ARGENTINA’S DELEGATIVE DEMOCRACY: A CASE STUDY

A dissertation presented

by

Florencia Inés Gabriele

to

The Department of Political Science

In partial fulfillment of the requirements for the degree of Doctor of Philosophy

in the field of

Political Science

Northeastern University Boston, Massachusetts December 2013

1

ARGENTINA’S DELEGATIVE DEMOCRACY: A CASE STUDY

by

Florencia Ines Gabriele

ABSTRACT OF DISSERTATION

Submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Political Science in the College of Social Sciences and Humanities of Northeastern University December, 2013

2 ABSTRACT

This study analyses why Argentina remained an immature and underdeveloped delegative democracy rather than a fully-liberal democratic polity. Following the work of

Guillermo O’Donnell this work explores the quality of, and serious deficiencies in,

Argentina’s democracy. This work pays special attention to presidential use and misuse of

Decrees of Necessity and Urgency by as a means to govern alone, thus bypassing Congress and how there is no existing check and balances in the government in this regard.

Observing delegative democracies, this work also examines the following: the use of economic restrictions, use of policies such as nationalizations, privatizations, management of the federal budget, international relations of the country, restriction on the media, behavior of the judiciary branch, changes in the national constitution, and decreasing role of the Vice President.

This work analyzes the relationship between democracy, decrees of necessity and urgency, laws sanctioned by Congress and inflation using transfer function models.

Democracy is measured using the Polity IV dataset. There is a causal relationship among the explanatory variables (inputs) —the numbers of laws passed by Congress, inflation, and number of DNU — and Democracy (output). This work finds that the number of laws passed by Congress explain the level of Democracy in Argentina. This study suggests that there is an inverse relationship, where the level of Democracy impacts inflation as well as

Number of Decrees of Necessity and Urgency (signed arbitrarily by the President). This study analyses the relationship among these three variables and the dependent variable

(output) democracy and offers policy recommendations to deal with these issues.

3 Keywords: Argentina, delegative democracy, decrees of necessity and urgency

4 ACKNOWLEDGEMENTS

This dissertation would not have been possible without the support and guidance of many people. Since my arrival at the Department of Political Science I had the privilege of working with Professor William Crotty in several projects. His passion for research in political science was an inspiration for me. Professor Crotty has been a great supporter through my time at Northeastern; without him I would have not been exposed to the complexities of Democratization, and I would have not fallen in love with the field.

Professor Amílcar Barreto is an example to follow in my career, both as a researcher as well as a professor. He guided me through this process and corrected many drafts of this work, always with insightful comments and ideas on how to improve it. I will be forever in debt with Professor Barreto for he has been so generous with his time and knowledge. I would also like to thank Dr. Silvia Dominguez for accepting to be a third reader and providing me with her valuable comments. Dr. Denise Horn, Dr. John Portz and Barbara Chin have been very kind and helpful during my time at Northeastern University.

I treasure the time I spend at Northeastern. Over the years I made many friends.

Chris Chanyasulkit, allowed me write at her house, where she would encourage me, help me get organized and helped me plan this work. Jessica Frost shared her wisdom and spirituality and always had positive thoughts and words to cheer me up. My filos D. G. proved to be a true friend and probably one of the few people that understood what I was going through. My friend Denitza Draganova knew of my intention to pursue a PhD since

5 we met during our undergraduate studies at Emmanuel College and helped me prepare for the GRE at a coffee house.

Many people from Argentina were instrumental in supporting me. I have to offer a special thanks to my dearest friend Maria Cristina Giangiobbe, who read drafts of this thesis, corrected my English and was truly there for me. I couldn’t possible imagine doing this without her support.

Argentina is home of many of my friends. Among them, Paula Zerda. She spent an entire summer discussing my ideas for impossible thesis models. My friends Nora, Candela and Victoria were always in touch throughout my work and supported me with their wonderful energy. The entire Caldani family was always in touch and with them I shared my progress. Their support meant a lot to me.

When my health was failing, Dr. Eduardo Aun and a team of doctors nursed me back to health, over and over again. In Boston, I counted on Marcy White, L. Ac., and Dr. Jonathan

Melman who offered me so much support when the pain hampered my writing, Also,

Carmen Rojas listened to me and supported me through the hardest time of my life.

But the biggest help of all came from my family: my mom, dad and sister who knew how badly I wanted to purse a PhD and made everything possible to help me finish the race. With those three examples of hard work, I could only continue marching forward. I am forever grateful for everything you have done for me. To them I dedicate this work.

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A papá y mamá, gracias por todo.

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TABLE OF CONTENTS Abstract 2

Acknowledgements 5

Dedication 7

Table of Contents 8

Preface 9

Chapter 1: Introduction 19

Chapter 2: Literature Review 47

Chapter 3: Argentina 104

Chapter 4: the vicious circle of Delegative Democracies 150

Chapter 5: Statistical Analysis 222

Chapter 6: Conclusions 275

Works cited 290

Appendix Chapter 1 294

Appendix Chapter 2 306

Appendix Chapter 3 310

Appendix Chapter 4 314

8 PREFACE

“Con la Democracia se come, Con la Democracia se educa, Con la Democracia se cura, No necesitamos nada mas, Que nos dejen de mandonear, Que nos dejen manejar la patria financiera, Que nos dejen de manejar minorías agresivas, totalitarias, inescrupulosas, Que por la falta de votos, buscan las botas para manejar al pueblo Argentino. […] aquí es entonces necesario que comprendamos, la bandera de la libertad sola no sirve, es mentira no existe la libertad sin justicia. Es la libertad de morirse de hambre, es la libertad del zorro libre, en el gallinero, libre para comerse con absoluta libertad las gallinas libres.”

“With Democracy we eat, With Democracy we educate, With Democracy we heal, We don’t need anything else, Stop pushing us around [the military], Let us manage our economy, Let us manage aggressive, totalitarian, and unscrupulous minorities, who lacking votes seek their boots in order to govern the Argentine people, […] it is important that we understand here, by itself the banner of liberty is worthless, without justice it is but a lie. It is the freedom to die of hunger, it’s the freedom of the wild lone fox in the henhouse, free to eat free hens with absolute liberty.”

Inaugural Speech of President Ricardo Alfonsin, on the reinstallation of democracy in 1983 (“Con la Democracia” 2009)

Leading scholars have classified Argentina as an underachiever in terms of economic growth (O’Donnell 1973, Waisman 1987, Adelman 1994, Pzeworksi and Limongi 1997). But

Argentina is also an underachiever in terms of democratization. According to Levitsky and

Murillo Argentina has been a “persistent failure to build enduring political and economic institutions and its continued propensity toward crisis”(Levitsky and Murillo 2005, 1). In Latin

American countries this is typical. “Something resembling liberal democracy has become almost

9 universal in Latin America in the past 15 years, but also … most of these liberal democracies share little more than empty shells” (Smith 2005, 224). Countries in this region have governments elected by their people, but the quality of those democracies is questionable. Any society aims to pursue social progress along with equity and extended periods of economic growth. This cannot be achieved in the absence of healthy and robust institutions that reconcile democracy and development within “a framework that includes greater social cohesion and more gender equality, how to seek after a more strategic relationship between market and State and a more functional one between state and society” (Zovatto 2011, 2).

Although Argentina has had a complicated past, alternating between democracy and authoritarian regimes, the country has achieved a stable democracy since 1983. The type of democracy that Argentina has is a Delegative Democracy (Goddard), a popularly-elected regime where presidents rule as they see fit during their tenure in office.1 Delegative presidents are usually product of crises, where the urgency and the necessity of leadership give them the power to act unilaterally. Argentina’s delegative democracy never evolved into a full, liberal representative one. The reason for such poor performance, according to the literature, is its weak institutions, as stated by Levitsky and Murillo (Clarin) and Acemoglu and Robinson (2012). In countries with delegative democracies one usually sees a vicious circle of crises and a never- ending need for delegative authority. “When the crisis starts in these governments, the country already has institutional weaknesses that the delegative leader has deepened” Bearing this in mind it is not surprising to see that the current administration in Argentina is leaning towards authoritarian policies — following in the footsteps of Venezuela — and is thoroughly dismantling Argentina’s democracy.

1 Term coined by Guillermo O’Donnell (1994), a Delegative Democracy is in place of a Representative democracy, which is what is usually studied in Political Science.

10 This work’s central hypothesis this is the core reason why Argentina is not progressing, as it should and as it could. While at the time Delegative Democracies seem an improvement from previous authoritarian alternatives, they have failed to evolve into full liberal democracies.

A Delegative Democracy is a democracy where one power — the executive — is empowered at the expensive of the other two others — the judiciary and legislature. This creates a system where the most basic checks and balances don’t work as they should and are considered an

“unnecessary impediment”(O'Donnel 2009) Delegative Democracies have failed to create incentives to improve economic performance, and this affects the country both domestically and internationally. This work will assess how DDs have held up growth and isolated the country.

Furthermore, Argentina has gradually lost its position in different international rankings.

Naturally has not taken place just in this one country; it also happens in other regions, and is particularly associated especially with events in Venezuela. Other aspects of this trend are: 1) a growing personalization of politics where the president anoints himself the embodiment of the nation and grows to be a crucial, determinant figure in any and every sense, 2) a constant need for unnecessary changes, where presidents bring about supposedly new or magic solutions. This second point foments a feeling of permanent national reinvention — the country is summoned to undergo fundamental changes, starting all over again in terms of policies generating great instability in the business sector and discouraging investors. For years Argentina has lacked a stable set of rules in terms of politics and economics policies emanating from democratic consensus. This behavior only generates uncertainties, very high transaction costs and encourages corruption.

As a result of these limiting policies imposed in many Delegative Democracies, countries fail in terms of economic and political possibilities. The following graph will illustrate how

11 Argentina is losing its position in different rankings: the first two bars show the index of economic freedom, the third one shows the report for global competitiveness and the last one shows the doing business report (Pallares 2012, 260)

In order to study this phenomenon, this work will focus on four persistent policies that define the

Argentine Delegative Democracy:

1. Overuse of Decrees of Necessity and Urgency. The prototypical tool of a delegative

leader is the use of these decrees to exercise authority over the legislature. This tool

allows executives to operate with a democratic façade while imposing severe restrictions

on the lawmaking body. As stated in the National Constitution, Congress should make

laws. Even though this is a time-consuming process, Congress’s task is meant to ensure

democracy. Decrees should not be promulgated out of political convenience: they are

meant to be used as a last resort. The use of DNUs as a political devise replaces the rule

of law with presidential fiat. DNUs are meant for extraordinary crisis or emergency

12 situations. It is the president who decides whether the situation is of such severity that he

has to rule by decree, whether the Congress cannot legislate because of any obstacle, or if

there is any impediment that makes it impossible for the Congress to legislate. In

Argentina, since democracy was restored it is a common practice for presidents to issue

these decrees.

Source: La Nacion Data

2. Imposition of hard economic restrictions. As expressed above, the country leaders

systematically change economic policies. This makes it harder for domestic as well as

international parties to plan their business and economic activities. Some of the

implemented include heavily restricting foreign trade — including basic commodities —

and exchanging foreign currency as well as nationalizing foreign companies. Trade

restrictions exert a heavy toll on daily life and severely affect peoples’ living standards

since. After all, they cannot even purchase the medicines they need, spare parts for their

cars, books, clothing nor many other kinds of goods. Small and medium businesses must

13 close their doors, ordinary citizens cannot save in foreign currencies, they are limited to

travel freely, real estate market plummets, etc. While the government controls monetary

policy at will by manipulating the currency’s value and devaluating it at will, it eschews

sound fiscal policies. As a result, trust in government falls precipitously. Domestically

this devaluation of currency generates inflation. Internationally the country is isolated; it

turns into a risky place for investments and an unreliable trade partner.

The following graph depicts the risk of investing in Argentina from 1998 to the

present. Argentina has had world high records of country risk, and its present record

represents very high levels in comparison to other regional economies.

Source: (Ambito-Financiero 2012, 261)

The following graph shows the country risk in comparison to regional economies

14

Source: La Nacion Data

The following graph shows how the value of the US dollar varies greatly as the

imposition to buy foreign currency favors the appearance of a black market .

Source: La Nacion Data

The following graph shows Argentina’s inflation compared to other regional data. Two

different sources were consulted regarding Argentina: the strongly questioned official

statistical methods and some private researches. (Donovan 2012, 262)

15

3. Amending the National Constitution for the benefit of the ruling party. While the National

Constitution is supposed to be the cornerstone of the national legal system, it has been

substantially and frequently changed in order to benefit the parties in office. Such

constitutional changes allow incumbent delegative leaders to continue in office.

4. Manipulation of the media and censorship. Through the manipulation of the media and

its contents, the excessive expenditure in propaganda, the removal of a variety of

programs as well as indoctrination, the government tries to influence citizens. The

government´s lack of transparency, the secrecy behind policies and the prohibition to

ministers and other officials to communicate with the press, are worrisome and contrary

16 to basic democratic principles. Incumbents only communicates through the official

broadcast (cadena nacional) and does not allow, nor does it answer, questions from the

local or foreign press.

This study will be divided in five chapters. The first chapter will situate this problem within a regional context. Argentina is not an isolated case in this difficult path towards a full liberal democratization. The regional pattern needs to be understood in order to grasp the difficulties that democratization presents in Latin America. The second chapter will look into the literature on democratization and political economy. This literature review will underscore how

Political Scientists have pondered these questions, in general as well as in particular. It will also explain the importance of this work. The third chapter will describe the policies undertaken to dismantle Argentine democracy. Politicians have carefully framed the perpetuation of delegative democracies through detrimental policies. This section will review Argentine history and examine the ways different political and economic tools have been used to prevent Argentina from growing to its real potential.

Chapter four will describe the model that will be tested here. It will see why Delegative

Democracies have not evolved into full liberal ones by looking at the gist of both political and economic activities: incentives. A Delegative Democracy may have a negative impact on economic growth and competitiveness and even create a poor pattern of growth and prosperity.

In order to test this econometrically, statistical data from reliable sources will be used to evaluate this hypothesis. Chapter five will draw upon the concluding remarks and the comparison to regional countries undergoing similar situations. Delegative leaders implement policies that prevent countries to develop full liberal democracies, and that makes them forever dependent on a delegative leader, a caudillo or a quasi-authoritarian leader, who consequently remains in

17 office. Once this path is cleared, societies will be able to start their own way towards democracy and evolution, and the population will achieve better living standards. All that politicians have promised for decades will now be a reality, not just a campaign promise.

18 Chapter I

Democracies have become the predominant form of government in today’s world, and

Latin American as well as Argentina are no exceptions to this trend. “Latin American democratic regimes themselves have defined the maintenance of democracy as their collective interest, and have acted diplomatically to protect that interest” (Grondona 2010, 183). In the world, it is estimated that two out of three governments are democratic and that democracies are the only form of government considered legitimate by international standards (Ibid.) Even authoritarian governments try to portray themselves as democratic in order to gain international acceptance.

For governments, being perceived as democratic brings about great values and benefits.

Democracy has taken room in Latin America. One hundred years ago there were no democracies in the region, fifty years ago there were just three, and today almost all Latin

American countries have democratic regimes. But the West expected Latin America democracies to imitate their classic model. Latin American democracies consolidated, but with very particular specifications. Clearly, these newer democracies have not developed into the kind of full democracies commonly found in Europe and North America. For instance, the resurgence of the caudillo style of leadership as well as the so-called “pink wave” are responses to neoliberalism.

Latin America presents a very complex situation in terms of economic and political issues.

According to Larry Diamond “democracy has been a superficial phenomenon, blighted by multiple forms of bad governance: abusive police and security forces, domineering local oligarchies, incompetent and indifferent state bureaucracies, corrupt and inaccessible judiciaries, and venal ruling elites who are contemptuous of the rule of law and accountable to no one but themselves” (Diamond 2008).

19 Political scientists perceive liberal democracies as better alternatives to non-democracies.

In liberal democracies citizens choose their representatives and the state commits itself to protecting citizens’ individuals rights. Even imperfect democracies are judged as better alternatives to non-democratic polities. “Accountability and response are legitimate goals for a liberal democracy, but even if they are less complete, a liberal democracy will still function”

(Smith 2005, 183). History has shown that liberal democracies are not necessarily more or less capable than authoritarian regimes in terms of economic issues (Ibid., 191).

The Latin American regimes that lead the path towards democratization in the past twenty-five years are of “poor quality, and also fragile and easily destabilized. With the existing international climate … they tend to support democratic regimes, though many of them have failed to put down deep roots, and are challenged by popular mobilizations, military uprisings and elite subversions”(Smith 2005, 129). Today, the central debate in Latin America is not about democracy versus authoritarianism, but about the quality of democracy: how to go from a mere electoral democracy to one where citizens participate with robust institutions, how to make democratization and development programs work at the same time.

Issues of Latin America

1. Long Struggle with Democratization

Paradoxically, Latin American countries pose great diversities and great similarities.

Governments have to respond to local and regional challenges, and the ability of governments to do so has created different realities. The establishment of democracies in Latin America, despite having “democracies with adjectives” and arguably very few polyarchies, has been scholars’ concern. Still, it can be said that this has been a successful endeavor. Peeler (Peeler) claims that democracy in Latin America is feasible and desirable “it is feasible because the Latin American

20 tradition includes ways of thinking and action that are adaptable to liberal democracy. It is desirable because it works to protect individual freedom and to restrict the concentration of power” (Peeler 2009).

In the 1970s — with the notable exceptions of Venezuela, Costa Rica and Colombia — many countries experienced military coups and the establishment of dictatorships that overthrew the precarious elected governments in office. The following decade, the 1980s, was also another hard time to manage in Latin America as it presented severe economic crisis, external debt impositions and popular revolts. Overall, over the last 25 years, democracy has been seen as fragile, temporary and superficial and it is anything but static, according to Peter Smith (2005,

19). He notes that Latin American countries have made many efforts to implement electoral democracies, but they have not always been successful. Smith sees that despite many difficulties, democracies have matured as a result of economic liberalization and free trade. Today, Latin

American democracies are experiencing a “pink wave”, that is the shift to the left that is occurring in most Latin American countries. Smith studied the evolution of 19 Latin American countries from 1990 to 2000. Cuba, a non-electoral democracy, was excluded from this study. In terms of population the study covers a population of about 500 million people. Around 1900 there were no democracies in Latin America; a century later more than three quarters of the region’s countries held free and fair elections.. Figure 1.1, in the appendix, produced by Smith shows the growth of electoral democracies in Latin America(Smith 2005).

Smith sees three broad democratic cycles. First cycle stretched, approximately, from 1910 through 1939. After that period the region was dominated by oligarchic competition. During this era democracy peaked in 1910. The second cycle took place between 1940 and 1977. The democratic curve of Latin America is M shaped. After the Second World War, several countries

21 became democratic (Guatemala, 1945, Peru 1945, Argentina 1946, Brazil, Venezuela and

Ecuador 1948). Yet there was a downturn in the 1950s, which reversed itself in the 1960s. The third cycle began in the late 1970s and ceased in the 1990s when Latin America had 15 electoral democracies. By 2000, nearly 90 percent of the Latin American countries were electoral democracies. According to Smith (2005, 3) this shows that the common notion that Latin

America is “inherently undemocratic” or that Latin American citizens are “unsuited for political democracy” is incorrect.

Smith assessed whether Latin American waves are unique or related to the waves of democracies described by Huntington. This periodicity of democratization has ”substantial caveats” (Smith, 2005,3). The author believes that what Huntington describes as a first wave in

Latin America was “more like a ripple,” as only three countries were experimenting democracies in Latin America (Ibid., 32). It was mostly oligarchic republicanism what was making advances in the region. It was not until 1930-1950 that electoral democracies took root in the region. What most resembles a wave is the series of democracies that germinated in 1978. According to Smith

“the use of waves as defining metaphor conveys the impression that the survey and decline of political democracy are natural process waves that mount in strength and intensity over time: they create at their peaks, and then, under gravitational pulls, they always recede” (Ibid., 33).

Smith understands that Latin America was living the same progress that the rest of the world was experiencing. He believes that political systems around the world were connected to one another

(Ibid).

