by the weekend, when the government reversed course and in effect allowed the currency to devalue, the big question in Buenos Aires remained unanswered: as John Paul Rathbone of the Financial Times put it: "If the flight to dollars is being caused by high inflation, cutting inflation means also cutting public spending and the money-printing used to finance it — which Fernandez’s left of centre government is loath to do."

Simply put, a crisis is an excellent moment to make deep structural reforms rather than ad-hoc Band-Aid measures, which the market soon discounts. Peronism is the vote-winning brand of Argentine populism and politics, but it has many doppelgangers elsewhere.

For example, Economic Freedom Fighters "commander" Julius Malema has borrowed both his beret and what passes as his economic policy from Venezuela’s late president, Hugo Chávez. Argentina in turn practices a sort of Chávez-lite policy, which is slightly less economically radical but minus the sea of oil on which Venezuela sits. Both provide a cautionary lesson in South Africa to the threadbare and impoverishing nature of populist economics in practice.

I asked Buenos Aires resident and the former head of retail and business banking at Standard Bank of Argentina (now ICBC), Johan Roets, for some local parallels. "A relatively small economy (Argentina and South Africa have roughly the same weight in the world) cannot control its own currency," he said. "Argentina’s leaders today are populists rather than leaders. Populism might help you get elected but eventually you fall off the cliff. What happened last week in Buenos Aires was simply the acceleration of a very long process of mismanagement."

A sombre note from the other side of the South Atlantic, or perhaps a home thought from abroad.

• Leon is the author of The Accidental Ambassador (Pan Macmillan). Follow him on Twitter: @TonyLeonSA OR on Facebook: facebook.com/TonyLeonSA

 

Ray Hartley Reviews The Accidental Ambassador by Tony Leon

07 Jul 2013 | Ray Hartley | Original Publication:  Sunday Times Lifestyle Magazine

A stint in Argentina gave the former opposition leader a fresh appreciation of South Africa, writes Ray Hartley

PICTURE a classroom somewhere in the bowels of the Department of International Relations and Co-operation in Pretoria. Seated at the desks are three soon-to-be ambassadors, Tony Leon, Zola Skweyiya and Ngconde Balfour.

They are being prepared for their new missions in Argentina, London and Botswana, respectively. Tony Leon, by his account – and it is the only account – is taking it all rather seriously. Zola Skweyiya admits that he is doing it out of political duty rather than desire, and Ngconde Balfour is frequently absent and wont to moan that he is being taught things he already knows.

The classes are Leon’s introduction to his new life as a representative of a government that he has criticised as corrupt, inefficient and incompetent in his years on the opposition benches.

After leaving parliament, Leon was pleased to lose his political straitjacket.

“I will certainly not miss the often dreary non-debates about non-issues which, over the past decade, often passed as the staple of parliamentary engagement. Nor will I mourn, too deeply, the dark arts of political in-fighting and intrigue with which political leadership is associated,” he wrote in the Sunday Times in 2009.

The course and a rapid introduction to Spanish behind him, he leaves South Africa for Buenos Aires to begin his new life as ambassador.

On his return, Leon is a changed man. He has not, he is quick to say, abandoned any of his principles. But he grudgingly concedes that he sees South African politics in a different light. His experiences while in Argentina have made him think again.

No longer “leader of the opposition”, he finds to his surprise that new doors are open to him. Leon has entered a new life in a realm somewhere above the grind of politics where there is more hope and possibility.

The then defence minister, Lindiwe Sisulu, whom he has always viewed as a preening “princess”, alights from the steps of the plane in Argentina to give him a warm hug. Leon observes that she is, it turns out, effective and functional as she deals with the signing of some or other much-delayed treaty that Leon had badgered her to attend to.

In Argentina’s president, Cristina Kirchner, he sees what a real princess can do when given the levers of power. Benefiting from several plastic surgeries, Kirchner sports “Angelina Jolie lips”. He makes this observation as he hands her his official accreditation.

