I spent most of this morning at a panel on Argentina in general, and the repercussions
from its hard-line debt restructuring in particular. It’s a topic I’m rather
fond of, and I saw lots of old friends there; I was sorry I couldn’t stay for
the whole thing. I almost felt nostalgic when Arturo Porzecanski,
of American University, said that he could never have foreseen how strong the
Argentine recovery would be. I think he’s been saying that now for pretty much
the entire duration of the Argentine recovery, which has been nearly as impressive
and miraculous as Porzecanski’s own, from a particularly nasty and rare blood
disorder. So it really was wonderful to see Arturo in such fine fettle today.
Each of the panelists had their own favorite metric of Argentine success: for
Porzecanski it was tax revenues, for Roger Noriega it was the
poverty rate, and for Brad Setser it was the rate of increase
of Argentine central bank reserves, which are now growing at the same pace ($2
billion per month) that money was flowing out of Argentina at the height
of the crisis in 2001. And yet, as ever on such panels, everybody was convinced
that Argentina was going to hit the wall Real Soon Now – a prediction
which president Nestor Kirchner has delighted in proving wrong
so far.
That said, Noriega’s predictions of gloom were more compelling than most, since
they were based not on economics but on the fact that Buenos Aires suffered
serious blackouts last week, after being hit by its coldest May in 45 years.
Everybody has known for a long time that Argentina’s achilles heel is underinvestment
in its energy sector, and the country’s capacity finally seems to have been
reached. Noriega’s second-best line was when he said that "Kirchner’s energy
policy has been to pray for good weather" – it’s a good line because
it’s true.
Noriega’s best line, however, was more self-deprecating: he described the amazing
Argentine recovery as an "intergalactic dead cat bounce". Which is
about right: it’s the only dead cat bounce which has risen higher than the height
from which it fell. But Argentina has already seemingly violated numerous laws
of economics: why shouldn’t it violate the laws of physics, too?