When it comes to resilience, figure 1.1 shows the overall duration of political regimes during the 20th century; the longest surviving regime type was electoral democracy with a range of 1-48 years and mean duration of 13 years. This, according to Smith (Smith), shows that

22 political instability in Latin America is endemic which ultimately impedes democratization rather than encourage it.2 According to John Peeler (2009, 101) a democratic regime is stable if

“it has passed through consecutive electoral cycles without the breakdown of its key rules and procedures.”(Peeler 2009, 101) Juan Linz and Alfred Stephan define the consolidation of democracy as the evolution of the democratic system to the point where it is “the only game in town” (Linz and Stepan 1996). Larry Diamond believe that consolidation is “the process of gaining broad and deep legitimacy, such that both elites and masses come to believe that a democratic regime is better for their society than any alternative regime, notwithstanding poor performance at any particular moment” (Diamond 2008, 1). Linz and Stephan understand consolidation as a state; Diamond treats it as a process. Peeler believes that the stabilization of liberal democracy cannot be linked to a single reason (Peeler 2009, 129).

In Latin America, Smith sees two types of authoritarianism: personalistic and institutional. In the former strong-willed leaders dominate the political arena and their main goal is the accumulation of power; in the latter, powers does not lie with on individuals but on committees, bureaucracies or institutions. In this second type, the junta, the collective dominates the political arena together. A common trait throughout Latin America was “bureaucratic- authoritarian” regimes — a concept studied by Guillermo O’Donnell. Initially they were led by the military officers who staged the coups. These regime overthrows claimed national redemption, which included the eradication of communist subversion, was their mission.

The reestablishment of liberal democracy started after 1974. The elections of the early

1990s in Latin America made a changed in the policies that were implimented. The tenants form

2 According to Smith there were 155 political regime changes from 1900 through 2000 — a rate of 1.53 per year. According this his study, there were no fewer than 55 major changes of regime oscillation between democracy and dictatorship.

23 the Washington Consensus started to be used across the board. Until the early 1990s, governments had to face worrying debt and fiscal crisis leading to severe hyperinflation.

According to many scholars, some of those governments were unable to finance social programs and responded with liberal reforms. The global crisis definitely had an impact on Latin America, and according to a study form Latinobarometro in 2011,they helped to explain how GDP growth decelerated in comparison to the previous report done in 2010 (Latinobarometro 2012, 24). When it comes to measuring democracy in Latin America, Latinobarometro is one of the most respectable sources. Latinobaroemtro is an NGO with its headquarters in Santiago, Chile. Their annual study conducts 19,000 surveys in 18 Latin American countries. Cuba is not included in these studies. The study asks questions about democracy, economy and society all together. GPD for Latin America is only 1.2% lower in 2011 than in 2010 (Ibid.). When it comes to supporting democracy, there is a regional decrease from 61% to 58% after four years of a continuous approval (Ibid., 26). According to Latinobarometro this is related to the economic decline as well as to different political aspects. Governments felt pressured to accept unpopular reforms, and in exchange they received a great deal of aid from intergovernmental organizations. Menem in

Argentina and Fujimori in Peru are examples of leaders whose administrations successfully curved inflation. These successes allowed them to secure constitutional reforms which in turn allowed them to stay longer in power.

The performance of neoliberalism is highly controversial. Karen Rammer (1990, 1991,

1993) studied the political impact of economic crises in Latin America. She contended that democracies have coped as well with economic crisis as do authoritarian regimes. The conclusion claims that he 80s economic crisis undermined support for incumbent democracies and promoted higher levels of electoral volatility, but without fostering political extremism,

24 exhausting elite consensus and leading to democratic breakdown. Javier Corrales believes that

“One of the most prominent features of neoliberal policymaking poses serious challenges to democracy, because neoliberal reforms typically damage the immediate well being of many it is usually considered necessary to insulate economic policymaking from the democratic political process(Corrales 2005, 110) . Despite promises neoliberalism did not benefit the majority of the people, and by 2008 leftist- or center-left president led every country in the continent except

Colombia.

In the past 10 yrs., Latin America has witnessed the election of left center governments in various countries of the region with an electoral platform based on explicit and firm rejection of the Washington Consensus’s Decalogue on macroeconomic policies and reforms. Once in office, all of them are implementing economic strategies that combine orthodox and heterodox elements, thus departing from the neoliberal toolkit centered on downsizing the state and severely restricting its intervention in economic matters in favor of market mechanism. However, neither their rejection of the Washington Consensus nor their departure from previous polices could be characterized as homogenous and uniform. (Their actual polices differ to some degree, dependent on the type of economic that were inherited) from previous government, the political space they have, and the objective they pursue. (Cameron and Hershberg 2010, 193). The “pink wave” started in Venezuela in the 1990s when President Chavez created a personalistic caudillo styled-administration, which was followed by others in the region. Other presidents with similar styles are the native leader Evo Morales, elected in 2006 in Bolivia, and

Rafael Correa elected the same year in Ecuador. Daniel Ortega from Nicaragua, who was also elected in 2006, engages in more moderate rhetoric. Classifying others is a challenge. “Nestor

Kirchner and his wife are clearly focused on stopping the movement towards neoliberalism and providing benefits to the poor and working class populations that constitute their political support base, but they are not undertaking the sort of major transformation that characterizes

Chavez and Morales”(Peeler, 174). The turn to the left has not spread uniformly across the

25 region and its effects are also uneven. But one thing is clear in Latin America: the bulk of the policies being proposed today are substantially different from the center-right ones proposed in the 1990s. According to Cameron and Hershberg “The left turns unfolding in the region are as heterogeneous in their policies as they are in their polices, but all accept democracy, at last in principle, similarly, nowhere is the left pursuing a radical statist project that is inimical to the interest of the business community as a whole” (Cameron and Hershberg 2010, 9). This could be an issue of debate considering that attitudes and understanding what democracy is and what it entails, varies greatly.

Latin America’s Left Turns is a complex phenomenon. Political and economic policies have changed dramatically in the 2000s than the previous decade. “The long term effects of the left turns and their likely durability can only be a matter of debate. Latin America’s pink tide in part manifests itself in the question of elections in which leftist presidential candidates have either won or performed well enough to take office”(Cameron and Hershberg 2010, 2). Cameron and Hershberger arguably state that the left’s worst enemy can only be itself, should it fail to take advantage of this historical conjecture. This work does not suggest that the recent left turn is irreversible or that the region will retain this political style; rather, the argument here is that the underlying condition fomenting this phenomenon are unlikely to disappear in the short term and the move to the left does fulfill the expectations of certain groups.

Many circumstances challenge democracy on a daily basis. Compared to previous years the 2011 Latinobarometro report is quite positive. Yet, it highlights areas where Latin American countries are still struggling. On the positive side, the report states that Latin American citizens are better educated, they are demanding more rights, and they are also in the process of dismantling the elites that have been entrenched for years replacing them with new ones. The

26 report warns, however, that these new elites are inexperienced in the art of governing. Another important finding is that citizens do not feel represented by political parties. When it comes to democracy the report believes that the region has completed the first stage of democratic consolidation. “While during the first years the demand was focused on the consolidation of liberties, today the dominant demands lie on the equality of opportunities, equality in the access to development and growth. The political guarantees were the beginning, the social guarantees come in the second place and will lead the agenda for decades to come”(Latinobarometro 2012,

7).

Governments are the institutions that gained the most confidence in the last years, even if there was backsliding in 2011. According to Jose Miguel Insulza “democracy today in Latin

America and the Caribbean has become more solid and consistent in the last ten years. There is more democracy in our countries than ever before in history” (Latinobarometro, 21).

Furthermore, the report highlights that all governments in the region, except Cuba, have come to power through free electoral elections. Latinobarometro focuses on 4 electoral tendencies during

2011 common to most Latin American countries:

1. The need for ballotage, or two-round voting. (Not applicable to Argentina as the current office holders won during the first round). 2. Support from Congress. This applies to Argentina where Cristina Fernandez de Kirchner has support from both houses. 3. Reelections. Argentina is also identified here, as Cristina Fernandez de Kirchner (CFK) was elected for a second time. 4. Need for security. The report states that security is a priority. The issue of insecurity (crime) has been one of the central themes of the electoral campaigns.

Appendix A, located at this end of this chapter will show how Latin Americans approve the way their presidents are leading their country. The graph shows the approval rate. The approval towards Latin American presidents has been high since mid 1990s. Appendix B will

27 show the evolution of GDP for Latin American countries. Appendix C shows support to democracy, the difference to GPD, the variation in the image of progress and the index of support from consumers. Support for democracy increased in Argentina despite a slight decline in GPD. According to Latinobarometro, these numbers show that a poor distribution in growth negatively impacts support for democracy. Appendix D shows the percentages of people that would not support a military government under any circumstances. In Argentina that percentage is 73%. Appendix E shows satisfaction with democracy. According to Latinobarometro, citizens perceive the performance of their states and governments lower than how they perceive the ruling classes. Those in office are seen as more positive since the mid 1990s; the state, on the other hand, does not receive the same approval levels. The blue line shows satisfaction with democracy, which is at 57% in 2011, and the red line shows dissatisfaction with it, which is at

52%

2. Proclaiming regional integration

Andres Oppenheimer has a critical eye for the decisive issues of Latin America. In his book Los

Estados Desunidos de America Latina (“The Fragmented States of Latin America”)

Oppenheimer reports that proclamations of regional integration has become a recurring theme in the rhetoric of several presidents — especially in Kirchner´s and Chavez´s administrations. Such declarations generate considerable discomfort among their neighbors. 3 MERCOSUR, the regional South American block is more and more tilting towards the left and taking Hugo

Chavez´s leadership

3 For example, during the Kirchner administration blocks that connect Argentina with Uruguay have been blocked repeatedly. Chavez has declared war to Colombia several times.

28

3. Constant revision of the past and growing personalization in politics In the book Basta de Historias (“Enough of Histories”) Andres Oppenheimer demystified many myths about Latin America. The author analyses the works and actions of national leaders and their mismatches. Many Latin American countries are immersed, perhaps obsessively, in a constant revision of their national histories. In the process they lose sight of their primary goals, which distracts them from higher policy goals such as improving their educational systems.

Oppenheimer claims “that clearly, much of this obsession with past times has a political objective: to give good reasons for deeds that could not be easily explained were they not justified by a supposed historical legitimacy”(Oppenheimer 2010, 27).

Not surprisingly, the image of past leaders is used over and over again to support current leaders. This is most apparent in Venezuela where the image of Simon Bolivar as guide and guardian of the nation is used constantly by President Chavez. It is also used extensively in

Argentina. Oppenheimer (2010, 39) claims, “…Nestor Kirchner and his wife, Cristina Fernandez de Kirchner, have shown themselves to the nation as Peron and Evita´s legitimate heirs. Peronist party leaders have always made use of Peron and Eva. But now it is Cristina Fernandez de

Kirchner, the current president of the country, that takes advantage of her late husband´s image.”

In Argentina, the image of President Juan Peron and his wife Evita were used extensively by leaders of the Partido Justicialista (the Justicialist Party) — the organization known unofficially, but commonly, as the “Peronist” party. Over the years the leaders, have changed.

Now the looming figure is that of the late President Nestor Kirchner an image used widely by his widow Cristina Fernandez de Kirchner, the country’s current president. In an interview,

Henrique Cardozo told Oppenheimer (2010: 39) “that the dead leading the living is a current

29 belief in Latin America.” Latin America is not alone in this manner. Indeed, half a century ago

Spanish philosopher Jose Ortega y Gasset (2000: 48) commented about his country’s history and said: “Those who have gone before continue to rule us and form an oligarchy of the dead, which oppresses us.” Even though Bolivar and Peron played an extremely important role in their days,

“it is high time to look ahead, since looking back to the past is very restricting. The world has changed but people do not realize it” (Oppenheimer 2010, 53). Oppenheimer agrees and believes it absurd to take Peron’s or Bolivar’s words as truth set on stone. The realities these leaders experienced during their lifetimes do not necessarily apply today. When it comes to human rights, Oppenheimer believes that there is nothing wrong with re-examining the past in order to enlighten violations to human rights, but that task sometimes become too energy and time consuming impeding governments to focus on the present and future. Oppenheimer sees that governments are going “backwards in a world that is moving, at full blast”(Ibid., 161).

3. Attention to the areas of education, science and technology.

Oppenheimer (Oppenheimer) claims that scientific, educational and technological areas demanding so much attention that the continent does not need to remain in the past. He finds it absurd that universities allow unrestricted access to students who can remain there for years without ever graduating. States embrace the creed everybody has a right to study in the country’s important universities. Yet, in Mexico, Brazil and Argentina, few can do it properly, since the majority of students lack the resources to complete their degree programs. As a result, state universities support a large number of students who never graduate. In Argentina, just two out of ten students who enter earn a degree (Ibid., 54).

30 Oppenheimer (2010) criticizes cabinet officers as well as presidents. From his perspective, presidents and ministers need to speak English and other foreign languages fluently if their countries intend to compete in global economy. Michele Bachelet´s administration proved particularly efficient at this; 70% of her ministers spoke English and held PhDs from

European and American Universities. In comparison, just 10% of the cabinets of other Latin

American countries can speak English. Many political analysts think that Chile´s economic success is due to the fact that the country was able to insert itself in the global economy — its growth has surpassed the average Latin American nation for two decades and is the only one in the region which reduced poverty in half (Ibid., 35, 318).

When it comes to Argentina, Oppenheimer (2010) shows that the state of education is worse now than in 2000. Argentina moved from being the 2nd country in the region, in terms of education, to the 8th place. In the country’s state universities, just 2 out of 10 people graduate.

This high attrition rate is due to high transportation costs, the need to work in order to pay for housing, poor scholarship systems, and the difference between what it takes to perform well in high school versus college. Accordingly, 60% of college students drop out during their first two years (Ibid., 18).

4. Starting from zero all the time

In Latin America the inauguration of a new administration inaugurates a “radical shift”

(Oppenheimer 2010, 258). The recent political experiences in Chile, Brazil and Peru show that some countries “are very successful in introducing the evil the curse of instability” (Ibid.).

Oppenheimer claims that countries are in the process of realizing that government plans cannot be recreated over and over again. He suggests that it is better to continue with the previous

31 government’ plans; it protects the region from violent ideological jolts. “For the first time in recent history we can see countries that bet on democracy and continuity. But still more important yet, is the fact that the latter ones increasing poverty” (Ibid.). The country that seems prone to this unhealthy habit is Argentina (Ibid., 184).

5. Respect for Constitutions and Reelection wave Respect for constitutions in Latin America is uneven. In some cases, constitutions have been respected and followed such is the case of Costa Rica, Uruguay and Chile. In others adherence to constitutional principles depend on the will of the incumbent executive. Daniel

Zovatto warns us about a reelection trend in Latin America. Venezuela is the only Latin

American country that allows presidents to be reelected indefinitely (Zovatto 2011). This change was imposed by Hugo Chavez. Other than Venezuela, Cuba also has had the same leader for over half a century and now is ruled by the same family. Interestingly, Hugo Chavez, claimed to be the reincarnation of Simon Bolivar, but it would be the former father of the nation Simon

Bolivar who would disagree the most with Venezuelan practices. In his speech on February 15,

1819 Simon Bolivar had claimed: “there is nothing as dangerous as having the same person in charge for a long period of time, since people become used to obey and the government to command. In this way usurpation and tyranny arise” (Ibid., 208). Even Colombia’s Alvaro Uribe, a popular president who successfully fought the guerilla group FARC, amended the country’s constitution in order to assure his reelection. And after a successful second term, he tried one more time to change the constitution to secure a third term. After successfully curbing hyperinflation both Menem of Argentina and Fujimori of Peru changed their national constitutions in order to seek a third term. Fujimori was forced to resign shortly after taking

32 office for the third time, while Menem was unsuccessful in securing a new constitutional term.

Fernandez de Kirchner in Argentina is also flirting with the idea of a third term.

7. Justice

Many justice systems in Latin America have serious issues in their organization and in the way they implement law. There is a lack of transparency in the way that justice acts.

Moreover, people have an uneven access to justice, which is clearly an undemocratic practice.

In Argentina, delegative leaders have tried to manipulate the justice system to their advantage. The Kirchner administration tried to implement a “democratization of justice.”

Despite the very promising name, the group of laws that were initially passed by the leading party were declared unconstitutional months later by the Supreme Court. One of the most contested issues was that the laws passed proposed that judges would be elected by the people, rather than their peers as it is stipulated by the Constitution.

8. Corruption

Another issue affecting democracy’s efficiency in Latin America is corruption. Without transparency there is no legitimacy, and without legitimacy the disposition to contribute to support state finances is inexistent. And without this there is no possibility of carrying out necessary social and economic reforms. Diamond considers that no institution is as important as an anti corruption one (Oppenheimer 2010, 258). In Oppenheimer’s words:

“At-risk democracies are almost universally plagued by poor governance. Some appear so trapped in patterns of corrupt and abusive rule that it is hard to see how they can survive as democracies without significant reform. The problem in these states is that bad governance is not an aberration or an illness to be cured. It is, as the economists Douglass North, John Wallis, and Barry

33 Weingast have argued, a natural condition. For thousands of years, the natural tendency of elites everywhere has been to monopolize power rather than to restrain it — through the development of transparent laws, strong institutions, and market competition. And once they have succeeded in restricting political access, these elites use their consolidated power to limit economic competition so as to generate profits that benefit them rather than society at large. The result is a predatory state.” Appendix F shows corruption percentile ranks for Latin American countries. 9. Censorship

Lacking or distorted information is detrimental to a democratic government. Zovatto is very clear about this issue: “Indeed several Latin American governments consider the media, and not the opposing political forces, to be their true opposition, and therefore try to exercise control by enacting decrees or laws aimed at influencing news content, by establishing their own media to use as propaganda machines, or by using official advertising as an indirect means of censorship(Diamond 2008; Zovatto 2011). This can be seen mostly in Cuba, Venezuela and

Argentina

10. Difficulties when facing legal dealings

Another practical issues is how complicated it is to conduct business transactions in Latin

America. The business sector has achieved important improvements under democracy.

Entrepreneurs expect greater protection for property rights and covet economic security. The

World Bank Doing Business Report analyses this issue. Economies are ranked from 1 to 183; this index measures the ease of doing business. According to the 2001 Doing Business Report, Chile has the best business environments in the region, ranking 27. Suriname, at 173, has the worst ranking in the region and one of the worst worldwide. The regional average is 113. Almost half of the adult population in Latin America subsists through the informal economy; they do not pay

34 taxes and they do not have access to credit. “When governments make it difficult for people to do business, they shift to informal economy, corruption grows and the social progress becomes much slower” (Oppenheimer 2010, 161)

11.Civil Society Civil society has strengthened and has made important changes in the political field, but it is not an easy task operating in Latin America. Juan E Mendez believes that the region’s political leadership has a profound disdain for Non-Governmental Organizations (Mendez 1999, 56).

Furthermore, this negative take of party leaders on civil society organizations increases if their agenda centers on social justice issues such as human rights, alleviating poverty, and promoting collective rights (Ibid.)

Appendix G shows attitudes towards civic culture. The first column lists the countries, the second shows the degree to which citizens comply with the law, the third reveals the percentage of citizens that demand their basic rights, the fourth reflects the degree to which citizens are conscience of their obligations and rights, the fifth columns illustrates the difference between citizens’ perceptions of rights via-à-vis their obligations, and the last shows citizens’ perceptions whether “the rich” comply less with the law. The table in the appendix will show how Argentina ranks low in comparison to other Latin American countries. Citizens obey the law at a low rate, lower than the average for Latin America, they are aware of their rights and duties and are better than the rest of their Latin American peers to demand for their rights.

Economy

The economist William Easterly (2002) bluntly states that bad governments “can kill growth”(Easterly 2002). Arguably one of the most important aspects of democracy in Latin

35 America is economy. According to the 2010 Latinobarometro (2010) survey, support for democracy in Latin America increased to 61% along with the recovery of the economy. Since

2007, support for democracy has experienced a gradual but sustained growth. Interestingly, the highest levels of support are registered in Venezuela at 84%, Uruguay at 75%, and Costa Rica at

72% (Zovatto 2011, 1)

Some issues need to be addressed in a timely fashion. Zovatto (2011) adds an interesting fact to this issue: Latin America is unique when it comes to democracy and development. On the one hand, nearly all countries enjoy democratic regimes, but on the other large sectors of the population live under the poverty line (close to 33%). Latin America has the most unequal income distribution and also the highest homicide rates in the world (Zovatto 2011, 2).