Princess privilege, in fact, knows no bounds. Leon discovers Kirchner’s government has banned the Big Mac from the McDonalds menu in Argentina, apparently because of The Economist‘s Big Mac Index, which it uses to calculate the true values of foreign currencies. The magazine retaliates by refusing to carry any of Argentina’s official statistics. It is more than an amusing sideshow, Leon points out. By manipulating the inflation figure, Kirchner is able to cheat buyers of inflation-linked bonds out of money.

Members of the embassy staff, by contrast, are not princesses. They are professional to a fault, Leon discovers. Dirco itself runs a very tight ship and is proud of its clean status with the auditor-general, going so far as to warn Leon not to tarnish its reputation by spending improperly.

The secretary-general of the National Union of Mineworkers, Frans Baleni, visits. Leon notes that South Africa’s laws, which protect labour, pale when compared to those of Argentina, where it is all but impossible to fire someone. Baleni shows big eyes at the thought.

In South Africa, Julius Malema advocates nationalisation in a populist assault on the investment community. But Malema is disciplined, sidelined and fired. Nationalisation is rejected by the ANC’s party conference.

In Argentina, the pouting president nationalises the country’s leading oil company by fiat. Newspapers, which are critical of her administration, are victimised. The tax collection agency is used to target dissenters.

Leon’s own eyes widen at everyday occurrences, like purchasing a pastry, which is a nightmare. There is a queue for the pastry and then a second queue to pay for it as an old shopkeeper thumbs his way through an order book in which each and every sale is recorded. Everything starts late. Meals frequently take place in the early hours of the morning, leading to unproductive mornings.

On tour with The Accidental Ambassador, his book on his experiences, he is back home and lighter and freer than when he left. There are no queues at the shops in Joburg’s Hyde Park shopping centre. A book club hosts him; he once again mentions Kirchner’s Angelina Jolie lips and can’t resist a swipe at his successor, Helen Zille, pointing out that Botox is fashionable in the Democratic Alliance these days.

He is at pains to point out that he remains somewhere in the DA firmament, but there is just a hint of bitterness. He appears slighted that he is not recognised for having created the platform for the party’s growth.

The irony – and in South Africa there is always irony – is that Leon and Zille have, sometime in the last five years, quietly passed each other like ships in the night. Zille has gone in the opposite direction – from independent journalist and NGO leader to party partisan. Leon, on the other hand, has had a relatively easy walk from politics to freedom. – @hartleyr

The Accidental Ambassador is published by Pan Macmillan

The Accidental Ambassador: From Parliament to Patagonia by Tony Leon
EAN: 9781770102415

The job of post office and travel agent

16 Apr 2013 | Sue Grant-Marshall  | Original Publication:  BDlive

Tony Leon puts his skills as a raconteur to good use writing about his time as South Africa’s ambassador to Argentina, writes Sue Grant-Marshall

MENTION Argentina and up pops Evita, Diego Maradona, the best beef in the world and Pope Francis. Into that heady mixture we can now stir Tony Leon’s hilarious, pertinent and thoughtful insights into the life of an ambassador in a country so volatile that South Africa pales by comparison.

I am struggling to acclimatise to the sight of the former leader of the official opposition sitting on our chosen restaurant’s hard benches instead of hectoring the African National Congress from the parliamentary ones.

We exchange pleasantries about the launch of The Accidental Ambassador (Picador Africa) the night before, when a long line of guests, clutching books for signing, wound out of Hyde Park’s Exclusive Books long before the speeches began.

Yet, it was with a jaundiced approach that I opened the former ambassador’s Argentinian memoir, sighing at the prospect of some heavy reading. I needn’t have worried for, by the end of the first chapter, I was chortling at Leon’s witty repartee and fascinating stories.

One of the first people he met on taking up his post in Buenos Aires was the country’s Cardinal Jorge Mario Bergoglio, now Pope Francis. "We had a bit of a chat, nice guy," Leon says, an opinion not shared by Argentina’s President Cristina Fernandez de Kirchner.

All ambassadors are expected to attend an annual religious ceremony held around Argentina’s April Independence Day celebrations. "But the Te Deum was never held where the president was because the cardinal was so critical of her. She made it quite clear that she would never set foot in the cardinal’s cathedral, which happens to be directly over the road from her palace."

