Argentina tends to get an unflattering press. With reason. One of the richest countries per capita in the world a century ago, its mismanagement has been a tale of woe ever since.

There are aspects of the Argentinian experience that reminds strongly of home, yet others that don’t, at least not yet.

We too have reason to complain about lost opportunities and own goals seemingly made daily, but it can always be worse than it actually is. With the unsettling promise, however, that it really can become worse, if policy choices were to take us there. As it has done Argentina, and others closer to home.

An article in the FT this weekend pinpointed the one constant in Argentina’s history as being its inability to manage a boom. Her political leadership calls the past decade their “glorious decade”, but it might be better described as a run of good luck now apparently ebbing.

While it lasted, the Asian-driven boom in commodity prices powered Latin America’s third-biggest economy for a decade, with in her case soya exports to Asia raising her growth rate for a while to Chinese-like levels, and poverty falling rapidly.

But this run of good luck is now ending and different realities have come to apply.

As the global tide has receded, the many Argentinian shortcomings again come painfully into view.

Her inflation today is said to be 25%, though this is considered an underestimate by some. Currency controls and general maladministration have weakened the economy by undermining productive ability and confidence. A bad battle with foreign creditors has shut the country out of global financial markets.

With eyes closed, the country being described is South Africa in the 1980s. Only our main ill then was a political credo unacceptable to our larger population and the world, and the resulting battle of wills sapping the economy the way it did.

In today’s Argentina they don’t have apartheid to blame for their plight, but something else that in essence comes close to it, namely a misguided political elite, in her instance extolling the “people” but favouring secrecy and personal power, graft and favouratism, on an apparently breathtaking scale.

This description immediately highlights differences with today’s South Africa. We don’t suffer 25%-30% inflation, our exchange controls today are more flexible than what prevailed during the 1960s, 1970s, 1980s and 1990s dog days, our state finances remain well managed even with a budget deficit of 5% and national debt rising north of 40% of GDP.

In other words, our macroeconomics remain holy compared to Argentina.

But like her we also have shown an unchanging proclivity for mismanaging the regular global windfalls coming our way, building too little buffer (fat) and safely storing it away for a rainy day.

We “only” converted a $25bn oversold forward shortfall into a $50bn forex reserve hoard in a matter of 15 years. Yet listening to SARB Governor Marcus reporting back to Parliament last week, this isn’t close to enough in modern times. In comparison, the smallest BRIC countries have laid in hundreds of billions of forex buffers (and the largest trillions).

As key central banks start ditching their unconventional monetary policies and a measure of normality is restored in leading economies in what remains of this decade, this is likely to be accompanied by market volatility, something that is best faced with large forex buffers (capable of acting like bomb blankets smothering at least some of the market unease).

We as yet don’t have such a safety blanket and like Argentina remain exposed to larger financial volatility.

More unsettling is what ails in our deeper innards, for here we also encounter public sector shortcomings in infrastructure and social delivery, fueling popular anger and lack of business confidence in apparent equal measures, eroding our productive output and willingness to take risk, denying us the resources with which to more ambitiously address our remaining shortcomings.

Our daily discourse today is also full of tales of secrecy and personal power, graft and favouratism, suggesting unprecedented corruption among our political elite while “talking as if they were Mother Teresa” as apparently they do in Argentina.

Argentina’s financial and economic shortcomings today, like our own financial and economic ineptitude in 1980s’ apartheid South Africa, is not something than cannot ever again afflict us.

Instead, the miracle of today is that our macroeconomic health is still holding up well despite what is being done elsewhere to our economy and society.

It is not a given that our macroeconomic health will keep holding up if our microeconomics keeps being corroded the way it is.

Still, like in Argentina, where political change appears to be in the air in coming years, and with it a possible shift in policy emphasis for the better, so our coming years may see more reform, either from within the ruling alliance, or instigated by new ones yet to be formed.

This makes the 2010s an exciting decade powered by what we can ultimately put on the table ourselves, as compared to windfall gifts bequeathed by the larger world in the 2000s decade and mostly frittered away.

For both Argentina and South Africa, therefore, the real test, as so often before, lies ahead as once again we are offered opportunities to break the old country mould of relying on global windfalls while mismanaging them, and achieve a more sustainable development momentum from within through serious reform.

In this, too, we may hopefully have some commonality as we complete this challenging decade and thereafter move on to yet more serial windfalls in decades to come, and these better managed than in generations gone by.

Reference

John Paul Rathbone and Benedict Mander “Fading populist clinging to the tatters of her ‘glorious decade’ Financial Times 12 October 2013