The economy is clearly a major issue in Latin America. According to Acemoglu and

Robinson, “The roots of discontent in these countries lie in their poverty”(Acemoglu and

Robinson 2012, 13). Page For starters, the level of poverty is unacceptable. This is such a pervasive issue that it affects democracy directly. Diamond, also sees economic growth as a key for the consolidation of democracy:

It is often assured that economic growth, […], is the key to creating and consolidating democracy. Certainly, the viability of democracy does hinge to some significant degree on economic development and open markets. But in most of the world’s poor countries, the “economy first” advocates have the causal chain backward. Without significant improvements in governance, economic growth will not take off or be sustainable. Without legal and political institutions to control corruption, punish, cheating, and ensure a level of economic and political playing field, pro-growth policies will be ineffective and their economic benefits will be overshadowed or erased. (Diamond 2002, 3) According to Hernando de Soto, author of El Misterio del Capital, the first priority to reduce poverty would be to grant people property rights and valid commercial identities to provide millions with direct access to the legal economy. Twelve Latin American countries

36 recently observed by liberal institutions and the International Development Bank show some alarming results. Furthermore, economists claim that at least half the Latin American populations

(about 258 million persons) have no access to the formal financial system (Soto 2002). There is also great disparity in what country leaders, profess. While the neo populist pretend to side with the poor, their policies are only detrimental to them.

Another side of poverty is health. Argentina spends around 10% of its GDP on healthcare, but the poor healthcare that people receive fail to reflect this significant investment.

Argentina “spends in health more tan US$ 1,350 per person per year. However, Chile and Costa

Rica show a lower mortality range among children below 5 years old. In Argentina there are three systems of health care: public welfare, and social and private security systems

(Oppenheimer 2009, 10).

B) Unemployment The issue of employment or the lack of it is another serious issue that governments need to address. According to Oppenheimer unemployment in Latin America dropped between 2003 and 2007. Oppenheimer explains that the economic growth during the last years was not enough to improve the social situation. Between 2007 and 2010, urban poverty remained at about 22%.

Inequality since 2002 has declined. It is important to note that the youth are at risk. The unemployment rate of the young is around 18%. Another important issue is the high level of informality in the economy. While by nature this is very hard to measure, the estimate of informality is around 35% (Oppenheimer 2009, 10) c) Inflation/Hyperinflation

37 Inflation and hyperinflation have been pervasive in Latin America. 4 Countries have responded to these crises with a variety of tight fiscal and monetary policies. Some counties — including Argentina, Brazil, Chile, Bolivia, and Peru — experienced hyper-inflation.

Oppenheimer cites “High inflation and hyperinflation produced deep social dislocations.

As Nobel Prize winner for Economics John Hicks has pointed out, money is not just a devise, an

M1 or M2 or an equation, but is essentially one of the most notable of human institutions. As such, it is more than just a measure of value: it is one of the most crucial elements of a national identity. The acceleration in the speed of circulation of money associated with hyperinflation deeply affects notions of social time and undermines the institutionalization of collective and individual practice. In the countries affected by hyperinflation, incomes and jobs were obliterated.” (Oppenheimer 2009, 23). Appendix H shows the inflation rate of the Latin

American countries. d) Crime

When it comes to crime, Latin America sadly is the “most violent region in the world” 5

(Oppenheimer 2009, 10) Despite the GDP growth of the last years, poverty reaches 43% of the population. (Ibid) In the slums in Argentina, the favelas in Brazil, the “Cerros” in Caracas, the

“ciudades perdidas” in Mexico, legions of youngsters absolutely hopeless to enter the productive society, are emerging. “They were bred in poverty, lacking families, and living in the informal

4 Hyperinflation denotes inflation over 100% per year. 5 According to Oppenheimer today Latin America is the most violent region in the world. He claims that people are more likely to be robbed/attacked walking on the Street in Mexico or Buenos Aires wearing a suit than walking in Baghdad wearing a US army uniform (Oppenheimer 2010)

38 economy” (Ibid, 21-22) Zovatto, informs that Latin America has reports 27% of the global

murder rates, while it only has 8.5% of the world population (Zovatto 2011, 1)

Appendix I shows which percentages in each Latin American country shows economic

problems and crime as the most important ones.

The future of Democracy

It is important to understand what the challenges ahead are for Latin American

democracies. Clearly, democracy needs to grow deeper and honor its name.

Before democracy can spread further, it must take deeper root where it has already sprouted. It is a basic principle of any military or geopolitical campaign that at some point an advancing force must consolidate its gains before it conquers more territory. Emerging democracies must demonstrate that they can solve their governance problems and meet their citizens' expectations for freedom, justice, a better life, and a fairer society. If democracies do not more effectively contain crime and corruption, generate economic growth, relieve economic inequality, and secure freedom and the rule of law, people will eventually lose faith and turn to authoritarian alternatives. (Diamond 2008)

Given what is happening in most countries, many scholars are not optimistic about the future.

According to Vanden and Prevost, “democracy has been a superficial phenomenon, blighted by

multiple forms of bad governance: abusive police and security forces, domineering local

oligarchies, incompetent and indifferent state bureaucracies, corrupt and inaccessible judiciaries,

and venal ruling elites who are contemptuous of the rule of law and accountable to no one but

themselves” (Vanden and Prevost 2008)

· Democratization and Institutions

As stated by Samuel Huntington, almost thirty years after the return of democracy to

Latin America — a process that was largely successful in the third wave of democratization —

39 the consolidation of democracy is not as strong as it should be. One of the main characteristics of the transition to democracy in Latin America in the 1980s is the public’s diminished confidence in democracy. This is especially evident with regards to the public’s perception of political parties and the electorate’s low levels of electoral participation (Heritage Foundation n.d.).

The following graphs shows trust in institutions. Trust in the Catholic Church as an institution has been dropping continuously since 1996 when it was at 71% to 64% in 2011.

The left hand side shows the data for 2011 while the right hand side shows the average for the years 1996-2010. The categories being shown are church, radio, TV, newspapers, banks, governments, armed forces, private enterprises, state, municipalities, police forces, congress, public administration, judicial power, trade unions and political parties. It is important to notice how little trust Latin Americans show as regards political parties.

The Apendix J shows the level of confidence in the government. While the previous chart showed that trust in the church dropped, trust in the government increased. This can be seen from 1995 until 2011.

Argentina

Argentina, as previously mentioned, is an underachiever in terms of economic and democratic performance. Still, measuring Democracy is not an endeavor that can be precisely quantified. Democracy is an abstract concept that cannot be measured directly and we rely on statistical proxies to do so. But the purpose of this section was to offer a quick overview of the different ways of cataloguing countries. The common view of the surveys presented here, despite their methodological differences, is that Argentina is covered by a minimalistic definition of

40 democracy; it is a hybrid regime that has areas where it needs to develop in order to become a full liberal democracy.

The Polity IV report for Argentina did not report a transition (3 or more points change) since March 1981. When it comes to competitive elections, Argentina scores 8 out of 10. Polity studies concomitant qualities of democratic and autocratic authority in government institutions.

Polity IV reports that elections have been transparent, civil liberties have been respected and citizenry has been protected. The military has not reentered the political field despite social protests and a severe economic downturn in 2001. When it comes to executive constrains the rating is 6, near parity. The report cites the times when the executive managed to bypass congress and controlled the judiciary. The report also cites the over use of Decrees of Necessity and Urgency by some presidents. During the periods when DNUs have been heavily used, the polity score was 7 out of 10. The ranking for political participation is 9, “limited and/or decreasing over coercion”(IV 2010). The report notes that Argentina still suffers from factional tendencies (Ibid). The transitions are personality based, and social movements rather than political parties define the political trend. The major cleavage is between Peronist and anti-

Peronist groups. The following graph shows how Polity sees the evolution of political regimes in

Argentina. Through history, it shows that most of Argentina’s governments have been authoritarian. Argentina never achieved a higher score than the current one — 8 points. This can be seen in figure 1.2 in the appendix.

Freedom House (FH) carries out one of the most quoted analyses of democracy on a global level. According to Freedom House, as of 2013, Argentina is a free country, with a 2.0 score, and a 2 score in civil liberties as well as political rights (being 1 the best possible score and 7 the worst). Overall in Latin America, 83% of the people are free, and the press is 46%

41 free. The report states that the economic recovery (in comparison with the previous year) helped boosting the falling approval ratings of President Cristina Kirchner. Institutionally there was a deteriorating relationship between Madame Kirchner and the two houses of the legislature just before the elections when the Peronist party regained control. Freedom House reports that her government “has consistently limited press freedom in practice”(Freedom House 2012). This is due to a reform bill passed in 2009 that was intended to break up the largest media conglomerate,

Grupo Clarín, claiming to prevent monopoly abuses. The bill included the creation of a politically appointed media regulatory body that would control and interpret how the law should be implemented. The Kirchner administration increased the advertising budget almost 40 times, from 16 million ARPesos to 233 million in 2009, which afforded the incumbent party to rely on a “friendlier media” as FH catalogs it. As a new way of hitting Grupo Clarín, the government canceled its license to operate as a broadband internet provider and accused the newsprint company Papel Prensa of conspiring with the dictatorship when the company was bought in

1976. Freedom House alleges that corruption is pervasive and continues to be an issue to be solved. The report on Argentina is summarized in the graph presented in the figure 1.3 in the appendix. Figure 1.4 in the appendix clearly shows how Argentina is steadily declining in the

Freedom House rankings and it is considered a repressed country. The following graph shows all of the variables considered in the freedom house index.

Argentina’s score of democratic freedoms has been deteriorating: business, trade, fiscal, monetary, investment and financial freedoms are declining. As a result, in Argentina it is harder and more insecure to invest, produce, work and save. The country is also tainted with corruption and poverty rights score low. When it comes to the press, the country is partly free, where the media is more and more manipulated by the party in office. According to Yuri B Bosin the

42 discrepancy between Freedom House and Polity is due to the different perspectives each one has.

Freedom House emphasizes human rights, therefore it shows a “slow dynamics with rare spikes and dips” as civil liberties and human rights are slow in their development (Bosin 2007, 10)

In terms of economics, Argentina is on the brink of another mayor crisis. The current issues of Argentina are recurrent, they are issues that are never adequately address and permanently fixed. Social protests (cacerolazos) have surged, organized by ordinary citizens through social medial. They do not recruit people from any specific political party. In 2012 there were five cacerolazos — May 31st, June 7th and 14th and September 3th and November 8th. The fifth one, on September 13th, recruited over 200,000 people (Larriqueta 2010). In the year 2001, when Argentina faced a crisis comparable to the Great Depression, the government was ousted from office due to social protests. These protests are definitely something that the incumbent administration should take into account.

Appendix K, published by the La Nación newspaper shows a comparison between the last two major protests of 2012. The first protest, according to different estimates, was attended by

50,000 to 200,000 people. Citizens were protesting against limits to buying foreign currency, a new reform of the constitution and the high crime rates. The protest took place in Buenos Aires and four other major cities. Outside the country, people protested in Punta del Este, Uruguay, a place where many Argentines vacation. The protest of November 8th, 2012, according to different estimates, was attended 250,000 to half a million people. Popular displeasure centered on high inflation, the third reelection of the current president, high crime rates and corruption.

This time, the protests took place in over one hundred cities as well as embassies around the world.

43 In order to answer the posed questions, this work will focus on four recurrent policies that define the Argentine delegative democracies that will be discussed at greater length in the literature review chapter:

5. Imposition of hard economic restrictions. As expressed above, the country leaders

systematically change the economic policies; that makes it hard for domestic as well as

international parties to plan their business and economic activities. Some of the

implemented impositions were and are impossibility to engage in foreign trade, including

basic commodities and purchase of foreign currency.

6. Change of the nation’s constitution for the benefit of the ruling party/leader. While the

National Constitution is supposed to be the stepping-stone and basis of the legal

operational system for the nation, it has been substantially changed to benefit the parties

in office. Today, 2012, there seem to be a new intention to continue changing the

constitution so as to benefit the incumbents.

7. Censorship of the Media. According to Freedom House, Argentina is declining in the

rankings of Freedom in the Press and “the hostile relationship has become an important

obstacle to the practice of journalism in Argentina and to the public’s right to be

informed about matters of national interest.”(Espert 2012). The goverment has also

manipulated the judiciary branch to pass laws that would be harmful to the opposition

outlets. Members of the executive do not talk to the press, and if they do, they pronounce

speeches, but the press is not allowed to ask any questions. The president only talks

thought cadenas nacionales (national broadcasts) which are used very often.

4. Overuse of Decrees of Necessity and Urgency. This project will borrow from the democratization field to investigate delegative democracies in depth. Democracy is more than

44 voting. These regimes, delegative democracies, constitute a grey area where countries operate on a façade of democracy but impose severe restrictions. Since the end of the last military government (Argentina reverted to a democratic government in 1983), the country has kept many of the characteristics of a polyarchy, but with one main caveat. The presidents in office, for several reasons to be developed in this writing, have chosen to rule by decree, and arguably that goes in detriment to the development of a polyarchy, as the executive power manages the country through the utilization of Decrees of Necessity and Urgency, a political tool meant to be used just in emergencies, not as a tool to bypass Congress. One of the most salient tools is these

Decreeses of Necessity and Urgency (DNU). This writing aims at studying what forces drive democratically elected leaders (who sometimes even have full support from the Congress) to rule authoritatively. As described in the national Constitutions, Congress should make laws. Even though this is a time-consuming process, the task of the Congress is meant to ensure democracy.

Decrees should not be passed when they are of political convenience; they are a tool meant to be used as a last resort. The use of DNUs as a political devise replaces the rule of law with presidential fiat. DNUs are meant for extraordinary crisis or emergency situations. It is the president who decides whether the situation is of such severity that he has to rule by decree, or if the Congress cannot legislate because of any obstacle or if there is any impediment that makes it impossible for the congress to legislate because of which he congress cannot legislate. After the decree has been issued there is a stage of control between the institutions. DNUs require legislative ratification, once that time has expired DNUs will be consider constitutionally valid, whether the legislature has acted on them or not. This work will study when and how democratically elected leaders use DNUs in order to bypass Congress and govern at their will rather than use them for emergency situations as stipulated by the national constitutions. Writing

45 DNU is constitutional yet highly criticized by scholars if they are not used in situations of actual

“necessity and urgency.” The president of Argentina has the authority of writing several types of decrees, yet the DNUs have been the most frequently used in the last fifteen years and are most controversial for scholars and politicians, regardless of their political standpoint. Citizens have suffered great consequences. This study will analyze the case of Argentina and look at society as a whole and see whether it is better off or worst off in terms of different social and economic indicators after years of this authoritarian model of governing with little constrains.

Mariano Grondona, an Argentine journalist and political scientist, sees the dynamics of delegative democracies as important. He believes that overcoming this issue so recurrent in Latin

American transitions, is the “unsolved business” of political development. He perceives Political

Development — to an extent a form of political maturity- as the time when power alternates among two or more parties. These parties compete for their citizens’ favor, they formulate long- term policies, and they are to be respected regardless, of which party is in office at the time. This sense of continuity will allow countries to grow. While in his study Grondona refers to

Argentina, his claim can also be made for other countries. This dissertation is about understanding why Argentina has not developed into a full liberal democracy after twenty five years of reinstating elections.

46

Chapter 2: Literature Review

DEFINING DEMOCRACY

Political scientists have always been fascinated with the study of democracy, from ancient Greece to the unfolding events we are witnessing today in the Middle East. The democracies we experience are imperfect and we, as citizens and political scientists, have tried to suggest improvements and understand them better through history. According to Larry Diamond,

“Democracy is the most widely admired type of political system but also perhaps the most difficult to maintain” (Diamond, 1990 48). While we may have a clear idea of what democracy should be like, in practice we are fully aware of the obstacles that we face. The study of democracy is dynamic and enriching in many aspects and requires a multidisciplinary understanding of societies in order to comprehend it fully.

This chapter will be divided into three sections. The first one will describe what is democracy and polyarchy. The second section will review the literature on the determinants of democracy. The third and last section will discuss the theoretical work that will be used in this work.

The term democracy comes from the Greek, and means literally “rule of the people” —

“demos” people and “krato” power). In the democracy that Athenians experienced over two thousand years ago the policies implemented were the direct reflection of the will of its citizens.

Citizens would meet several times a year to discuss and vote on the laws that would govern them. Out of these meetings they would also choose the city’s administrators who held what we would understand today as public office. Athenians understood that voting for their public officers had a selective character, and the “best” ones would rise above the others in that

47 competition. Some posts would allow citizens to be reelected indefinitely — such is the example of Pericles, who was elected several times as a city strategist. After his death, with the

Peloponnesian War between Athens and Sparta, Athens fell into the hands of Philip of

Macedonia and subsequently Alexander the Great. Though the Athenian democracy lasted for just a century, it is still cited as the exemplar. Its existence demonstrated that democracy is possible; and when implemented it provides many benefits for its citizens. Today, with a very different understanding of human rights, we see fatal flaws in the Athenian democracy. We remember the Greek democracy as the first trial of a direct democracy, as it was the first time in history where all citizens — meaning, men over 20 years old, sons of Athenians and Athenian citizens — could voice their opinion and vote in the popular assembly. Women were excluded from voting and so were slaves who constituted the majority of the Athenian population. At that time, Athens had an estimated population of 200,000; among them only 38,000 were citizens

(Grondona 2010, 10).

Athenian democracy is an ideal example of a direct democracy. The policies and laws were the direct result of citizens’ consensus and they rebuffed the interference of any representative or intermediary. There are few other examples of direct democracies: some small areas of Switzerland host town meetings, a few indigenous communities in the Americas, and small New England towns, particularly in the eighteenth century. But this system would be impractical for discussing and solving issues in a polity as large as a modern country.

When discussing democracy today it is not citizens that directly govern and create policies and laws; we elect representatives who discuss and vote or who become public administrators. We expect citizens to have the right to vote for their governments, but the power of governing is in the hands of public officials. This is the main characteristic of contemporary

48 indirect or representative democracies — the object of study in this work. I will come back to the issue of representative democracies, but first it is important to continue highlighting the evolution of democracy.

Democracy took two millennia to become what it is today. There are some significant events we should highlight in that trajectory. During the Roman Empire its citizens could choose their high officials, who came from noble families. It was a good exercise representative government; however, it did not succeed in restricting the concentration of power in the magistrate. The emergence of Christianity within the empire raised issues related to social justice. And while the Roman Empire collapsed, the church remained united. With the transformations towards the feudal system in Europe, governance was justified not in the name of the majority of the citizenry but with the authority that God granted rulers, as temporal leaders, and the Pope and Bishops, as spiritual shepherds. For centuries monarchs enjoyed unrestricted power. The 1648 Treaty of Westphalia marked the end of the absolute authority coming from God and put the state in the hands of the rulers on Earth. From that moment, the authority over a state was granted to someone elected, no longer to a God who ruled through the

Monarch. Westphalia marked the beginning of the existence of the state and sovereignty. The existence of these entities is taken for granted in the discussion of democracy. Without them, there would be nothing to discuss.

In modern times, the United States of America adopted a constitution in 1789 and based its laws on the values of freedom and equality. While at first the franchise was reserved for white, free, landowning men, it was clear that in America people could elect their officials. In

France, in 1789, the Declaration of the Rights of Man and of the Citizen inaugurated a new

49 thought that inspired the French Revolution in 1848 when people demanded that their leaders implement liberal and democratic governments.

Philosophers struggled with different ideas of how governments should be organized.

Aristotle found that democracy was “the most tolerable system of government” (Aristotle 350

BCE). This concept of democracy was limited to free men. Aristotle found flaws in democracy.

He also considered the relationship between democracy and wealth. He spoke in favor of welfare states “measures therefore should be taken which will give [all people] lasting prosperity.” The

“proceedings of the public revenues should be accumulated and distributed among its poor” which would allow them to “purchase a little farm, or at any rate make a beginning in trade or husbandry” (Aristotle n.d.). Jeremy Bentham and James Mill described a Protective democracy.

They were worried with safeguarding citizens from the unfettered power of the state and wanted to make sure that governments would act according to the people’s best interests. J. S. Mill described a developmental type of democracy. Democracy in this case was seen as a way to help improve people, and as a key feature to human development. He suggested a laissez-faire model, but criticized political and economic inequalities. Rousseau believed in direct democracy. But his ideal of democracy was applicable to small polis or cities, such as Geneva, where he lived and was a small area with very few citizens. He also pointed out the importance of equality, both in political rights as well as in socioeconomic issues.

While the abovementioned examples were critical in the development of democracy, it was not until the midst of the 20th century that democracy became the most trusted and desired form of government worldwide. The economist Amartya Sen stated that democracy is one of the most predominant events of the 20th century (Sen 1999). Samuel Huntington explained the

50 increase of democratic governments around the world in three waves each one leaving a higher number of democratic regimes. Historically it has been quite difficult to transform authoritarian regimes into democracies, but over time the number of democratic regimes has increased.

