- The Washington Times - Monday, February 19, 2007

BUENOS AIRES — Five years after Argentina’s economy collapsed, triggering food riots, supermarket lootings, devaluation and debt default, Maria Elena Lopez is still scavenging in the streets for recyclable paper.

But competition is lower today and it takes fewer hours to amass $5 worth of junk, pushing a creaky wooden cart through an upscale Buenos Aires suburb in search of paper, cardboard and anything else she can sell.

Miss Lopez, 34, is at the bottom end of a remarkable economic recovery that is generating jobs, boosting exports and reviving businesses — but still has a long way to go. “Five years later, it’s definitely better,” said Miss Lopez, wearing a baseball cap and sweating in the Southern Hemisphere’s summer. “But it’s not great.”

The ranks of the cardboard scavengers — “cartoneros” — have thinned as South America’s second-largest economy rebounds at a blistering pace, growing more than 8 percent year after year.

Miss Lopez now has time to earn extra money baby-sitting, while two brothers idled by the crisis have gone back to low-paying jobs, one at a carwash, the other in a tire-repair shop.

It is now rare to see desperate families Dumpster-diving for rotting vegetables, and those classified as poor have gone from more than half the population of 37 million to about a third.

Argentina has posted 47 months of uninterrupted growth and has renegotiated repayment of $100 billion of public debt after the largest default the world has known.

The biggest South American farm nation after Brazil, Argentina exported its way out of the crisis, registering a record $46.5 billion in sales last year, led by soybeans, corn and wheat from the fertile Pampas.

The Argentine peso was pegged 1-to-1 with the U.S. dollar for more than a decade until the recession and mounting debts caused a run on banks by depositors in 2001, sending the currency into free fall.

Today, the government pegs the peso at 3-to-1 with the dollar to boost tourism, exports and construction. The cheap exchange rate also keeps prices lower in dollar terms, and some fixed costs such as utility rates remain frozen by the government at 2002 prices.

Favorable winds

President Nestor Kirchner, elected in March 2003 after four others were toppled by the crisis in the space of just three weeks, also strong-armed creditors worldwide, forcing them to accept repayment of less than 30 cents on the dollar. He made early repayment of about $9 billion owed the International Monetary Fund, using tax dollars reaped from the export windfall.

Mr. Kirchner is a friend of Venezuelan President Hugo Chavez, and his election was seen as another win for a resurgent Latin American left. He is heavily favored to win re-election in October if he runs.

Many Argentines remain skeptical that the good times will last. One reason for their lack of faith: Credit programs that shriveled in the crisis haven’t rebounded, squeezing first-time home buyers and small businesses. Interest on home mortgages has soared above 12 percent.

Critics complain about the unorthodox price controls Mr. Kirchner imposed to squelch inflation. Last year he banned most beef exports for six months, hoping to keep enough red meat at home to ensure high supplies and low prices for this key component of the consumer price index. He has slapped new taxes on soybean exports to finance subsidies of bread and other foodstuffs on the index.

Such moves are manageable when the economic conditions at home and abroad are working in Mr. Kirchner’s favor, said political analyst Rosendo Fraga. “It will be easier to see how things play out when the winds of the world economy blow against him.”

Perhaps the biggest complaint is wages, which remain sharply devalued. Although the jobless rate is down by half to about 10 percent today, many workers say cost-of-living adjustments are long overdue.

Argentina’s largest labor confederation wants a 30 percent wage increase for millions of its members. The talks start this month but protests already have begun: About 200 unionized supermarket workers beat drums and lighted firecrackers outside the Labor Ministry this month.

Middle class rebuilds

Such developments leave Argentina’s battered middle class, Latin America’s largest, watching warily — people such as Rogelio Perez, 67, who laid off 50 workers when his cookware factory disintegrated five years ago.

“It was chaos, just chaos,” he said, recalling how Argentines traded Monopoly-like IOU money and bartered their appliances and silverware for food.

The devaluation eventually made the glazed-clay dinner plates and coffee mugs of Mr. Perez competitive against imports again, so he sold his car, obtained a loan to buy a kiln, rented a warehouse and started over. As consumer demand picked up, he moved to a larger warehouse, but he still operates on a much smaller scale than before the crisis, employing only a few workers, some of them his relatives.

He is struggling to find an affordable loan to expand again.

“There’s far more demand than I can meet. But there’s no affordable credit,” he said.

Still, Buenos Aires is on the mend, as its skyline shows.

A former wharf district of run-down warehouses, which began booming before the crisis, is filling with luxury apartments and office suites. Despite the credit difficulties, investors are building new skyscrapers. Several industries are booming with new opportunities.

Horacio Moschetto, who lobbies for shoe manufacturers, recalls how the overvalued peso made it hard to compete with 25 million pairs of Brazilian shoes flooding the Argentine market.

Argentine shoes are back, selling throughout Latin America and Europe, and the industry’s work force has grown from 14,000 in 2001 to 52,000 today, Mr. Moschetto said. Now, even Brazilian companies want to manufacture in Argentina because costs are lower.

“In 2001 we manufactured 33 million pairs of shoes and last year we made 88 million pairs. This kind of recovery, I know, is happening in many industries,” said Mr. Moschetto.

In December 2001, just before the economic collapse, protesting Argentines set ablaze a mock “Christmas tree” of cut-price Brazilian shoes.

“That’s something I still remember well,” Mr. Moschetto said.

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