MercoPress. South Atlantic News Agency

The Economist: Kirchners recipe for continued decline

Leaving aside much of the London media rhetoric about a build-up or even a possible re-edition of 1982, between Argentina and the UK over the Falklands and South Atlantic islands sovereignty, The Economist adopts a more common sense and pragmatic attitude about the controversy over oil exploration in the South Atlantic.

Basically it argues that if the Argentine administrations of the Kirchner couple had not been so hostile to private initiative in the energy sector, the big oil-strike, could very well be taking place on the continental side and not necessarily in the Falklands. And a more mature leadership would be taking advantage of the current Falklands round as an economic (and know-how) opportunity to become the main onshore base for the Islands oil industry.

The current childish attitude of the Kirchners administrations is, unfortunately, a recipe for continued decline again threatening Argentina with the long fall from the first to the third world over the past century. The Economist points out that they have only to look around them—at Brazil, Chile and Uruguay—to see that responsible centre-left governments have achieved lasting social progress by respecting the role of private investment and the sanctity of contracts.

Follows the transcription of the article

Argentina and the Falklands

The beef in Buenos Aires

The Kirchners could have more oil if they stopped bullying Argentine business

Once again an unpopular Argentine government is making aggressive noises towards the Falkland Islands. In 1982 the country’s military dictators gambled that grabbing the islands, a far-flung relic of the British empire, by military invasion would allow them to cling to power on a wave of popular acclaim. Fortunately for the islanders the junta was defeated by Margaret Thatcher’s dispatch of a task-force (though it was a far closer-run thing than she would ever acknowledge and cost 650 Argentine and 260 British lives). The conflict had a silver lining for Argentina, in the form of its swift return to democracy. Now an elected, but unpopular, president, Cristina Fernández de Kirchner, is working herself into a nationalist frenzy over the arrival of an oil rig.

Seismic studies of the islands suggest there may be a lot of oil and gas beneath waters that Argentina has always claimed as its own. Ms Fernández’s government pledges to prevent their discovery and development, and has restricted the use of Argentine ports and waters by island shipping. Argentina wisely insists that it will not resort to military action (in contrast to 1982, the Falklands are now well-garrisoned whereas its own armed forces have shrunk). Instead it is counting on regional solidarity and diplomatic pressure. This week it won the support of a summit of the leaders of 32 countries from Latin America and the Caribbean.

Almost every Argentine and most Latin Americans believe that in geography, history and international law the islands they call the Malvinas belong to Argentina. Britain ousted a small group of Argentine settlers in 1833. British ownership is indeed an anomaly—but the world is full of them. If the clock is to be turned back to 1833, southern Argentina should be an independent country under indigenous leadership and the Brazilian state of Acre should revert to Bolivia. For Britain, upholding the right of the Falklanders to self-determination is paramount. And that is the stronger argument.

What the Kirchners should learn from their neighbors.

The irony in Ms Fernández’s stance is that a big oil-strike could very well be taking place in Argentina, or its inshore waters, were her government and that of her husband and predecessor, Néstor Kirchner, not so hostile to private initiative in the energy industry. As a result of their policies, Argentina’s output of oil and gas has fallen in each of the past three years. That forms part of a pattern. Under the Kirchners some private businesses have faced nationalization or harassment by punitive regulation, while others have flourished, seemingly because the Kirchners see them as loyal (see article). This formula is a recipe for continued decline. So is the government’s childish attempt to fiddle the country’s economic statistics. Inflation, at once symptom and cause of Argentina’s long fall from the first to the third world over the past century, once again threatens to take off, potentially ruining Argentines’ living standards. They have only to look around them—at Brazil, Chile and Uruguay—to see that responsible centre-left governments have achieved lasting social progress by respecting the role of private investment and the sanctity of contracts.

A more mature Argentine leadership would see oil exploration in the Falklands as an economic opportunity, not a political one. Argentina could become the main onshore base for the Falklands’ oil industry—if there is one. Its own offshore exploration could benefit from the know-how that this would create. A friendlier Argentina could profit greatly from co-operation with its South Atlantic neighbors. And oil could provide the economic foundation for the Falklanders to declare independence—something Britain surely would not resist.