According to O’Donnell there have never been as many democratic regimes as there are right now; nor have there ever been as many regimes claiming to be democratic. He believes that these politicians claiming to lead democracies do it for the sake of political capital and credibility

(O'Donnel 2007, 6). Unlike earlier eras, democracy is generally regarded as the most legitimate of all regime types.

Briefly, Huntington recognizes three waves of democratization. The first and longest one started in 1820 and continued until 1926. This surge gave birth to 29 democracies. In 1922, as

Mussolini was taking on power in Italy, the first reverse wave started. Reverse waves mark periods when the number of democracies decline as more authoritarian governments gain power.

The first reversal reduced the number of democracies to ten in only twenty years. The second wave of democratization began with the allies in the Second World. It raised the number of world democracies to 36. However, the world suffered a second reverse wave (1960-75) that reduced the number of democracies to 30. Huntington left us at the third wave of democratization; since in the late eighties and early nineties Latin American and African countries democratized. In the early 2000s there was a debate over whether we were on a third reverse wave and nowadays, a fourth wave of democratization is mentioned with the so called

“Arab spring” where long time oppressed Muslim countries are seeing the light of democratization. Huntington was cautious when it came to the spread of democracy. He warns us about cultural economic factors and legacies, which can hamper a change towards democracy.

Simultaneously, Francis Fukuyama’s “The End of History” was very optimistic about the fate of

51 democratization and the success of the West. Fukuyama understands that there was a “total exhaustion of viable systemic alternatives to Western liberalism” (Fukuyama, 3). As a response to that piece, Samuel Huntington wrote The Clash of Civilizations (1993) Huntington explains his theory that in the post Cold War world people’s culture and religions identities will be the primary cause of conflict (not ideological or economic issues) (Huntington 1993) .

When defining democracy in the book Capitalism, Socialism and Democracy, by the

Austrian American political scientist Joseph Schumpeter, the author explores the prospects of both capitalism and socialism in terms of democracy. Schumpeter understands democracy as just a system where leaders are elected in periodic competitive elections. In his own words, democracy is “that institutional arrangement for arriving at political decisions in which individuals acquire the power to decide by means of a competitive struggle for the people’s vote”

(Schumpeter 1950, 269). Unlike any other operative definition of democracy, this definition comes very handy in order to produce any type of comparison, as it would allow the largest number of samples. In this case, we understand democracy as a regime where those who govern are elected in contested elections; contested elections are then the only necessary element to characterize a regime as a democracy. The fact is that while we might consider that all democracies should have contested elections, not all regimes that have contested elections will be considered democracies.

Prezeworksi is a defendant of the Schumpeterian minimalist definition of democracy. In his opinion having rulers elected is not a small accomplishment. He believes that the mere possibility of being able to change governments can minimize violence and that being able to do so by voting has other consequences. Przeworksi defines democracy as “a regime in which

52 governmental offices are filled as consequences of contested elections” (Przeworksi 1997, 178).

Later he expands the concept, claiming that a contest means the presence of “an opposition that has some chance on winning office” (Diamond 1990, 16). It must be noted that contested elections could mean different things in different cases. Huntington offered a more elaborated version of the minimalist definition, as he includes issues of liberty and freedom when he claims that elections should be "fair, honest, and periodic," with "virtually" the whole of the adult population eligible to participate (Huntington 1991, 7). Even by working with a bare minimum definition of democracy, we might not be able to unify the process.

Robert Dahl describes the most liberal, complete type of democracy: polyarchy (rule of many). Dahl started exploring this idea in his book A Preface to Democratic Theory in 1956.

Polyarchy is a journey, not a destination, and it has two main components: participation and opposition. Dahl is realistic in the sense that he believes that polyarchy can always improve.

Political Scientists concur that democracies are very different in distinct settings and can take dissimilar evolutionary paths. Ideally we should start with high standards. Polyarchy is the term used by Robert Dahl (1972) to describe an ideal democracy. The interesting and valuable part of this description is that it indicates a journey towards perfection. Dahl, in reference to the nature of this term is very optimistic, and implies that there is always room for improvement in a government. Polyarchy has been cited countless times by political scientists and it provides a useful framework for the study of democracy. A polyarchy has two distinctive characteristics: participation and opposition. According to Dahl, systems can be graded on whether they have these qualities in greater or lesser degrees. He believes that most regimes will fall into a gray area whether they are neither perfectly competitive nor inclusive; but he also believes that all should work towards polyarchy. It is in this grey area where many Latin American countries

53 would fall. Smith 2005 also understands that liberal democracies are the best type of regimes yet available that can protect citizens from the abuse of their governments (Smith 2005, 187).

Naturally, the prime examples of polyarchy offered by Dahl are the United States and other developed western countries that have universal suffrage and low limitations for running for public office. In his text he recognizes that the study of polyarchy is important because the most favorable conditions are uncommon and difficult to create. Sharing Dahl’s beliefs on

Democracy, we find Schmitter and Karl who think that “modern political democracy is a system of government in which rulers are held accountable for their actions in the public realm by citizens, acting indirectly through the competition and cooperation of their elected representatives” (Schmitter 1991a, 76). Since the Federalist Papers the idea of market competition is seen as a necessary component of democracies.

We expect democracies to be more than just an electoral exercise and aim at becoming polyarchies, but as Dahl points out, even polyarchies are in constant development. According to

Sen, democracy is more than a majority rule — a demanding system, not just a mechanical condition. The necessary conditions are voting and respect for election results, as well as the protection of liberties and freedoms, respect for legal entitlements, and the guarantee of free discussion and uncensored distribution of news and fair comment.

Many authors support this idea. Guillermo O’Donnell also understands democracy as having two basic concepts: fair elections and an opposition that has a reasonable chance of winning. He adds that elections should be decisive, which means that the winner should be the one in office and that his or her tenure should last as indicated by the constitution. Political freedoms associated with voting — e.g., freedom of speech and association, access to

54 monopolized information and movement — should also be hold before, during, and after the vote.

Going through history we can see that different authors can point out different characteristics as being the most important ones for democracies. Schmitter and Karl in ”What

Democracy is … and is not” summarize some of their important actors. They write about the ruling person who occupies an authority role and gives legitimate commands to others”, the difference between democratic and non-democratic regimes as the way the ruler comes to power.

These rulers are elected directly or indirectly. The citizens are the most distinctive element in democratic regimes. Historically the number of those who qualify as citizens has widened, since as time passes, there have been severe restrictions on age, class, gender, race, literacy minimum requirements, property ownership, tax paying status and other requisites. Many authors agree that citizens are the most important element of democracy. According to O’Donnell (2007) democracy should be based on citizens not on votes. Societies had to face different struggle levels to make this more inclusive and comprehensive. Karl and Schmitter also talk about competition, which is one of the key features that will be studied in this essay. In a Western sense the idea of democracy can be summarized as rulers are elected by citizens in competitive elections. Another central feature of democracy is cooperation. Actors act together in groups seeking to solve issues without the intervention of a central authority. Schmitter and Karl also mention that today this phenomenon is seen and understood as “civil society”. When analyzing democracies other factors are considered: consensus, participation, access, responsiveness, majority rule, parliamentary sovereignty, party government, pluralism, federalism, presidentialism and checks and balances.

55 The authors end their article with some qualities that democracies lack; they are not a guarantee for more efficient economic management. Democracies do not ensure an “orderly, consensual or manageable” state, and certainly they not always have more open societies

(Schmitter 1991b, 82). But democracies will or should have the resources that will allow them to modify their rules and institutions consensually in response to changing circumstances. Despite all this conditions the authors believe that “all democracies involve a degree of uncertainty about who will be elected and what polices they will pursue” (Ibid, 82).

Hybrid Regimes

Democracies are seldom easily identifiable as perfect polyarchies or minimalist democracies. Every definition6 marks frontiers in terms of what is to be expected, but in defining democracies these frontiers can be blurred. There are many examples of countries that have democratic components in their government, but show some authoritarian elements as well.

Today regimes are pressured by domestic and international actors to adopt democratic forms.

Diamond claims that even military regimes are disappearing as officers seeking office try to legitimize their rule by running for the presidency in contested multiparty elections, even if these elections are fraudulent, coerced, and manipulated (Diamond 2002). According to Diamond, “the trend toward democracy has been accompanied by an even more dramatic trend toward pseudo democracy” (Ibid, 27). The study of hybrid regimes is therefore a complex endeavor.

Mariano Grondona warned us about representative democracies. According to Grondona, representative democracies have many issues by definition. He thinks that it is impossible that the choice of millions of voters could effectively represent all of them well. There are two electoral methods: one is majoritarian and the other one is proportional. In the majoritarian

6 Definitions mark an end (finis) or frontier of a concept; beyond that the concept looses it's identity. (Grondona 2010)

56 method, the party recieving the majority of votes is the one that will place most of its people in office; in the representative system (the number of seats in Parliament depend upon the number of votes won by a party) or the group of candidates is proportional to the number of votes achieved. The benefit of a majoritarian electoral system is that the winning party will more seats in the legislative chambers thus facilitating governance. Proportional systems, while mathematically the more accurate representation of the popular will, are usually characterized by fractious governments and weak coalitions; thus, lacking a clear legislative majority, they are harder to manage.

Another limitation that Grondona sees in representative democracies is that decisions are taken by a professional class of citizens: politicians. In Athens, citizens were called “polites”

(politics), as they ruled their city themselves, while in representative democracies there are two classes of people, citizens and politicians. While referring to England Rousseau said citizens were free for just one day, the day they vote; after that they were at the mercy of their public officers.

Grondona thinks that representative democracies in developing countries add even more challenges to a true representation of their citizens. His book El Desarrollo político (“Political

Development”) is dedicated to analyzing the dangers of political development in developing countries. One of the main issues Grondona cites is electoral fraud; he mostly refers to

Argentina. Another issue that needs attention is financing electoral campaigns, favoritism for those close to politicians, subsidies during election times “buy” votes. Grondona marks a distinction between developed and developing countries. While in developed countries there are mathematical issues that make perfect representative democracy a challenge, in developing countries voters do not chose their candidates freely, but respond to the manipulation of their

57 officials. Lipset sees other issues in his work Political Man, where he describes democracy as “a political system, which supplies regular constitutional opportunities for changing the governing officials, and a social mechanism which permits the largest possible part of the population to influence major decisions by choosing among contenders for political office” (Lipset, 1960, 27).

It is important to note that not every democracy will succeed in dealing with its deep divisions.

Nevertheless democracy has institutional features that offer the hope that every part of the population will feel part of a whole.

For research purposes, the most convenient definition of democracy is the minimalist one.

Larry Diamond, however, uses Samuel Huntington’s definition to exemplify how even a minimalist definition of democracy leaves room for interpretation: “its most powerful collective decisions are taken through fair, honest and periodic elections in which candidates freely compete for votes” (Huntington 1991, 7). Diamond asks what would constitute “fair, honest and free” elections (Diamond 2002, 22) According to Diamond, “virtually all hybrid regimes in today’s word are quite deliberately pseudo democratic since the existence of formally democratic political institutions, such as multiparty electoral completion, asks (often , in art, to legitimate) the reality of authoritarian domination”(Ibid, 24) Fareed Zakaria claims that “the global wave of democratization spilled into previously undemocratic terrain, unbridle majoritarianism might ride roughshod over constitutionalism and the rule of law (Zakaria 1997, 54). Zakaria expressed his concern about the spread of popularly elected leaders who not come along with the spread of freedom. Zakaria understands that there is a rise of illiberal democracy.

The other types of democracies

58 Unfortunately, not everything is black or white in the democratization literature. As stated in the introduction of this text, the subcategories of democratization are numerous. Collier and

Levitsky count over 550 subtypes. Democratic and authoritarian characteristics live together in democratic governments everywhere at all times. According to Ivan Krastev we live in a world where the clear-cut opposition of democracy and autocracy no longer exists: we face a threat posed by democracy’s doubles. Ivan Krastev believes that “democracies doubles present themselves not as alternatives to democracy but as embodiments of real democracies” (Kastev

2006, 53). He uses the examples of Hugo Chávez and Putin, whom he believes to be the masters of using democratic rhetoric in achieving their political ends. Both leaders, according to Krastev, have domestic support in the polls and invest in expanding their models abroad. They also have in common an anti-US rhetoric. According to Krastev while these regimes “in some ways resemble democracy, … in both cases the reality is a near total monopoly of power” (Ibid, 53).

Grondona would agree with this point. He believes that as democracies transformed themselves into the predominant form of leadership and also became the only type of regime considered legitimate, dictatorships “dress up as democracies to become acceptable” (Grondona

2010, 14). Krastev explains that democracy’s doubles can be seen as an “attempt to construct political regimes that mimic democratic institutions but work outside the logic of political representation and seek to repress any trace of genuine logic of political pluralism” (Molino

2004, 54). Krastev warns us that these models of democracy are “conscious projects” and that

“they are likely to be replicated somewhere else” (Ibid, 54). The reason for these managed democracies to exist is that in many parts of the world governments that rise through elections and democracy are the only methods seen as legitimate, violence has an increasing cost as a method to preserve power, the rise of TV and Internet and the de-ideologization of politics.

59 These regimes express a desire for a change but not necessarily a desire for democracy. Krastev concludes that the hallmark of democracies doubles is the deficit of political pluralism.

According to this author “managed democracies is a political regime that liberates the elites form the necessity of governing and gives them time to take care of their personal business” (Kastev

2006, 60). O’Donnell would agree with Krastev as he claims that “many countries are ruled by barely liberalized regimes that play cynical dress-up games stealing the vestments of democracy by staging elections that bear little resemblance to free, open, fair and honest competitions”

(O'Donnell 2010, 30)

Also, nations in transition could showcase both democratic and authoritarian elements.

Guillermo O’Donnell and Philippe Schmitter claim that regime transitions have inherent uncertainty and variations in outcomes. A transition from an authoritarian regime would ideally lead to a democracy, but it could work as a liberalized authoritarian regime (dictablanda) or a restrictive, illiberal democracy (democradura)(Scmitter 1986) .

Competitive Authoritarianism In a very recent book Levitsky and Way describes how Competitive Authoritarianism works. This is a type of hybrid regime type that has “important characteristics of both democracy and authoritarianism” (Levitsky and Way 2010). The authors explain, “Competitive authoritarian regimes are civilian regimes in which formal democratic institutions exist and are widely viewed as the primary means of gaining power, but in which incumbents’ abuse of the state places them at a significant advantage vis-à-vis their opponents. Such regimes are competitive in that opposition parties use democratic institutions to contest seriously for power, but they are not democratic because the playing field is heavily skewed in favor of incumbents. Competition is thus real but unfair” (Ibid, 5). The authors understand as unequal playing fields to those

60 situations where the democratic competition among actors is not determined by fraud or repression but by the unequal access they have to state institutions, resources and the media

(Ibid, 1).

Illiberal democracy, is a concept explained by Fareek Zakaria. “Democratically elected regimes, often ones that have been reelected or reaffirmed through reference, are routinely ignoring constitutional limits on their power and depriving their citizens of basic rights and freedoms. From Peru to the Palestinian Authority, form Sierra Leone to Slovakia, from Pakistan to the Philippines, we see the rise of disturbing phenomenon in international life –illiberal democracy” (Fareed 1996, 1). The author argues that elected representatives were ruling by decree, imposing restriction on speech and assembly and tolerating and inflicting human rights

The task of defining Latin American democracies is not an easy one. Most Latin

American countries today are governed by democracies, but according to Levitsky and Collier

(1997), they are “democracies with adjectives.” They are what Larry Diamond (1999) called electoral democracies, mostly defined in minimalist terms, many developing countries have regimes were authoritarian and democratic elements coexist. As African, Asian and Latin

American countries were moving away from authoritarian governments, democratic regimes emerged in their stead. These regimes were not considered fully democratic; hence scholars have attempted to qualify them. Collier and Levitsky argued that scholars have a contradictory goal when doing this: “On one hand they seek to increase conceptual differentiation or order to capture the diverse forms of democracy that have emerged. On the other hand, they seek to avoid conceptual “stretching” (Collier and Levitsky 1997, 1). Their examination of the literature provided over 550 examples of democracies. As the authors noted, there are more subtypes than

61 countries being analyzed. This work will work with one of those subtypes of democracy common in Latin America: delegative democracies.

Delegative Democracies

Delegative Democracies (DD) is the term coined by Guillermo O’Donnell. Delegative

Democracies are based on a central premise: “he …who wins a presidential election is enabled to govern the country as he sees fit, and to the extent that existing power relations allow, for the term to which he was been elected” (O'Donnel 1993). There are two schools of thought. The first one would study tendencies toward personalistic rule and weak institutions such as Wiarda

(2001). Other scholars, such as O’Donnell, empathize the institutional arrangements that emerged from democratic transitions and the political and economic crisis that have beset in

Latin America. This work will be based on the idea of Delegative Democracies that Guillermo

O’Donnell has developed.

The president is the embodiment of the nation and the primary custodian of the national interest, which is incumbent upon him to define. What he does while in office does not need to bear any resemblance to what he said or promised during the electoral campaign. He is authorized to govern as he sees fit. Since this paternal figure has to take care of the whole nation, and not just a faction, his support cannot come from a party. His political basis has to be a movement, the supposedly vibrant overcoming of the fractions and conflicts that parties bring about. Typically and consistently, winning presidential candidates in DDs present themselves as above all parties. (O’Donnell 1993a, 6). Archiblaldo Lanus, sees this as a constant practice in

Argentina when he claims that governments try their hardest not to be accountable about the

62 decisions and policies of their administrations and “make the impossible” in order to prevent the normal process of alternation in power (Archibaldo Lanus 2012, 15).

A delegative democracy is the antagonist of a representative democracy. A DD comes into being from democratic elections and it reluctantly limits or suppresses some democratic liberties such as freedom of speech, assembly, and access to information.

Leaders in this type of democracy come into being after an important financial crisis and they quickly moved from being highly popular to unpopular. O’Donnell highlights that not all crisis will breed a Delegative Leader. But when it does, these leaders believe that they have the right and obligation to decide on behalf of the people what is best for the country. Also, these leaders believe that any type of institutional control is unjustified; therefore Delegative leaders have a tendency to suppress and disregard institutions and have more power in their hands creating an image of “almighty.” Delegative leaders (DL) also are bothered by the request of transparency and accountability. The DL has no allies and cannot truly trust the people claim to be on one side or the other. The aids of these leaders cannot have any political weight or independence and DL are also suspicions of ministers who will be willing to make their own decisions. With time new crises will appear and those will be tougher to weather, as he or she has destroyed the institutions that could have prevented them. “The leader tends to adopt a psychological mechanism well studied and will opt for doing the same as he has done before and what worked in the past,” which of course might fail to rescue the country from the new crisis.

Any opposition will infuriate the DL and will be the excuse to suppress the remaining liberties in the country (O'Donnell 2009).

63 Guillermo O’Donnell mentions the following as a key aspect of DDs: In the logic of DDs, elections are not understood as the normal happening of a representative democracy; they are the key element that represent the nation’s salvation. For DL, parliamentary elections can be

“dramatic” as they could allow electing people that could ruin the direction of the country and bring it back to a crisis (O’Donnell 2009).

O’Donnell’s last writings on DDs show clearly that he was deeply concerned about the way in which delegative democracies were affecting Argentina. He wrote: “I express a deep preoccupation. I am sure that the future of our country (referring to Argentina) depends on it advancing towards a representative democracy” (O'Donnell 2009). Achieving polyarchy should be what drives academics and politicians to work towards a healthier democracy in Argentina.

Polyarchy, introduced at the beginning of this chapter, needs seven main requirements: one, freedom to form and join organizations; two, freedom of expression; three, the right to vote; four, eligibility to hold public office; five, the right of political leaders to compete for support; six, alternative sources of information, and seven, free and fair elections (Dahl 1971, 3). Other preconditions include: competitive political parties, rule of the majority respecting the rights of the minority, democratic institutional arrangements, protection of human rights, accountability to the mass electorate, experience regarding democratic governance, national economic level of performance to support a large middle class, willingness to yield power when losing elections

(Ibid, 3).

A polyarchy’s success depends on issues such as democratic beliefs and culture, as democracies can be very challenging at times, for example during war, depression, and ideological shifts. It also depends on the control of the military and the police. Pluralism is another important factor as well as is having a modern economic and social system. According to

64 Dahl (1971), market economies contribute to the success of polyarchies with their organization, pluralism and education. That most often happens when there are relatively few parties that persist over several elections. The more stable and capable elected authorities are, the less scope there is for military intervention in democratic politics. Stable and capable elected authorities are also better able to integrate the social movement’s demand into the democratic process.

