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BUENOS AIRES – Much has been written, and much more has been said, about Argentina’s impressive triumph in this year’s soccer World Cup. Much of the media coverage, of course, has revolved around the tactics and performance of the Argentine team, the wild celebrations that followed the country’s first world title since 1986, and the potential political impact, considering that the victory of the team took place in an election year. But a more interesting question is what this sporting achievement can tell us about the economic instability in Argentina in the last fifty years.
Argentina’s economic performance stands in stark contrast to its excellence on the soccer field. On the one hand, Argentina is often seen as a lost economic opportunity, reeling from one crisis to another for decades, squandering valuable assets that could have given rise to a very prosperous country. On the other hand, the country has a long history of nurturing and retaining top-level talent.
Sport is an example. While the national soccer team and its remarkable captain, Lionel Messi, are already legend after their World Cup triumph, their success is far from an anomaly. It was preceded by five previous appearances in the World Cup final and by a historic title from Diego Maradona in 1986. But the capabilities of the Argentines go far beyond sport; literary giants like Jorge Luis Borges, musical luminaries like Daniel Barenboim, and medical pioneers like René Favaloro were also born in the country.
Clearly, Argentina has a tremendous volume of human capital. In theory, that should have created a thriving economy. What then explains the country’s recurring macroeconomic crises? In my opinion, the best explanation is Argentina’s inability to gain and maintain competitiveness without periodically implementing large nominal exchange rate devaluations.
While nominal currency devaluations can bring some short-term benefits, an economy can become competitive only if productivity and profitability improve. That, in turn, requires investment and technological progress, as well as a functioning legal system and certainty about the rules of the game. Argentina has not provided investors with such a context, nor has it adequately protected property rights. Instead, the government has intervened increasingly in the economy over the past 50 years, reversing privatizations and imposing new taxes and exchange controls that have strained foreign investment and other development channels. Argentina’s rigid labor market, where unions interfere in companies’ wage-setting processes, has affected the growth of the private sector.
Taken together, these impediments help explain why the Argentine economy is less competitive than it could be, despite the emergence of prominent companies such as the e-commerce retail platform Mercado Libre and burgeoning sectors such as the soybean industry. But these successes are atypical and many Argentines end up emigrating to countries where their abilities are more valued.
The Argentine soccer team is, once again, an example. Although most of the team’s stars play abroad, they are happy to turn up when called upon to don Argentina’s albiceleste jersey. But while the current government has grudgingly accepted the players’ status as national heroes and role models, many on the populist left see their expatriate compatriots as traitors.
To encourage investment, boost growth, and harness the true potential of the economy, policy makers in Argentina must introduce market-based reforms. The latest IMD World Competitiveness Ranking places Argentina in 62nd place out of 63 countries, behind Venezuela.
Here, too, football can teach us some valuable lessons. To begin with, there is no political interference in the selection of the players for the national team. Undoubtedly, Argentina’s polarized politics is reflected in relations between the country’s soccer clubs and within the powerful Argentine Soccer Association, which essentially “owns” the team. However, the members of the team are chosen by a non-political professional technical director. This limited interference, which has been crucial to the team’s latest triumph, is possible only because millions of Argentines feel they are interested in the team’s success.
But we should remember that the Argentine team has not always been successful. It took him 36 years to find the drive and management necessary to win the World Cup. While avoiding political influence was crucial, the professionalism of the players and their respect for Messi, for head coach Lionel Scaloni, for each other and for the rules of the game were just as important.
To break the endless cycle of macroeconomic crises and regain its competitiveness, Argentina can look to its national soccer team for inspiration. The players’ pride and sense of belonging, as well as the tenacity and perseverance they have shown, having lost their World Cup opener to Saudi Arabia, will be crucial to building a thriving economy that makes the most of its top-level local talent. . While the Argentines should learn from their mistakes, they can also learn, and a lot, from their successes.
Former president of the Central Bank of Argentina, he was director of the Center for Central Banking Studies at the Bank of England.
Copyright: Project Syndicate, 1995 – 2023
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