So the ambassadors were flown at vast expense to the Argentinian taxpayer to some other spot in that huge country. But, when he became pope, "in the most Argentine way, instead of crossing the street to his cathedral, she flew all the way from Buenos Aires to Rome to attend his investiture and shake his hand. So, there you have it in a nutshell, some of the contradictions of Argentine-style politics."

You won’t find that story in his book as the pope was chosen well after he had penned his last word. But there are many others, equally amusingly told by the former Democratic Alliance leader and ambassador, who landed in the latter job after a casual conversation on the 2009 election campaign trail with President Jacob Zuma.

Leon had decided he had "done my national service" in Parliament and mentioned to Zuma that he intended leaving politics. Some time later, he found himself having a job interview with Zuma.

He wrote his book because "I needed to reflect how we actually do this job if you come from the opposition ranks — how do you remain true to yourself and to SA?"

He thinks you can do both, and hopes he has managed this. "One of the reasons I accepted Argentina was I felt I could do the job of pushing South African trade, building up our exports and pushing tourism from that country to ours, without having to violate my principles." He succeeded, for tourism grew by 120% in 2010, the year of the Fifa Soccer World Cup, and trade increased by 80%.

Leon believes that if South Africa spent more time building up its trade offices and less time sending its politicians around the world, "we would create a lot more jobs here".

But it wasn’t all lengthy asado (braais), jaunts to wealthy ranches and exquisite wine estates with the cream of Argentinian society.

He struggled to learn Spanish, couldn’t adjust to dinners that started after 10pm, disliked the hectic traffic and found the "constant feeling of crisis in Argentina quite a challenge. At least here at home, there is less crisis and I can do it in my own language."

He recounts a story of a South African fruit-juice company that couldn’t move its product out of the Argentinian customs house "because the trade minister would phone the supermarkets and ask why they were selling our juices so cheaply".

The minister’s advice was: "I suggest you get them off your shelves, and if you don’t, then we’ll find some reason to come and deal with you."

Leon recalls it being like "a Mafia shakedown, the guy looked like an extra from The Sopranos, which perhaps just reinforced the prejudice I had about the way they operated".

Leon is an excellent writer and raconteur. His description of the drowning of one of his two beloved dachshunds in a park over the road from the ambassadorial apartment, their anguish and his resolve to find another, is eloquent and heartwarming.

He and his wife drove to a breeder’s home in a dodgy suburb, "a ramshackle ruin of a structure, but inside was a dachshund lover’s heaven, with all manner, types and colours of the hound running about".

They settled for a tiny puppy with the colouring of a Nguni cow, which they dubbed Argentino Julio Leon.

During their three-year stint in Argentina, the Leons travelled extensively throughout South America, visiting Brazil, the Galapagos Islands and "the Boers at the End of the World in Patagonia".

Three ships took 800 families there at the end of the Anglo-Boer War, so it is not surprising they hardly speak Afrikaans any more and answer to names such as Juan van der Merwe.

Leon doesn’t pull his punches about an embassy today being "a sort of glorified combination of post office and travel agent".

Nor does he spare his words in describing how his minister, Maite Nkoana-Mashabane, spent R235,000 for a single flight from Norway to Bulgaria, "when she refused to have her handbag searched at Oslo airport and chartered a private jet". He estimates the cost "of this one junket was equivalent to my embassy’s entire annual budget for public diplomacy projects to promote SA".

During his time there, Leon hosted, among others, author JM Coetzee, Lindiwe Sisulu, FW de Klerk, Tokyo Sexwale, the Springbok rugby team and Joost van der Westhuizen. Now in a wheelchair, Van der Westhuizen attended the book launch at Leon’s invitation.

When Leon arrived in Argentina, he was told the definition of an ambassador is "someone who thinks twice before he says nothing. But I was not that sort of ambassador. I had a few things to say and a few things that I should not have said".

And now that he is no longer an ambassador, you can read his sometimes undiplomatic but always insightful comments about his accidental job in his book. You will not be bored.