Polyarchy is a system that has extraordinary tolerance for the opposition. A strongly institutionalized stable democracy channels elites into the democratic process (Dahl 1972, 140).

In a polyarchy institutional are necessary but not sufficient to have the democratic process of government in large-scale system.

DETERMINANTS OF DEMOCRACY

The section of this study will review the current theoretical and statistical issues that try to identify the factors that affect the democratization process and how. There is a vast number of opinions on the reasons that affect the democratization produced in the last 60 years. Mostly of them come from time series studies that yield light into what matters and how much. Yet, there is an aspect of individuality for each country that should not be forgotten. Consequently we need to understand the big picture, what the basic conditions for a democracy are, so as to be able to implement them in a society, what the characteristics of that society are in order to sustain that democracy and not slide backward, and so on. According to Teorell the ideal theory of democratization “should be sufficiently general to encompass the regularities in pattern of regime change across both time and space, but without sacrificing concreteness and the ability to account for complex causal mechanism at work in singular instances” (Teorell 2010, 16).

65 The main factor examined in this literature is the impact of economic factors in democratization. Although statistically it has been impossible to prove causation there is definitely a strong correlation between the two. There is no single variable that can explain the emergence, sustainability or fall of democratic regimes, but according to many studies, economic factors are the most influential ones. As previously stated, economic growth may happen under all types of regimes.7 . Adam Przeworksi warned us about of that years before: “there is not a single reason to sacrifice democracy at the altar of development” (Prezworksi 2004, i).

Over fifty years ago, Lipset (1959) wrote a seminal piece entitled “Some Social

Requisites of Democracy: Economic Development and Political Democracy”, where he tried to find the social and economic causes for democracy and started a discussion about the factors that really matter. Lipset’s goal was to see which conditions help democracy emerge, stabilize and maintain. This was the first work that sought to understand that a country´s chance of sustaining democracy depends fundamentally on its level of wealth and analyzes the structural causes of democracy. While he was unable to show causality, he was the first to establish a strong relationship between the two variables. He saw that certain aspects of social structures such as education, income and industrialization, also had positive impacts; yet, by themselves, none of them explain the existence of democracy. In terms of religion — also tested on this study —

Protestantism8 is more associated with democracy than Catholicism, Orthodox Christianity,

Islam and Confucianism. He also mentioned that capitalism is necessary but not enough a precondition for the persistence of democracy. His study was the first statistical analysis

7 Acemoglu and Robinson 2012 discuss how under extractive institutions growth occurs, even though it is not sustainable. 8 This concept starts with Max Weber in the XIX century who argued that there is a strong relationship between Protestantism and Capitalism. Later, “modernists” of the 1950s associated Protestantism with democracy.

66 performed on the topic; yet, it had some pitfalls. While evaluating European and Latin American countries he changed criteria for selection according to the region.

One of the major conceptions that Lipset left for the field was that he was the first one to prove mathematically Aristotle’s theory that for democracy to prevail societies should be well off economically and have a small amount of poor population. That started what is known as

Lipset’s hypothesis — the idea that prosperity stimulates democracy. 9 Robert Barro (2009, 166) also validates this thought when he claims that “more prosperous places are more likely to be democratic”. Lipset also validates Tocqueville’s (1935) idea that private organizations as well as institutions are important players in government control. Robert Putnam (1993) expands this idea when he studies the role of civic activity and its positive impact in the reinforcement of good government in some regions of Italy. Dietrich Rueschemeyer et al. (1992) argue that the working class —rather than the middle class — is the foremost champion of democracy.

According to these authors the explanation of the democratization process lies on two main concepts: the size and density of the working classes organization and the landowners´ weakening size and power. This would also explain the link between indicators of socioeconomic development and democracy presented by the modernization school. While

Lipsest´s study was the first one to demonstrate empirical substance to this previously interesting hypothesis, it suffered from methodological shortcomings. Lipset has just sought to demonstrate

9 “From Aristotle down to the present, men have argued that only in a wealthy society in which relatively few citizens lived in real poverty could a situation exist in which the mass of the population could intelligently participate in politics and could develop the self- restraint necessary to avoid succumbing to the appeals of irresponsible demagogues” (Przeworksi 1997, 12).

67 that certain gross differences exist between social and economic composition in different forms of regimes.

The economist Robert Barro, took upon Lipset’s work and improved it. He was also trying to show some causality between democracy and economic development. His statistical methods are much more sophisticated than Lipset’s and his sample is larger as he handles one hundred cases covering the lapse between 1960 and 1995. Barros with a larger sample compared to Lipset´s, work (1959) confirms the Lipset/Aristotle hypothesis, which states that a higher standard of living promotes democracy.

Barro’s work contributed to the field of study with other important findings. Education is influential to the existence of democracy; but only at the elementary level. A small gap between men and women would also have a positive impact. For some variables such as urbanization, he believes that causality can run both ways. The rural population has a limited ability to organize and is therefore easy for a dictator to suppress. A less dense rural population is harder for the central authority to monitor and control.

This study also shows that, measured as indicator of electoral rights, the improvement in the standard of living predicts an increase in democracy. Another key finding of this study is that improvements in the standard of living predict an increase in democracy when measured as an indicator of electoral rights. This likelihood of democracy increases with a rise in per capita

GDP, primary schooling, and a smaller gap between male and female primary attainments.

According to Barro, democracy has little to do with a country’s size. But he does find a strong positive correlation: democracy and urbanization. Democracy is also positively correlated with per capital GDP as well as other measures of standard of living (Barro 2009, 165). According to

68 this study, democracy rises together with the middle class’ share of income. In terms of religion,

Barro finds a negative effect coming from Muslim and non-religious affiliations (Ibid, 158).

Another variables studied by the author is oil — a dummy variable in his analysis —which is significantly negative. Thus, high levels of per capita GDP, on their own, do not have in this model a positive relationship with democracy, which is common with democracy (Ibid, 167).

In a very interesting paper entitled “Extreme Bounds of Democracy”, Gassebner, Lamla and Vreeland analyze the robustness of 59 factors that have been cited in literature and evaluate

3 million regressions to determine which factors affect democracy. They conclude that the most robust determinants of transitions to democracy are GDP growth (which has a negative effect), past transitions (which has a positive effect) and OECD membership, also with a positive consequence. Fuel exports and Muslin countries are less likely to transition towards democracy.

When the authors test for determination of the survival of democracy, the most robust determinants are GDP per capita (having positive effect), and past transitions bearing a negative effect. The evidence also shows that having a military leader as chief executive has a negative effect while having other democracies in the geographical proximity has a positive impact.

While there are many studies that try to establish the determinants of democracy, there still is little consensus in the field on which are the variables that best explain the existence or the transition to democracy. The vast literature clearly demonstrates that there is not just one explanation for the democratization process, its endurance or its “birth”. The works conducted so far show that when it comes to transitions to democratization theories, economic growth has a robust negative effect. This finding refutes a fundamental tenet of modernization theory. The literature concerning the diffusion of democracy, determines that international organization membership has positive effects in the transition to democracies. This happens to be true when it

69 comes to the Organization for Economic Cooperation and Development (OECD). Previous experiences with democracies also increase the probability for the emergence of democratic regimes. Consistently with the existing literature, the authors find that the share of Muslim population has a negative effect on democratization, and that also fuel exports have a negative effect, as well. When it comes to the reasons for democratic survival the model suggests that the economic development has a positive effect while the number of past transitions has a negative one. This would indicate that “both supporters and subverts of democracy learn from history”

(Goddard 2006, 3). Not surprisingly, these authors showed that having a military leader as chief officer in a country has a negative effect on democratic survival. Neighboring countries having democratic governments seem to have a reinforcing effect.

Another important study is “Economic Determinants of Democracy” by Edward N

Muller. In his cross-national quantitative study (58 countries observed between 1965 and 1980) he discovered that the largest gains in democracy were experienced by countries at the intermediate levels of development. In this work a country’s level of economic development is associated positively and strongly to the extent of its political system manifestation of democracy properties and level of economic development, measured as GNP-energy consumption per capita-. It looks as the most important explanatory variable to which the political system manifests properties of democracies and the level of economic development (measured as GNP or energy consumption per capita) is the most important explanatory variable. The explanation for the positive effect of economic development likelihood of a country establishing and maintaining a democracy emphasizes two interconnected variables: political culture and social structure. Muller finds that economic development is closely associated with increases in education. Although he emphasizes that economic development and income inequality are the

70 most important economic determinants of democracy, the effects of other potentially relevant non-economic variables must be taken into account to determine the impact on its inclusion.

Torell’s book, Determinants of Democracy, revises the existing literature and runs its own regressions to study the determinants of democratization. It employs statistical analysis of social, economic and international determinants of regime change in 165 countries between 1972 and 2006. The author concludes that “democracy is promoted by long term structural forces such as economic prosperity, but also by peaceful popular uprising and the instructional setup of authoritarian regimes” (Przeworksi 1997, i). According to Teorell´s study, the non-domestic forces that affect democracy are international trade, neighbor diffusion and pressure from regional and international organizations. Teorell recognizes that “not such a thing as a perfect theory of democratization exists” (Teorell 2010, 14).10

The most relevant discoveries in literature review are the following:

Well Being

Barro’s study bolsters the Lipset/Aristotle hypothesis: a higher standard of living promotes democracy. Electoral rights or civil lives are positively related with standard of living measured by GDP, primary school attainment, and the gap between male and female primary schooling (Barro 2009, 182). Gering 2012 studied the same issue using a time series cross- country analysis. The author examined whether a country’s level of democracy in a given year affects its level of human development and weather. The author uses infant mortality rates as a proxy for human development. The results show that while there is a slight evidence for the first

10 The studies carried out by Teorell on this issue are presented on Table 1, at the end of this chapter. The results show the effects of democratization on the short and long run. These results are in line with Barro work (1999).

71 proposition, there is substantial support for the second. This shows us that the best way to think about the relationship between democracy and development is think about it as a time-dependent, historical phenomenon (Gering 2012, 1).

Standing from a different viewpoint, Acemoglu and Robinson study the facts that affect prosperity. The key idea is that there is a link between inclusive economic and political institutions and prosperity. According to the authors, inclusive economic institutions are those that enforce property rights, create a level playing field, and encourage investments in new technologies and skills which will end up being more conducive to economic growth than extract economic institutions which are structured to extract resources form the many by the few and that fail to protect property rights or provide incentives for economic activity. (Acemoglu and

Robinson 2012, 430).

Middle Class

According to Lipset (1959), development can affect the nature of the class struggle. It is particularly important to have a middle class A large middle class plays a easing role in moderating conflict as it is able to reward moderate and democratic parties and penalize extremist groups (BCC-Mundo 2001, 83). Others such as Rueschemeyer et al. (1992) and Coller

(1999) argue that it is the working class rather than the middle class what leads democratization processes. Lipset also thinks argues that “economic development helps foster civil society by helping to check and balance the power of the state , serves to train men in the skills of politics” and “helps increase the level of interest and participation in politics” (Lipset 1959a, 89).

Development also fosters democracy by enhancing values and stretching political culture (Ibid,

83-84). Lipset also confirmed that education is also a pivotal factor (Ibid, 79-80).

72 Transitions

While there is abundant literature on the issue of transitions, it is not the goal of this work to elaborate a comprehensive list of these works but simply to present their main findings. The issues of transitions are quite vast and depend greatly on the geographic area. As is the case with the democratization process, transitions to and from democracies cannot be explained with just one or a few factors. “What brings down a democracy is not the inverse of those factors that bring down an authoritarian regime” (O'Donnell, Schmitter, and Whitehead 1986). Hence, generalizations are very dangerous. Barrington Moore (1966) studied the role of the upper classes and the peasantry when explaining the transformation from agrarian into industrial societies, and how they ended up in democracies or dictatorships. Moore’s research showed the importance of the middle class: “no bourgeois, no democracy” (Sachs 1999, 418). Years later the idea was expanded by Rueschenmeyer et al. (1992) who argued that the middle class, the bourgeoisie, is the leading class in a democracy. There are two extremely important factors: the strengthening in size of the middle class and the power of landowners (Diamond 1997, 46-61;

Dietrich Rueschemeyer, Stephens, and Stephens 1992). This school used to explain the association between indicators of socioeconomic development

Dankwart criticizes Lipset for neglecting the “generic question of how a democracy comes into being” (Sachs 2001, 340; Dankwart 1970). In order to fill this gap, Rustow builds a model where countries would transit from an authoritarian to a democratic rule — Preparatory, decision and habitualization phases. O’Donnell and Schmitter picked up that idea twenty six years later and also described democratization as a process that goes through “phases,” which makes the idea of structural preconditions unnecessary. Under this understanding it is the elite and the state agencies that play an essential role in this process. O’Donnell and Schmitter

73 believe that the preparatory state is called liberalization, the decision phase is the democratization process and the habitulialization phase is the consolidation. The authors claim that “there is no transition whose beginning is not the consequence –direct or indirect- of important divisions within the authoritarian regime itself” the process of democratization would then be driven by the elite forces “from the above” (Przeworksi 1997, 20).

In the study entitled “Extreme Bounds of Democracy” the authors state, that rising the level of development is crucial for the survival od nascent democracies, and suggest that if promoting democracy is a goal of its foreign policy, leaders should spend money helping poor established democracies to develop, rather than helping countries where democracy had never before existed” (Gassener, Lamla, and Vreeland 2009)

“Democratization never just happens,” claims Teorell, action is needed in order to install and protect democratic institutions (Przeworksi 1997, 100). The social forces approach is very important whether it is done by the elites (democratization from above) or by the lower masses

(democratization from below).

There are few relevant studies that explain the effect of popular mobilization on democratization. Litpset et al. 1993 and Przeworski et al. 2000 study this but neither of these studies can assert regime change. “The true impact of political mobilization… remains an open question” (Nacion 2001, 125; Coppedge 2003). Teorell’s own calculations show that peaceful demonstrations have a statistical significant effect. Riots do not seem to have any impact. Strikes aimed at the national government policies only have a negative and marginal impact.

(Przeworksi 1997, 101). Furthermore, Teorell states the empirical evidence that proves that

74 peaceful democrats are a positive trigger of democratization. “There is a strong force from below, when peaceful.” (Ibid, 116)

Kurt Shock´s investigations show that peaceful demonstrations, “unarmed insurrections,” contribute to encourage democratization (Shock 2005, 40). They can be non-violent protests that require little organization: no special technological equipment and independence of physical fitness of those who implement it. According to Shock it has “the potential to allow the maximum degree of active participation in the struggle by the highest proportion of the population” (Ibid, 40).

Teorell explains that repression against peaceful mobilization may have a “mobilization effect” as its gives innocent people a sense of victimizations (Teorell 2010, 105). According to

Teorell armed protest raises the probability of third party involvement (such as transnational social movements, international organizations or foreign governments) by stressing the fact that the incumbent regime rests on physical force rather than voluntary agreements. This may further mobilize activist to joining the unarmed cause (Ibid, 105). Teorell finds that there is empirical evidence to the effect that peaceful demonstrations were a positive trigger of democratization in the third wave (Ibid, 116). Teorell concludes: “There is a strong force from below, when peaceful” (Ibid, 116).

Education

Lipset studies the relationship between education and democratization. Lipset explains that education broadens men's outlooks, enables them to understand the need for norms of tolerance, restrains them from adhering to extremist doctrines, and increases their capacity to make rational electoral choices (Lipet 1959b, 79). Yet, despite this common sense notion,

75 statistically it is not easy to prove that higher levels of education make democracy more likely.

Lipset encountered this issue, and he cannot state that “high” levels of education would be a sufficient condition for democracy. In regards to Latin America, Lipset considers that

“widespread illiteracy still exists in many countries, we find that of all the nations in which more than half the population is illiterate, only one, Brazil, can be included in the "more democratic" group” (Lipset 1959b, 80). For Barro, democracies do not relate to school attainment at the secondary and higher levels of education (Barro 2009, 182)..

Colonial Heritage

The literature points out that colonialism is associated with underdevelopment and high levels of social fractionalization. This would seem to be an obstacle to both economic development and democratization. But some colonies seem to be more conducive to democracy, such as former British, French and Spanish colonies (Przeworksi 1997, 39). There are several panel studies that show the importance of colonial heritage in democracy. Lipset believes that the

British rule provided a “crucial learning experience” that lead to democracy (Lipset et al. 1993,

168). Barro states that colonial origin is an import factor in democracy if the last colony occupying that had a tendency to political freedom (Barro 2009, 175). Colonies that had several rulers are studied in relation to their most recent occupiers.

Media

Teorell believes that media proliferation has a significant impact as TV and newspapers have widely spread among in the population. “Media proliferation as the most promoted mechanism behind the modernization effect helps explain its asymmetric nature” (Teorell 2010,

6). Now, literature has to include social networks as an important feature.

76 Authoritarian governments try to limit contact with the media, and generally are challenged by the power of the new social networks. The exception, of course, are media outlets they control. “Authoritarian regimes are often aware of the importance of a free media, and do their best to fight it. An extreme illustration of this comes from Fujimori in Peru” (Acemoglu and

Robinson 461-2).

Country Size

This idea goes back to the Ancient Greek experiment with democracy. It was believed that democracy is more likely to prosper in smaller countries. Centuries later, Robert Dahl and

Edward Tufted (1973) have the same understanding, as they believe that democracy is more likely to do well in small countries where the government can work closer to its people. This would enhance citizen participation, security and order, as well as other loyalties to the state.

Arendt Lipjhart (1977) also understands that small countries will have better working democracies as they will develop a stronger “spirit of cooperativeness and accommodation”

(Liphart 1977, 65). On the other hand, through his concept of capital mobility Boix believes that fixed assets are more easily transferred out of small countries. Robert Dahl believes that both population and geographical size demand attention, as well as population density and shifting boundaries. The most intractable problem democracy presents about size boils down to a tradeoff between effective citizen participation and system effectiveness.

Religious Tradition

Although most authors argue that Islam is negatively associated with democracy they are hard pressed to explain why. Fish argues that Islam has an antidemocratic effect due to female subordination; however, they are not scripturally based since the Koran does not proscribe it or

77 indicate female subordination (Fish 2020, 30). Fish considers that there are sociological, psychological and demographic reasons that could obstruct Islamic gender inequality as regards democratic transitions. Patriarchal and repressive family relationships are likely to be the reasons that generate a culture of dominance. A patriarchal society “creates conditions under which young men are more likely to join military groups and engage in threatening, anomic behavior that provoke official repression” (Ibid, 30-31, 37). Ross, who argues that oil wells have another take on this same issue and not the Islamic religion what imposes on gender equality (Ross

2008).

Related to this, is the concept that “democracy’s prospects are dimmed by social heterogeneity” which could be the case of divided societies (Teorell 2010, 41). A related study performed by Alvin Rabushka and Kenneth Shelpsle in 1972. These authors portray a theory of

“democratic instability” based on social choice analysis together with the problems involved in aggregating irreconcilable preferences. Taking this theory into account ethnicity would be the most relevant element of competition (Robbins 1962, 91-92).

Contrary to this understanding, Mark Beissinger (2008) states that ethnicity can strengthen the democratization process under some situations. This would happen by enabling nationalist mobilization against an authoritarian regime (Simmons 2008).

In 1999, in a previously mentioned study, Robert Barro (1999) conducted a comprehensive study of social factors. He tested the effects of democratization on several social determinants. He did not find that country size or colonial history have a positive impact. The only marginally significant but negative effect of ethno linguistic fractionalization the size of

Muslim population is a fully significant predictor in this set of variables. In his work, he also

78 finds that Protestant countries do not have a democratizing advantage, but Muslims seem to have an anti-democrat tendency. Country size bears a statistically significant impact on democratization. This result is in line with the Boix argument.

International Determinants

Globalization aims at the diffusion of ideas across borders. Therefore, it cannot be ignored as a factor that affects the democratization process. Pervehouse (2005) brings to the attention the use of regional international organizations. Intergovernmental organizations can put pressure on dictatorial regimes to undertake democratic reforms or democratic procedures.

Membership in democratic regional organization can impulse movements towards democracy and will aim at democratic survival- such the case of China and the WTO (Teorell 2010, 142).

A more direct impact can be seen in the direct foreign intervention in cases such as

Afghanistan and Iraq; although it might be too early to test those results. States can also impose economic sanctions or military intervention. An example of an economic sanction is the Cuban embargo.

Teorell assesses the impact of trade volume and he agrees with studies carried on by Li and Reuveney in 2003, and Rogobon and Rodrick in 2005, where all state that trades volume impedes democratization during the third wave. According to Teorell’s calculations, democratization among neighbors is significant at the .05 level, as well as the regional level of democracy is important. Neighbor diffusion can take place through imposition or emulation. The

Democratic Peace Theory suggests that countries do this in order to improve international security. According to Teorell’s own studies, neither foreign direct investments nor portfolio investments have significant statistical results.

79 According to the Pevehouse study, there are three distinctive mechanisms through which members in a democratic regional organization in a country might influence democratization.

The first one emerges as a result of pressure. Through different kinds of punishment, intergovernmental organizations can influence democratization; they can do so through verbal condemnation and threats of sanctions, membership suspension, and impositions that can threaten to harm the economy. Pervehouse claims, “If allies and institutional partners threat the regime as a pariah state, this can impact on public and elite perceptions with the state. This pressure can help to weaken an authoritarian regime’s grip on power” (in Teorell 2010, 90). The second, organizations can generate an acceptance effect. Agreeing with Haggard and Kaufman

1995, Pevehouse believes that the support of certain critical elite groups might reject a move towards democracy. Being part of an IGO, “dampen fears of democracy among these elite groups and help them acquiesce to the transition” (Ibid, 90). The third possibility for IGOs to promote democratization is legitimizing an interim government. IGOs can help governments to gain credibility.

Acemoglu and Robinson also discuss the importance of international factors in democratization. The authors believe that aid is one of the most popular policies that western governments, international organizations and NGOs recommended as a way of combating poverty around the world, but with little success. According to the authors this is due to an incorrect understanding of what causes poverty. (Acemoglu and Robinson 2012, 453). The authors explain that now aid is granted under certain conditions, such as loans. Aid is now given with conditions. Besides, recipients need to meet certain conditions such as liberalizing markets or moving towards more democratic regimes as a precondition to receiving the aid. It was the G.

W. Bush´s administration that undertook the biggest step towards this type of conditional aid

80 payment, dependent on quantitative improvements in several dimensions of economic and political development. Interestingly, the effectiveness of conditional aid does not seem to be any better than the unconditional kind (Ibid, 453).

Economics

Probably the factor most suspected to influence the democratization process is economics, and it is also the most studied factor.. While the Democratization literature has been studying the relationship between economic development and democratic development, and statistically it has been impossible to prove causation. Still, there is definitely a strong correlation between the two. There is not any one variable that can explain the emergence, sustainability or fall of democratic regimes, but according to many studies economic factors are the most influential ones. And the main idea was expressed by Adam Przeworski when he said that “there is not a single reason to sacrifice democracy at the altar of development” (Przeworski 2004, i).

Authoritarian regimes can subsist under good or bad economic terms. Bad economic times negatively affect both democracies and authoritarian governments; conversely, good economic times benefit both.

Over fifty years ago, Lipset (1959) wrote a seminal piece where he was trying to uncover the social and economic causes for democracy. He was one of the first ones to point at the conditions where democracy could emerge. While he was unable to show causality, he was the first to prove a strong correlation between the two. He believes that economic development helps predict democracy. Factors such as income, education, industrialization, and religion

(particularly Protestantism) are especially positive.. He also mentioned that capitalism is

81 necessary but not a sufficient precondition that should exist for democracy to persist. Lipset is cited as the first “modernization theorist.” Critical of this approach is Samuel Huntington (1968) who claimed that sustainable democracies require political development alongside economic development.

But the most telling publications have been produced in the last twenty years. Joseph

Barro (1990) conducted a panel study with over 100 countries that covered the period between

1960 and 1995. Improvements in the standard of living predict increase in democracy.

Democracy rise with per capita GDP, primary school and a smaller gap between male and female education. The net effect of democracy on growth is uncertain.

In 1993, Adam Przeworksi and Fernando Limongi examined the mutual relation between political regimes and economic growth. They discussed two key questions: 1) whether economic development affects the emergence and the survival of political regimes, and 2) whether political regimes affect economic performance. It is expected that there will always be differences between poor and rich countries. Even if democracies spring in poor countries, they are extremely fragile while confronting poverty. So, poor countries (in terms of GDP per capita) are much more likely to be ruled by dictators. As poverty increased people consume less, live shorter, have more children who are also more likely to die young and experience violence.

Political regimes have no impact on the growth of total income when countries are observed across the entire spectrum of conditions. Democracies do not reduce the rate of investment even in poor countries. Dictatorships rely on the growth of labor force and on keeping wages low.

Meanwhile, democracies pay higher wages, their labor force is more effectively, and they benefit more from technical progress. Interestingly, growth under wealthier dictatorships is more labor

82 intensive and labor exploitative than under wealthier democracies, so that functional distributions of income are different, the average rates of growth of total income are about the same.

Przeworksi, Alvarez, Cheibub and Limongi (2000) also explore the relationship between economic growth and democracy. Still unable to find the statistical relationship between development and democracy, they explore how different regime types experience growth. The fastest and slowest economic growths are reported in dictatorships (Ibid, 177), but over time they do not necessarily do better. Women are particularly affected by dictatorships. They participate in gainful activities at the same rates they do in democracies ad was workers they get lower wages. While democracies are far from perfect, lives under dictatorship are “grim and short”

(Ibid, 26).

Dani Rodrick (2004) studies whether democratization in developing countries produces political instability, ethnic conflict and poor economic outcomes. He claims that the previous studies assessing the relationship between democracy and economic performance are mostly cross national regressions. These studies find that democracies are correlated but with no statistically significant difference in economic growth. Rodrick uses annual data and studies within country effects of the democratization process. Democracies do yield benefits in terms of individual freedom and empowerment. He rejects the hypothesis that democratization is followed by bad economic performance, especially in poor, fractionalized countries.

Mostly time series studies try to shed light into what matters and how much. Yet, there is an aspect of individuality to each country that should not be forgotten. These papers serve the purpose of explaining general trends but cases should be studied in detail in order to understand better the characteristics of each country. The idea behind this section is to review what is known

83 in the literature and then focus to the cases that are discussed in this thesis. But the macro level cannot be avoided for micro study that would be missing the forest for the tree. According to

Teorell the ideal theory of democratization “should be sufficiently general to encompass the regularities in pattern of regime change across both time and space, but without sacrificing concreteness and the ability to account for complex causal mechanism at work in singular instances” (Teorell 2010, 16).

Crisis

Crises open a possibility for change. According to Guillermo O’Donnell it is during a crisis where most of the Delegative Democracies are born. Javier Corrales asks whether economic crisis contribute to economic reform. He writes that crises are “a blessing in disguise” as they allow the adoption of harsh measures for economic stability and structural adjustment.

Crisis do play a role that needs to be study in politics and especially in economic reform

(Corrales 1997, 617). Corrales believe the crisis will disrupt old structures and make room for new ones. Yet in the discussion about crises, it is hard to see what constitutes the bottom of the crisis or the level that required for a government to apply changes. Argentina lived a “non-stop sequence of economic crisis” that started in the mid 1970s (Ibid, 625). Among the crises, run away hyperinflation fomented persistent unease —a recurrent issue in Argentine history (Ibid,

625).

Transitions:

Gassebner, Lamla and Vreeland produce a bounds analysis to test the robustness of dozens of factors in a bid to determine which ones affect democracy. They conclude that the most robust determinants of transitions to democracy are GDP growth (which has a negative

84 effect), past transitions (a positive effect) and OECD membership (which also had a positive effect). Fuel exports and Muslin countries are less like toy to transit towards democracy. The evidence also shows that having a military leader as the chief executive has a negative effect while having other democracies has positive effect.

Inequality

Burkham, Lewis and Muller attempt to correct Lipset by highlighting that he did not sufficiently stress the inequality factor. Burkham and Lewis (2005) believe that a divided society will be more prone to authoritarianism. Muller (1988 and 1995) claims that where there is high inequality the middle class will favor authoritarianism and where there is low inequality the middle class will be more prone towards a democratic regime. Burkham and Lewis warn us that variables such as education, industrialization, urbanization, modernization, are so dependent on each other that are measuring the same thing. We should be aware of the existence of multicollinearity when designing a study of this sort. These authors believe that the higher the levels of education the better chance a country has to have a democratic government. Acemoglu and Robinson (2012) also study the impact of inequality, and see extractive institutions as creators of inequality. “Inequality in the modern world largely results form the uneven dissemination and adoption of technologies” (Acemoglu and Robinson, 53).

Democratization from below

Democratization is not the result of spontaneous combustion, claims Teorell, “someone has to take action to install, or protect, democratic institutions” (Teorell 2010).. The social forces

85 approach is very important whether it is done by the elites (democratization from above). There are few large n studies that study the effect of popular mobilization on democratization. Lipset et al. 1993 and Przeworski et al. 2000 study this but neither of these studies can assert regime change. He believes that the true impact of political mobilization.. remains an still as a question to be answered.” (Ibid, 125). Teorell’s own calculations show that peaceful demonstrations have a statistical significant effect. Riots do not seem to have an impact. Strikes aimed at the national government policies have only a negative and marginal significant impact (Ibid, 101). Kurt

Shock studies why are peaceful demonstration “unarmed insurrections” conducive to democratization. According to the author the key to this issue is the what Smithery and Kurz

(1999) call “the paradox of repression” (Ibid, 40-44). Teorell states that an unarmed challenge might happen when there is state force directed against it (Ibid, 104). This can be non-violent protests, which require little organization, specialized technology, and do not depend on the physical fitness of those implementing it. It has the potential to allow a high degree of of active participation in the struggle by the highest proportion of the population (Ibid, 40).

Teorell explain that repression against peaceful mobilization can a ”mobilization effect”

(Ibid, 105). Unarmed protest increase the probability of third party involvement such as transnational social movements, international organizations and foreign government by highlighting the fact that the incumbent regime rests on physical force rather then voluntary agreement. Teorell finds in his study empirical evidence that proves that peaceful democrats are a positive trigger of democratization. “There is a strong force from below, when peaceful” (Ibid,

116).

THEORETICAL FRAMEWORK

86 Political Science operates with three fundamental paradigms. Each school of thought has a different ontology and method of study. None of the approaches is able to fully explain comparative political phenomena on its own. While we can identify authors with the perspective they use to analyze their cases, it is not unheard of to encounter authors would nourish themselves from more than one perspective.

Structuralism was the dominant approach used to study politics in the 1930s, 1940s and

1950s. It is a macro analysis approach to the study of relationships of the state. Structuralism explains how state structure defines its functions. It also claims that structure is more important that the people occupying positions of power. Structure is so conditioning that could even make people take some irrational actions. This approach takes institutions as being fixed. This approach fails to explain the existence of populist or charismatic leaders, as it does not give credit to personalities.

Marx, one of the earliest structuralist, blamed the innate structure of capitalism for oppressing the lower classes. Some authors that use this approach are Robert Dahl, Schumpeter,

Samuel Huntington. Cardoso and Faletto explain dependency theory as a result of structures and relations among rich countries that exploit third world countries, thus hampering their grow and prosper. This theory was very much in vogue in the 1970s and made a contemporary resurgence now with the populistic and leftist governments in Latin America that came to office in the wake of Hugo Chávez’s election. These regimes blame the international system for the region’s problems. The neo-dependency theory claims that the first world uses institutions such as the

World Bank and the IMF have exploited the third world.

87 The latest book from Daron Acemoglu and James Robinson (2012), entitled Why Nations

Fail, study the importance of institutions in the development of societies and study why are some are more conducive to growth than others. Different institutions create difference incentives, and the choice of institutions is the key for understanding the success or failure of nations, hence the name of the book. “Economic institutions shape economic incentives: the incentives to become educated, to save, and invest, to innovate and adopt new technologies, and so on. It is the political process that determines what economic institutions people lives under, and it is the political institutions that determine how this process works. … It is the political institutions of a nation that determine the ability of citizens to control political and influence how they behave.

This in turn determines whether politicians are agents of the citizens, albeit imperfect or are able to abuse the power entrusted to them, or that they have usurped, to amass their own fortunes and to pursue their own agendas, ones detrimental to those of the citizens (Acemoglu and Robinson

2012, 42.)

The book describes two types of institutions. The first ones, inclusive economic institutions, such as the ones of the United States, are the ones that encourage participation of the people in economic activities that would put their talents to best use (Ibid, 74). These are typically associated with the United States. These institutions foster economic activity, productivity growth and economic prosperity and create a level playing field. For these institutions, securing private property rights will be key, since that will be the base for invest and increasing productivity (Ibid, 75). Furthermore, inclusive economic institutions lays the first stone for other instruments of prosperity: technology and education (Ibid, 77). This type of institutions allow for free media to exist and that is what is needed to provide information about an mobilizes opposition to threats against inclusive institutions (Ibid, 333)

88 Extractive economic institutions on the other hand will focus power in the hands of a narrow elite and place few constrains on the exercise of this power. It is the elite that will extract resource from the rest (Ibid, 81). Extractive instructions can generate some growth, but it will not be sustainable growth (Ibid, 94). The growth varies according to different types of institutions. The growth generate by extractive institutions is not sustainable (Ibid, 150). And this type of institutions does not provide checks against abuses of power” (Ibid, 343). The authors continue explaining that extractive political institutions create few constrains of the exercise of power therefore, so there are essentially no institutions to restrain the use and abuse of power by those overthrowing previous dictators and assuming control of the state, and extractive economic institutions imply that there are great profits and wealth to be made merely by controlling power, expropriating the assets of theories, and setting up monopolies. (Ibid, 366). Acemoglu and

Robinson conclude that the most common reasons why nations fail is because they have extractive institutions (Ibid, 369). Extractive institutions do not create the right incentives for people to save, invest and innovate and they mark the way for state failure. Extractive institutions destroy economic incentives (Ibid, 373).

Rational Choice Rational Choice starts with assumption that individual actors are rational who attempt to maximize their utilities. Rational Choice is commonly employed in economics. This approach is highly generalizable and nomothetic. It aims at explaining patterns of conduct that could be applied to different places and situations. Rational Choice treat context or structures as constraints on actors. Game theory is a mathematically-oriented branch of this school of thought.

One of the main advantages of rational choice is that we have concrete data to test our

89 hypothesis. More and more in the democratization literature indexes and economic indicators are used to show causality among the variables being studied.

Rational choice is not without it’s detractors. It is argued that not all people are

“rational,” (Shapiro 1994) that rationality is hard to define. Rational choice does take into consideration cultural believes and values that can shape actions.

Robert Bates explains the development path using rational choice. He sees people utility maximizers. He believes that development depends from two things: 1) capital accumulation and organization of the economic activity and, 2) taming violence and political organization. Bates studied history and how people had to protect themselves, monarchs of increasing their revenues, and people trying to prosper in general. In the book Prosperity and Violence, Robert Bates studies how society were formed and know kinships protect each other (Bates 2009). One of the key ideas is that investment is key to economic development, security and property rights in general are important as they bring about investment. In a society, if there is violence and an uncertain future, investing in that society might not be a rational act. Third world counties do not have states hat have a monopoly on the legitimate use of violence within its broader, and it also does not have a state, which ha traded off political power so that economies can flourish, as there is no incentive to invest. Third world counties lack institutions need to create economic growth.

Another political scientist that belongs to the rational school of thought is Tsbelis. At times actors choose options which appear suboptimal. That’s because, he argued, actors may appear to be playing one game when in reality they are engaged in another. For instance, actors may vote strategically if there are more than one rounds of voting. Hence, the author described this as a nested game.

90 In Power and Interdependence, Keohane and Nye discuss how states act rationally when pursuing international cooperation within a system of complex interdependence while avoiding military action. While the common inference is that dictators are “crazy” the author uses rational choice to explain how their decisions are highly rational. Wintrobe classifies authoritarian leaders, from tinpots to dictators. Each of them would have particular characteristics and their policies will aim to achieve their goals, whether it is higher taxes, censoring freedom of speech, changing education programs, or other decisions. He explains why military governments usually fail. As rulers they lavish the armed forces with funding; as they do so it becomes more expensive for them to keep running the country. At a certain point it is unsustainable, and they have to hand over power to other regime. Each action has a goal in mind and a well-crafted plan that they follow to achieve their goals. Dictators are rational actors that seek to maximize their power and wealth and remain in power for as long as they can.

Culture, and Geography

Culturalism/ Behaivoralism was created in response to the Structuralist approach by political scientist who believed that structure cannot explain a vast array of phenomena. With the appearance of Behaivoralism new methods of analysis (mostly quantitative) scholars started to try to measure believes and values. Inglehart, Putnam, Almond and Verba, Landes are authors that became prominent in this new intellectual wave that studied, among other topics, the effect of culture and geography in democratic and economic development.

This literature grew in prominence during the 1960s. Almond and Verba’s The Civic

Culture is a seminal piece in the field. It was the first attempt to systematically measure democratic values. Before this, political scientists based their analysis assumptions, folklore and

91 common sense. This study was noteworthy for demonstrating that long-assumed relationships may exist in some countries, but not hold true into others. Cross-national studies were uncommon at the time, and this was especially the case with countries other than the US. The authors’ study seems rudimentary now, but it was cutting edge at the time and started a new field of inquiry. The authors studied a total of five counties — the United Sates United Kingdom,

Mexico, Germany and Italy — and collected one thousand samples in each (Almond and Verba

1963). In the 1970s and 1980s their approach was discredited11, and the authors decided to write

Civic Culture Revisited in a bid to answer their critics. With the end of the Cold War, there was a new impetus for political culture studies.

At the core of Civic Culture is the elucidation of three types of political cultures. The first and most basic one is the parochial, where people have little to no real interaction with the state; the second one is the “subject” where citizens have some interaction with the state, but it is mostly a top-down relationship; and the third and most evolved was “participation culture” where the population is aware of the state and they constantly participate and interact with the government openly and freely (Almond and Verba 1963).

Another leading author in the field is Ronald Inglehart. Inglehart moves from the political aspect of culture and expand the ideas developed by Almond and Verba. He argued that economic development, cultural change and political change go together in a coherent and predictable pattern. Modernization theory states that “economic and technological development

11 Some of the criticisms of this work were as follows: a) the study was too general, b) one thousand samples in each country is hardly representative of the overall population, c) samples in Mexico were conducted only in urban areas, d) there was an initial bias in choosing Mexico expecting to see a parochial culture, e) the definition of democracy was not constant, and it was arguable whether Mexico was one at that time, f) the authors did not take historical events into consideration, g) ten percent of the questions were open ended questions, h) there was no uniformity in what things meant in different contexts nor in the quality of the survey translations, i) surveys were conducted and there was a 6 month follow up survey that suffered from a significant attrition rate, and j) the study might be useful as a snapshot but did not clarify culture change during the period studied.

92 bring a coherent set of social, cultural and political changes” (Inglehart 1997, 39). The values survey show how worldviews of people that live in rich and low-income society differ systematically in terms of political, social and religious issues. Inglehart includes in his study feelings and attitudes towards the state and how these might connect to economic development.

One of the main assumptions of this work is that individuals pursue goals in a hierarchical order.

For example, the author expects people to satisfied material needs such as hunger or thirst first.

This separation borrowed from Abraham Maslow’s Hierarchy of Needs (1943) who saw five basic needs: physiological needs, safety needs, needs for belonging and love, esteem needs and needs for self actualization (Inglehart 1997). This work was important became it was the largest and longest (20 years) project that measured material and post material values, it has a good number of cases and it is a project that continues until this date. Modernization is a process of social changes that is connected to industrialization. Inglehart believes that once it starts modernization infiltrates all aspects of life which creates a create a self-reinforcing mechanism that would transforms social life and political institutions (Inglehart 1997, 34). This is a process that increases the economic and political capabilities of a society but, modernization is not the end of history, the two main ideas of this work are: 1) societies with high levels of economic development have relatively high levels of post materialistic values, and 2) societies that have experienced high growth rates will show relatively y large differences between the values of younger and older generations. Wealth along does not automatically produce democracy.

Economic development is conducive to democracy, and not the other way around. Two other aspects of the book are relevant to democratization. The first is related to a structural aspect..

Cultures many not cause a transition to democracy, but they are key to its survival. Economic

93 evolution may lead to stable democracy, because it brings necessary changes to social structures and cultures.

Inglehart (1997, 33) does not believe that modernization automatically leads to democratization but it paves the way on the long run it would also be improbable that democratic institutions can be set up easily as he believes that democracy will emerge when there are certain social conditions in the society. According to Acemogulu and Robinson “Modernization theory is both incorrect and unhelpful for thinking about how to confront the major problems of extractive institutions in failing nations” (Acemoglu and Robinson 2012, 445). They explain that as the strongest evidence in favor of modernization is that rich nations enjoy democratic governments, have market economies, respect human rights and so on. Acemoglu and Robinson believe that key lies in the types of institutions that exist in each society (Ibid, 445).

Robert Putnam studied Italy, where he asks under what conditions do public institutions serve the public interest. He argued that the regional governments throughout Italy bring policy- making institutions closer to the people. He founds important difference between northern and southern Italy. Some innovations of this book are its statistical method, and the use of game theory.. The book finds a strong between social capital and institutional performance. According to the authors, civic transitions not only have remarkable staying power, but they are also almost impossible to change, even in the long run. Any attempt to foster a successful civil society will depend largely upon the already excitant civic traditions of the region in question, areas within weak civic societies will not succeed in quickly developing the traditions that lead to a flourishing civil society. This books bright into the field the important of adding social capital to political science studies.

94 While the conventional wisdom regarding natural resources is that natural resources is that its abundance is a good thing and they would be beneficial for a countries development, today’s literature is careful in taking this at its face value. The first records of discussion about geography and climate are traced to Montesquieu who thought that these two elements affect the temperaments and customs of people (Baron de Montesquieu 1756). He postulated that people who live in warm climates are more emotional, temperamental, lazy and less inquisitive than those living in colder climates . These people in warmer locales, according to Montesquieu, will not work as hard and will not be innovative and former from colder regions. He also argued that the quality of a country’s soil affects the forms of government, where monarchies will be easier to find on fertile soils and republics are more prone to exist in barren soils. These claims are clearly based on a subjective observation, as his study does not present any statistical bases for his judgments. This theory does not explain the recent economic advances done in countries such as Singapore, Malaysia and Botswana.

Years later, Adam Smith (The Wealth of Nations, 1776) also revised why some countries are rich while other are poor, and he argued that the best recipe for prosperity is a free market economy where government does not interfere and business are allowed to pursue profits. But in his writing he also notes that physical geography will have an influence on the economic performance of a country. His argument was that coastal regions and those near navigable waters are richer and denser than waterless regions.

Since the 1980s, historians and economists have reconsidered the importance of geography. Geography affects transportation costs, agricultural production, health issues and proximity and ownership of natural resources. With the exception of Western and Central

95 European countries, which operate within the net of the European Union, landlocked countries are poor.

Sachs expands Smith’s ideas and tests them statistically with his co-authors. According to

Sachs et al., an area’s climate can affect economic prosperity in terms of health issues and the qualities of the soil. Tropical regions are more exposed to infectious diseases and have lower agricultural productivity. The poorest areas in the world are those that have the burden of tropical infectious diseases and are often at a distance from safe water (Sachs 2001, 73). Temperate weather does not guarantee economic growth. Temperate weather is thought has a positive impact on growth when it is accompanied by the following factors: a) a country is in the

Northern Hemisphere, b) it has avoided secularism, and c) it has not been devastated by war

(Sachs 1999). Another reason why geography matters is because geography affects agricultural productivity, major trading crops such as wheat, rice, core, only grow in temperate climates. “We must stress, however, that geographical factor are only part of the story. Social and economic institutions are critical to long-term economic performance” (Sachs 2001, 74) The best indicator to show this is GNP per capita, in the following map it can be seen how he poorest countries lie between the tropics. The wealthiest countries are located on temperate zones. Sachs et al.(2001a) conclude that geography matters along with political and economic institutions. The geography hypothesis alone could not explain the differences that exist between North and South Korea.

Jared Diamond also studied the impact of geography. He discards racist reasons on moral grounds and due to well-documented studies showing that there are shared genetic inherence among human societies. His explanation for economic growth is that Eurasia has an advantage in agglomeration economies and the diffusion of technologies. Technological diffusion Works best

96 within economic zones and these translate better from East to West rather than North to South which cuts ecological zones. (See Appendix 2.1)

Another recurrent issue related to geography is the so-called “resource curse.” The idea is that countries that are well endowed with natural resources grow at a slower rate than countries that have scarce natural resources. In the literature, this idea starting growing in the post-World

War II period, but can robustly been shown that since the 1970s resource abundant countries have stagnated in terms of economic growth, and of the Latin American and African countries have been used as examples of this curse. Sachs and Warner show in their work that well- endowed countries tend to have high price economics as a consequence of that they have a tendency to miss out on export led growth (Sachs 2001, 74). Wheeler (1984) found that within

Sub Saharan Africa countries rich in mineral grew slower than those that were not. Sachs and

Warner (1995) examined a large data set and conclude that between 1970 and 1989 natural resource abundance was negatively correlated with economic growth. The resource curse also affects government types. The literature suggests that natural abundance countries are associated with the onset of civil war and the influence, intensity and duration of civil wars. Collier and

Hoeffler (1998) believed that natural resources abundance countries have a strong significant impact on the onset of civil war. The authors also believed that the duration of civil war and natural resource abundance have a curvilinear relationship. Others also believe that naturally well-endowed countries are associated with low levels of democracy. Wantchekron (1999), studied 141 countries between 1950 and 1990 and found that on per cent increase in natural resource dependence, as measured by the ratio of primary exports GPD, increased the probability of authoritarian government by almost 8% (Wantchekron 1999, 2). This author also believes that countries that are rich in natural resources re more likely to have slow or failed transition to

97 democracy. Some reasons why this could be happening are the following: a), on the economic front, it can be beloved that dependence on natural resources is inherently unstable therefore that instability can be transfer to domestic economies affecting the ability of government to effectively managed revenues and foreign exchange supplies. This can translate to a high-risk scenario for private investors. The rational choice perspective would point out that these types of markets would offer an opportunity for rent seeking. Leaders have an opportunity to directly benefit from the rents created by resource books and can and will choose how to allocate this.

Rent seeking is understood to be behavior that leads to negative economic resources. A state center perspective would point out that the state has a capacity to promote economic development and the rentier state receives taxes or royalties. The state can choose not to spend wisely or distribute unfairly the income that was earned by the agricultural sector of the society

The economic literature also considers culture as an explanatory variable for growth. In this school of thought, culture is seen as a possible determinant of prosperity and democracy. But this is also quite contested, and sometime politically incorrect to discuss. Acemoglu and

Robinson refer to the Iberian or mañana (“tomorrow” in Spanish) culture, and claim that there is still a thought that Latin Americans lack work ethics or have a tendency to postpone things.

Along comes the African culture that can also be disregarded and be seen as a culture more prone to use and believe in witchcraft and are more likely to disregard Western technology. The

Chinese and Confucian culture can hostile to economic growth. The culture theories does has some value according to Acemoglu and Robinson, but it would not explain why there is such a wide different among the democracy and economic levels of Latin American countries and

Africa, as it does not explain the dramatic growth that China went produced. Another aspect related to culture that has been studied in the literature is religion. The literature only finds the

98 Muslim religion as statistically significant. Acemoglu and Robinson disregard this variable as a sole explanatory for inequality. They claim that it is not the Muslim religion what make countries such as Egypt or Syria poor, but the institutions that they have in place.

There is a last theory that economist consider that would influence both politics as well as economics. According to Lionel Robbins, economics was defined as the “Economics is the science which studies human behavior as a relationship between given ends and scarce means which have alternative uses,” in his book An Essay on the Nature and Significance of Economic

Science (Robbins 1962, 16) . If we accept that definition, we infer that a good government is the one that know how to manage those scarce resources. So poor governance, inequality, poverty would all be direct results of this lack of knowledge or inability to govern. Today we understand economics more something more comprehensive than that. Today, we understand that through economics and the creating of public policies, we create incentives. So rather than seeing how people in office manage scare resources, we study what incentives are created in each action. So it is important to create incentives to people send their children to school, work and save, and so on.

Diffusion

The diffusion of democracy is another issue that worries political scientists. Beth

Simmons studied in her book the patters of diffusion of markets and democracy. As one of the defining characters of the 19th century the author cite liberalism in terms of economic and political features.12 While some attribute these changes to the Bretton Woods institutors others

12 The author define “liberalism” in a classic way rather than an American way, as she would claim. Liberalism is referred as the reduction of government constrains on economic behavior and the creation of incentives to have the rules of the market governing transitions. In terms of political liberalization, political liberal reforms to policies that

99 believe that liberalism was induced through the process of “technologically induced globalization”(Simmons 2008). The spread of liberalism follows an S shaped curved. The curve is associated with the diffusion of innovation and while people were hesitant at first, there was a rapid escalation and leveling off. The graph below shows three curves. The liberalization curve shows how privatizations were a common policy used since the 1980s. In the text, Simmons claims that it was the “iconoclastic” policy from Margaret Thatcher (Ibid, 3). Also the opening of the markets to expectant forces (the author cites reductions in policy restrains on cross border capital flows) as examples and the third curve shows that democratic countries in the worlds was around 30% on the early 1980s and almost doubled to 60% by 2002. The authors also note that this happened while the number of sovereign states in the world also almost doubled at that time.

Beth Simmons claims that liberalization of polities and markets is one for the most “significant developments of the second half of the twentieth century” (Ibid, 44).

Scholars have tried to see being beyond the particular characteristics of transitions towards democracy. Simmons et al. (2008) demystify that the global distribution of democracy as well as transitions to democracy cluster in time and space. This shows there is a diffusion mechanism that influences the domestic institutional arena. External factors can change the relative balance of power between regimes and oppositions forces.

Simmons et al. show that even though democratization can be induced about in multiple different ways and involve very different factors; external factors are better indicators of the fate of transitions than domestic ones. The authors also clearly state that there is not any one single factor or mechanism that will be responsible for characteristics for all transitions. The authors

recied the constrains set on political behavior, and the establishment of rights and allowance of political participation.

100 present evidence that transitions cluster spatially and the diffusion process plays a predominate role in transitions to democracy, thus undermining the hypothesis of Przewroski and Limongi

(1997) who claimed that transitions are random events.

When it comes to discussion the waves of democratization as described by Huntington,

Simoms et al. claim that they are an artifact that show that “changes in population of states over time rather than reflecting changes in prevailing types of governance” (Simmons 2008, 266).

Analyzing data, Gleditsch and Ward (1997) find that the probability of a randomly chosen country to be a democracy is .75 of the majority of its neighbors are democracies. That probability is 0.14 if the majority of the neighbors of a randomly chosen country are non- democracies. This is not a static pattern, as countries are geographically close are closer physical from one another are more likely to experience transitions and regime changes as their neighbors experience them (Ibid, 271). The book explains, how global diffusion drives transitions to democracy and authoritarian governments are less likely as the as the global proportion of democracy increases (Ibid, 283). Furthermore, the results of the book reject the idea that institutional change is driven entirely by domestic processes and that it is unaffected by regional and international invests. The author does not believe that transitions to democracy are random and but that they are exogenously determined when the regional context provide and influence for them to happen (Ibid, 296). As the authors study the impact of different facets to lead to democratization, they conclude that social requisites such as increase in economic wealth are conducive to democracy. However, these changes can be seen slowly over time. (See Figure 2.2 and 2.3 in the Appendix)

When it comes to the global diffusion of democracy, Simmons et al. claim that

“International policy diffusions occurs when government policy decisions in a given country are

101 systematically conditioned by prior policy choices made in order countries” (Simmons 2008, 7).

When explaining how this works, the authors cite coercion the number one mechanism of diffusion of democracy. Coercion is one of the main explanations for the spread of liberalism, and it can be applied by government, international organizations and non-governmental actors as well as be done in different fashions using force or with more subtle ways. “Coercion involves the (usually conscious) manipulation of incentives by powerful actors to encourage others to implement policy change” (Ibid, 11). Intergovernmental organizations can use conditionally as way of coercion. Coercion serves to highlight the role of powerful actors. They will in turn use policies such as conditionality as well as use their political and economic power (Ibid, 17).

Another way is competition as diffusion, a way clearly approved by liberalism. Governments have an incentive to make “market friendly” policies, by making each country an attractive for investors and providing the locals with a way to be able to compete in a global market. The policies that are adopted in this case are simplifying the regularity requirement, meliorating investment risk and reducing tax burdens. Countries adopt policies that will increase competitiveness in the intentional system. Learning is the other type of way of liberalizing counties. According to the authors this is a change in believes when new observations or interpretations are acquired. Other way to create incentives for diffusion of democracy is through emulation. This is a constructivism perspective where individuals, organization and social movements can have an impact, as policies are voluntarily invitations as result of diffusion.

Changes then can happen as a way of ‘follow the leader” which can happen “even in the absence of evidence of the efficacy of those policies”(Simmons 2008). Whether a country is likely to experiment with democracy depends not only on the perceived benefits form democracy, but also the expected costs of not being a democracy relative to other nations. This cost has changed over

102 time. For example, during the times of the Cold war, ruling a country in an authoritarian fashion did not necessarily impose particular problems; furthermore, most countries were not democracies, especially in the developing work (Ibid, 278, 279).

103 Chapter 3: Argentina

Given what the literature review explains as the preconditions for the government to transit into a democracy and a democracy to survive, we can take into account some of the features that contributed to Argentina sustaining its democracy. Having said that, Argentina is frequently mentioned in scholarly works due to its exceptional traits. Both politically and economically

Argentina has challenged ordinary rules. Probably the most concerning one is that Argentina is the case of a wealthy country that experienced a development reversal and military coups despite its high levels of socioeconomic development and a large middle class (Levistsky 2005, 1). In the economic arena, at time of drastic market reforms when Argentina was seen as a “poster child of neoliberals” after the 2001 debacle, scholars asked what had gone wrong. Murillo and

Levistky argue that Argentina has a current pattern of institutional instability, which could be the underlying issue of its problems. This chapter will provide a literature review for studies on

Argentina as well as an explanation of its path to becoming a country. The reader will come out of this chapter with a clear idea of which are the issues that Argentina has struggled with since its birth. While there will be a comprehensive overview of the history of Argentina, emphasis will be given to the last 70 years of Argentine history.

The Argentine Pendulum

There is one predominant characteristic in Argentina history, politics and economics: its instability. This was first discussed by Marcelo Diamand, an engineer who wrote about the implications of Argentine politics and economics in industry. Diamand’s insights, for which he was recognized, were published in a paper in 1983 entitled “The Argentine Pendulum: how long

104 will it last?13” His ideas remain very much tuned in with the present reality. Diamand claimed that the main problem of the Argentine economic policies is its “total divorce” (Fukuyama 1989,

3) between the ideas that guided the political economy and the reality of a crisis of inadequacy between the economic theory that was used at the beginning of the XIX century and the reality of sub-developed countries. This certainly resonates with the ideas of the Argentine economist Raúl

Prebisch.14

The idea of the Pendulum that Diamand presented shows an “alternation” between regimes or political polices when trying to develop a nation — Argentina in this case. Diamand claims that the last decades have been characterized by very abrupt and very frequent changes in its political economy. The actions of political economic regimes oscillate between two opposing schools of thought: one is an expansionary or popular understanding of the economy and the other one is an orthodox or liberal one.

According to Diamand, the popular current of the time of thought reflects what the majority of the people aspire at. Its ideas follow Keynesian school tenents and are rooted in economic nationalism. Its main goals are the progressive distribution of income and full employment. It aims at increasing social benefits, increasing salaries and controlling prices. It is managed by controlling exchange rates and the tariffs of public services. The expansionary stages start with an increase in real salaries, low and accessible credit, increase in the economic activity and “euphoria” in the industrial and retail sectors. As Diamand stated, this stage does not last long. Rapidly enough, the deficit of the budget growth pushes the balance of trade to a lack

13 In Spanish, the title of Diamand’s paper reads “El Pendulo Argentino: hasta cuando?” 14 Raúl Given Argentina’s experiences, Raúl Prebisch challenged David Ricardo’s ideas on international trade. Prebisch believed that there were two types of countries — a center (US, Europe, etc) and the periperhy (raw material producers). This notion is a key concept for understanding dependency theory and is still used today. He believed that as technology improves, countries in the “Center” can retain the savings they earned from trade and technology, while the “Periohery” gets weaker.

105 of equilibrium, pressure starts to build in and as unions start to put too much pressure in the government, there is an increase in general discontent, the country is deprived of its elementary provisions and inflation grows. Diamand explains the side effects of ISI by explaining that it is usually delayed due not only to its own difficulties, but also to the lack of new and safe investments in classic economic items derived from the companies’ expectations, trade union overflowing, lack of restrain, frequent harsh price controls and a dilatory behavior towards effective investments. This process ends when a central bank runs out of reserves and there is an economic crisis. When the government gets tired of trying to stop capital flight, it does so by imposing harsh exchange controls. In this desperate attempt to stop capital flight a parallel market arises. Sooner or later controls wear out, the country enters into default, and shops run out of provisions. Productive capacity is prone to paralysis because production decreases. (Ibid

29-33).

As the influential sectors are increasingly opposed to the government and its economic team the government collapses. According to Diamond, the administration ignores the problem at stake or even “makes it worst.” Clearly Diamand explains the logic of a situation of crisis and despair not uncommon to the country. This severe economic crisis always provokes an abrupt shift to the other extreme: the liberal one.

Diamand claims that liberal policies get to power during a balance of payment crisis. In that case the economic policies that are applied are severe measures such as abrupt devaluation, increase in the agronomical incomes, decline in real salaries, drastic monetary restriction, and recession, governments try to attract foreign capital as much as they can. Inflation starts increasing as a result of currency devaluation, but over time it drops, foreign capital starts coming into the country and salaries improve. Nevertheless, Diamand claims that this does not

106 last long; after a while the governments start losing credibility. Once again foreign capital starts leaving the country, this creates pressures over currency reserves and there is a new crisis in the stock market, which develops into an other devaluation. Salaries decrease as there is a decline in the demand and inflation becomes rampant again.

Diamand highlights the idea that neither perspective could have worked in the past as they were implemented. Both schools of thought, consequently, have brought about severe disorder, food shortage, inflation, unpaid foreign debts, recession, default on debts, lack of confidence both inside and outside the country, and there is clearly a failure in the public polices applied. This pendulum that oscillates between two very different schools of thought that prevents the country to develop its economy can also be seen in the political sphere of the country.

When it comes to the political front, Diamand names this struggle the “Unbalanced

Productive Structure” (Fukuyama1989, 88). Diamond sees that in Argentina there are two main productivity sectors: the primary sector, in this case agriculture which is highly productive, works on international prices and seeks to export, and the other sector, the industrial one, which has low productivity and works using prices that are higher than its international competitors, mostly to supply the domestic sector. This sector is ineffective when it comes to competing overseas. “In EPDs such as Argentina, industry is much less productive than in big industrial countries due to its lower level of development. Even though what is mentioned above would justify lower salaries, it could not explain its absence of international competitiveness since this should be linked to an appropriate exchange rate” (Ibid, 8). On top of the disadvantages that the industrial sector has over the agricultural sector, there is another issue that EPDs have to face. As

Diamond pointed out the industrial sector is vulnerable to the external sector crisis. The search

107 for FDI and finance is a common characteristic of EPDs. “This resource will never solve the problem; at the most, it will just alleviate it now to later make it worse” (Ibid, 11). Diamand states that the reasons why the pendulum moves are many: political issues, expansion cycles, recession, and unsolved problems in the balance of payment. But there are three vicious cycles that make things even worst in the external sector: external debt, development issues, income transfers, inflation and lack of efficiency.

There are many reasons for the pendulum to shift so vigorously, but according to

Diamand the most important one is the concentration of public power. That allows authoritarian governments impose a particular concept of economy to a practically defenseless society, the sense being the abundance of funds coming from raw material surplus that allows the country to get more and more in debt. The third reason that keeps the pendulum moving is the outside pressure and support for liberalism (Ibid, 14). Diamond does a good job explaining how

Argentina shifts from opposite policies and fails to grow in a sustained manner.

Ambassador Archibaldo Lanus also believes that Argentina goes back and forth with the polices it chooses and that is detrimental for economic growth. “Each government comes to change what the previous did, sometimes denigrating its antecessors. Argentina lacks any long- term strategies shared by the majorities of people, as it also lacks institutional procedures to reach consensus or decrease conflicts” (Schmitter 1991, 14). As it takes office, each government changes completely the policies implemented by its predecessor. Governments do not build upon their legacy; they spend their time destroying or reformulating what has been previously done.

Economic policies shift from drastic liberal to drastic conservative ends. In Archibaldo Lanus’s words “since 1955, we have lived on a carrousel that stops and starts and the result of those turns is a loss of status for the country.” To illustrate this example, the author presents the case of YPF

108 (Yacimientos Petrolíferos Fiscales) where the state oil producing company shifted hands from state to private hands, being hostage to the hands that ruled the country, and not being as productive as it should have been (Schmitter1991, 17).

The journalist Andrés Oppenheimer concurs. He claims that Argentina is the country that swerves.15 He argues that the country shifts directs from one extreme to the other. Each governor blames its predecessor for all the things that went wrong and changes directions. As a result, the country, despite having had some good economic times, never gets anywhere. Oppenheimer also blames the current administrations of doing the same, and bringing Argentines from massive euphoria to massive derision, (form feeling the champions of the world, to feeling the backyard of the world) (Lipset 1960, 163-4).

1800-1880: A time of growth

Argentina was a Spanish colony until 1816. The first task in the republic’s creation was to establish new institutions that would replace the ones inherited from colonial times (Diamond

2001, 91). Juan Bautista Alberdi wrote the first pieces that served as the set up for the Argentine government and later the first constitution. Alberdi suggested the values and organization that the country should have. Alberdi´s motto was “to govern means to populate”. Via the Constitution

— Article 25 — he tried to encourage the immigration of Europeans to help create working habits and civilized practices into the lazy “criollos” and also to fill the country’s lonely vastness.

Regarding immigration, Argentina was at this time the second largest recipient in the world, following the USA. In the 1880´s an important immigration wave took place in Argentina. By

1914, a 30% of its population was foreign-born, while in the USA it was just a 14%. The

15 In Spanish he calls it “el país de los bandazos”

109 American population increased about 4 times between 1870 and 1950 (that is in 80 years), while

Argentina increased it ten times between 1869 and 1959. With some possible exceptions, since

1897 the country received more than 100,000 immigrants per year. In 1929 this figure rose to

400,000. If illiterates were ”honest and hardworking” the country received them (Archibaldo

Lanus 2012, 164). This was in contrast to the US where the old, the illiterate, the insane and anarchists were denied entry. In Argentina, poor peasants, low-income peasants arrived first.

Consequently, the country suffered a social as well as a cultural and ethical change in its former values and customs. Immigration was thought to be a sort of remedy to prevent the evils the national organization men saw in the country (Ibid, 164).

What is known as the “May Revolution” was a weeklong series of events that ended on

May 25th, 1810 in Buenos Aires, which at the time was the capital of the Viceroyalty of the Rio de la Plata (roughly it covered Argentina, Bolivia, Paraguay and Uruguay). The Viceroy was removed a first local government was established with a republican system and a separation of powers. In 1816, Argentina declared its independence from the United Provinces of South

America. Implementing a constitutional regime was a tremendous task for a world operated under absolutism. According to Cortes Conde it was hard to organize such a vast and under- populated territory. It was difficult to arrange a centralized government and to define who would be the legitimate governing authority after the King. Organizing the military was a costly endeavor. In 1820, a few years after the independence from Spain, the national government was dissolved and the provinces assumed their own leadership. There was a major internal war, which the country could not afford at the time. Local rulers confiscated land and increased taxes.

Cortes Conde marks this as the beginning of “caudillismo”. In the rural area, where the state did not provide security for its inhabitants, private armies arose. Strongmen, or caudillos, emerged as

110 as regional leaders; they provided security in exchange for taxes that were paid not with money but with goods or services. The nascent country was built under caudillo rule.

The 1853 the constitution was written after nearly 50 years of civil war. It established a federal and presidential system, which shared power with a bicameral legislature. When the

Constitution was sanctioned in 1853, there was no true state. Uprisings in the provinces were still ongoing, the national territory was divided into pieces, there were no railways, communications were poor, immigration was spontaneous, and national unity was based on pacts among the provinces. There was no defined national project. Political action took place in law offices and political associations, which appeared and disappeared according to the circumstances and manipulations of politicians in office (Schmitter 1991, 154). Socio-economic changes along with a new constitution allowed the country to build a government with a limited central regime marked by a division of powers and independent judicial system (Ibid, 155). These changes allowed and encouraged a massive entry of foreigners. After all, as the population arose so too did the government’s tax bases — the means of supporting the new modern state. In exchange for immigrants from Europe Argentina exported basic materials such as wool, leader, and cereals. One of the government’s most important tasks at that time was the construction of railroads. Indeed, the same logic propelled the governments of the United States and Canada to become directly involved in the construction of their own transcontinental railroads.

1880 – 1920 Crisis

The late nineteenth-century government missed a great opportunity for growth and the

1880s ended up with more minuses than pluses. There was a great distrust in the government due

111 to public treasury deficits. Capital flight developed into the great crisis of 1890. This crisis would mark the course of Argentine history for the next 40 years.

In the 1910s Argentina was doing well, but with the advent of the First World War capital from Europe dried up and with it the country’s construction boom. Cortes Conde claims the recession was brought on largely due to international factors, which was aggravated by other external factors such as bad weather that caused a severe harvest loss. At the end of the First

World War, the country started recovering thanks to its exports of cereals and other raw materials (Cortez Conde 1998, 30). The demand for food augmented their prices and helped the argentine economy greatly. That demand didn’t last as Europe recovered quickly. This short bonanza took place between 1919 and 1920. During the 1920s Argentina was trying to stabilize its economy, and remained very susceptible to outside conditions such as Europe’s hyperinflation.

It was easier for Argentina to face that situation as the country’s economy was still growing; railroads and ports were under construction and cities were enlargeing. According to

Cortes Conde “During the XX century a different kind of investment was needed, such as cars, trucks and industrial machinery, all of them of a lesser extent” (1998, 51). For example, the country needs to create a telecommunication industry.

The nature of the industry was shifting. Early production relied on natural resources; later it shifted to activities that were more labor intensive, such as the textile industry. Labor was becoming more expensive. According to Cortes Conde this happened as the number of immigrants decreased (Ibid, 58). Cortes Conde claims that overseas authoritarian regimes

112 coerced the labor to discipline it and to lower its value. Argentina had to do that by devaluating its currency.

1930 -1943, La Década Infame I (The Infamous Decade I)

In the 1930s Argentina was facing very serious socioeconomic changes. High prices for its commodities, which had situated Argentina into its golden age, plummeted 50 percent from

1928 prices as a result of the Great Depression. This suddenly affected the country’s process of industrialization and urbanization. Thousands of people had moved from rural areas into the main cities (mostly into Buenos Aires) and due to the lack of employment, slums started to grow.

Between 1930 and 1943 times in Argentina proved hard and disturbing. Due mostly to economic unrest army officers overthrew President Hipólito Yrigoyen (UCR) on September 6, 1930. The demands of the emerging urban working classes were increasing which led to the 1943 coup. The effects of the crisis were short lived; yet the military junta decided to shift 180 degrees and managed the economy in such a way that they reduced dependency by substituting imports. The military argued that they were preventing fraudulent elections from taking place.

During the Infamous Decade, traditional parties were banned and elections were cancelled. Those opposing the military junta were oppressed, repressed and prosecuted (although not to the level of the Dirty War decades later). It was the beginning of a series of fourteen coups that took place in Argentina between 1930 and 1983.

1940 Peronism is born

Perón assumed into power in 1943 through a coup that put in power very nationalist military leaders. This group of leaders, known as the GOU (Grupo de Oficiales Unidos, United

Officers Group), included Colonel Juan Domingo Perón as one of its members. It was a group of

113 young officers that came from low and middle-income classes, ultra catholic and nationalistic.

Their ideas were a response to the “Década Infame”. The governement’s primary goals were: develop of national industries, end of corruption, respect the constitution, and prevent communism. Juan Domingo Perón was assigned to serve as Minister of Labor, and later

Secretariat of Labor and Welfare where he had a real impact on workers and their rights. His reforms were numerous, but the most important ones were: establish labor courts to intervene in conflicts between employers and employees, set up regulations against arbitrary job dismissal, a right to paid holidays, retirement benefits, create new unions, increase wages, unionize rural workers, and improve working conditions.

Perón worked hard as an image-maker. He wanted to be seen as the producer of all the above-mentioned reforms. He also believed that when it came to workers’ rights, the workers, the employers as well as the state should be engaged. Another major change included unprecedented political access that he gave to union leaders, and sponsoring legislation to improve people´s working conditions. Workers sided with Perón immediately; they saw him as their savior and in the process Left-wing parties lost their appeal among workers. As Perón sided with unions, it was clear that it was important to have him on their side.

Having a very high visible profile, Perón continued growing his political career when he was appointed Minister of War in 1944. Argentina broke its neutrality during and declared war on the Axis in 1945, a very short time before the war ended. It is important to see that while

Perón was elected Minister of War, he still held the post as Secretary of Labor. In his new assignment, he expanded the armed forces and increased their budget. With new personnel and more equipment, a higher pay and new barracks, the military also supported Peron. He became

Vice President of Argentina in July 1944. In each of his posts, Perón would empower the state.

114 He gained support by sponsoring legislators that benefited workers and lower classes; but had to face resistance and opposition from the conservative sector which ultimately forced him to resign in 1945. Perón was jailed in 1945 for five days, until a massive working-class demonstration forced his release. This marked the beginning of the Peronist party on October 17th, 1945. This new party quickly established itself as the most powerful and versatile force in Argentine history.

The party’s creation was intelligently carved out of materials and symbols that managed to incorporate the low and working classes into Argentine politics. Perón won the February 1946 presidential election by a landslide. As an ideological doctrine, Peronism sprang up in a historical context when the liberal republic project, a tributary of the doctrines of Illuminism, had been dismantled by the time of 1930 and 1943 coups.” (Schmitter 1991, 292).

Although elected democratically in 1946 Perón subsequently turned his back on democratic institutions (Levistky 2005, 24). He bullied, imprisoned, or exiled government opponents. Workers were forced to join the Peronist party.16 Press freedoms were curtailed after the 1946 elections. Perón redrew electoral district boundaries in order to reduce opposition representation in congress. Levitsky believed that Peron’s comparative advantage regarding access to fiscal resources and the electoral return derived from investing in public jobs. The

Peronist Party had an advantage over the UCR as the PP enjoyed the combination of electoral and fiscal federal institutions along with the geographic distribution of its voters. (Ibid, 25). In the same text, Levitsky notices that Peronism is characterized by a combination of organizational strength and institutional weakness. Levitsky also highlights flexibility as one quality in

Peronism (Ibid, 25). The PP has an astonishing ability to adapt and which has been its key for its

16 Workers not only were forced to join the PJ, at the time of Eva Peron’s death: those who were unwilling to wear mourning band where fired from their jobs.

115 survival. The PP has under its umbrella people as different as they can be, both Menem and

Kircher as good examples of that, not only they have little to nothing in common, but also they have changed greatly thorough the years to adapt to what the people wanted to hear.

Perón did not create a culture of work but one of welfare. With a very crafty use of material and symbolic appeal, Juan Perón and his wife Eva, incorporated the lower classes into politics (descamisados). Since Perón had a very strong control over Congress he could manage to pass extensive socioeconomic reforms. The government expanded the state’s role in economy, nationalized key economic resources such as the railroads, telephones, and agricultural tax exports to promote industrialization, expanded and improved worker’s incomes, implemented reforms that made working conditions better and gave people a variety of new social benefits

(social society, universal health insurance, paid vacations, mandatory Christmas bonuses). The

1945 Labor Law strengthened unions and made them the only representative for collective bargaining and instituted automatic due deductions. The General Labor Confederation (CGT) grew to be the largest and best-organized workers’ organization in Latin America.

• Perón was an authoritarian leader whose tenure was detrimental to democratic institutions. Opponents were harassed, jailed and exiled, public employees were forced to join the Peronist party and freedom of press and expression was curtailed. The post 1946 elections took place in amidst of intimidation and abuse of state resources.17 Perón rewrote the constitution in 1949 in order to be reelected. Thus, in 1951 Perón was allowed to run again as a president; he won by a vast majority.

In 1955, Perón’s forces crushed a coup led by the Argentine navy, but later that year he was forced out of office and exiled by a coup led by all three branches of the army under the

17 On the bright side women were granted the right to vote in 1947.

116 banner of the “Liberating Revolution”. Conservatives and Radicals had no means to remove

Peronists through constitutional means. While in exile his party was banned. Perón was an unstoppable force. The opposition knew that they could not overthrow Perón in free elections.

Argentina has an iron law of politics, of sorts, which said that if Peronists are running in a competitive election, they will certainly win. That law was broken only twice: first by Raúl

Alfonsín in 1983 when the country returned to democratic rule, and second with President De La

Rua in 1999. On September 23, 1955, General Eduardo Lonardi came into office after taking his oath as President; but his term lasted just 52 days. Perón left the Casa Rosada, the Argentinian presidential palace.18 No violence was inflicted upon him; he was granted protection when he parted, and Lonardi respected his political asylum in the Paraguayan Embassy.

Presidential elections were held in 1958. From abroad, Perón ordered his followers to cast a blank vote since he and his forces were prohibited from appearing on the ballot. Arturo

Frondizi was elected president. Cortes Conde explains that during the Frondizi´s administration important steps were taken regarding the modernization of the economy. The country was overcoming an endemic energy crisis, and a process of capitalization, updating and concentration different industrial sectors were all under way (Cortez Conde 1998, 60). Frondizi’s government was hard to manage in terms of maintaining authority: “Since the government had self justified its need of imposing order, it was evident that its authority had decreased and it was practically concluded” (Ibid, 61).

In 1962 Frondizi was overthrown and replaced by the President of the Senate. Elections were held the following year. Although Arturo Illia was elected president, but only three years later he was overthrown in a coup led by General Juan Carlos Onganía. A series of military

18 Casa Rosada literally means “Pink House” and it refers to Argentina’s executive mansion. It is the equivalent of referring to the White House in the United States or No. 10 Downing Street in the United Kingdom.

117 governments ousted one another only worsened the country’s social and economic conditions.

As a consequence of President Onganía´s growing confrontation with the army, the country started facing a new issue that would last for about two decades: terror. Neither military nor civil governments could control it. The electorate remained strongly Peronist and when Peronist leaders were allowed to run for office (which happened for the first time in 1962) they won easily. Activists managed to mobilized strikes, organize factory occupations and establish mass protests. During the years in which Peronism was banned no other party managed to captivate

Personism’s electoral base. A Peronist faction transformed itself into a guerrilla group called the

Montoneros.

Since the country was becoming harder to manage the military government decided to legalize Peronism in 1972. The following year a Peronist representative, Hector Campora, won the presidential elections. He quickly resigned so that Juan Perón, who had returned from exile, could take the post. According to O’Donnell (1973, 166-7) argentine policies was deadlock between 1955 and 1972. There was a very complicated scenario. On the one hand, lifting the ban would allow Peronist to go back to power; but on the other, Peronist popular support was so great that the labor movement could manage to destabilize any government through general strikes, mass protests and factory occupations. “The prevailing anomie, the despise for the

National Constitution, and the absence of both a Rule of Law and a fair play concerning electoral processes, were everyday recurrent events” (Archibaldo Lanus 2012, 313). Campora´s government lasted 49 days. When he resigned, Perón won the elections.

Perón returned from exile in Spain and won the 1973 presidential elections by a striking

62%. Although banned from political activity the Partido Justicialista, still enjoyed a great deal of support among the lower working classes. Perón returned with his new and third wife, María

118 Estela Martínez de Perón. Far from being as charismatic and involved with the people as Evita had been, María Estela (Isabelita as she was popularly known) was nonetheless imposed as

Peron’s vice president. When Peronism came back to power after 18 years, the world was different place and it imposed different constrictions. Exports came to a virgual standstill and industry, which had proved a possible alternative to future development, was unable to adequately compete in world markets (Cortez Conde 1998, 315).

Perón never managed to get the economy growing; but he still counted on a broad base of popular support. He imposed extensive socioeconomic reforms, which were nationalistic in nature. The government’s role in the state grew exponentially as he nationalized private companies. But in 1973 he nationalized people’s bank’s deposits. Of course Peron’s attitude was to blame the outside world for the country’s economic troubles. “On 12 June, 1974, shortly before his death, Perón had been trying to manage Argentina´s economic mess, but his efforts failed. The country was simply not competitive. Perón died in 1974; his vice president, and widow, became president. Unable to control the opposing forces that were pulling the country apart —increasing guerrilla activity, paramilitary violence, and labor mobilizations — Isabelita was ousted by another military coup in March 1976.

Military Rules

Przeworski and Limongi (1997, 170) claim that Argentina is the wealthiest country in history to experience a military coup. Given its level of development and its large educated middle class, the country has underperformed in terms of economic and political development and has failed to offer its citizens stability in any of these areas. The 1976 coup differed

119 significantly from previous ones: repression became the order of the day. During this period, an assortment of political activities were banned, not only Peronist, and those associated with the left were repressed, detained, tortured and killed. This era, from 1975 to 1983, became known as the Dirty War.

With the illusion of regaining popular support, the military government launched an invasion of the British-controlled archipelago known as the Malvinas in Spanish-speaking countries, and the Falklands in English-speaking countries. The Argentine military invaded the island with a group of inexperienced soldiers, and tried to impose the Argentine way for a few days, 19 but were defeated by the British in about 10 weeks. Argentineans highlight the courageous soldiers who fought against one of the strongest armies in the world. Argentina’s quick defeat triggered the dissolution of the military administration.

1983 – Return to Democracy

Argentina is known for its exceptionalism, but in politics and economics the country’s development is said to defy conventional theory (Nun 1967, Huntington 1968, O’Donnell 1973,

Mallon and Sourrouille 1975, Waisan 1987, Adelman 1994, Przeworski and Limongi 1997).

Some events that illustrate that problem are the fact that Argentina used to be a wealthy country that experienced a “reversal” of development (Wasiman 1987, Adelman 1994) and many military coups despite its high level of socioeconomic development and a large middle class

(Nun 1967, Huntington 1958, 83-83, O’Donnell 1973). Others classify Argentina as an outlier, even if a curious but theoretically unimportant outlier (Przeworski and Limongi 1997). Other

19 For example, the military government mandated driving on right rather than the left in order to accommodate the Argentine way rather than the British way.

120 scholars have developed idiographic explanation of Argentine” exceptionalism “ (Peralta Ramos

1978; Weisman 1987).

The 1983 election was meaningful in every possible sense. First of all, it set int motion the return to democracy but foremost it was also the first triumph ever over Peronism. This transition towards democracy marked the end of military coups. Democracy came hand in hand with hope and expectations for prosperity, but while democracy provided many advantages, it failed greatly to full an array of high expectations. Democratic institutions, as it will be explained in the upcoming text, survived several economic crises. What kept people beholden to democratic values, was that military regimes in Argentina had proved disastrous at managing the economy unlike their Chilean counterparts.

The changes introduced in Argentina in 1983 by Raúl Ricardo Alfonsín were epic. He managed to lead a peaceful transition towards democracy. Alfonsín had a colossal task in front of him. He observed: “It is not easy to build democracy in a setting where political culture and civic habits have been degraded by authoritarianism. Nor is it easy to build democracy in the midst of a deep economic crisis exacerbated by the need to repay a huge foreign debt that the old dictatorial regime had contracted and irresponsibly misspent” (Bosin, 2007, 92). Alfonsín understood that institutions had to be created (Ibid). Larriqueta remembers it as a very positive time for the country, and as a turning point (Latinobarometro, 94). Alfonsín carefully crafted a message of hope and change. Like President Obama in the United States, he was seen as an agent for change, having the values and the energy necessary to create a breakpoint with the past.

Continuing with a positive message Alfonsín tried to close a dark chapter in the country’s history, the Dirty War, and he tried to judge those responsible for crimes committed under that period. The brutality experienced during the previous military regime and the pain caused by the

121 Falkland War were the catalysts for mobilizing human right activities. Alfonsín embodied that fight for human rights. He decided to prosecute and convict the military commanders that had been involved in the Dirty War. The military forces rebelled in 1987 and 1988, threatening

Alfonsín´s democracy. He could maintain power, but the scope of the trials had to be limited to the higher-level officials. The Alfonsín government created a commission to investigate the fate of the “disappeared”. The National Commission of Disappeared Persons was created, and law granting the military amnesty was annulled. “Our intention was not so much to punish as to prevent: to ensure that what had happened would not happen in the future, to guarantee that never again would an Argentinean be taken from his home at night to be tortured or assassinated by state agents” (Bosin 2007, 16). Alfonsín is remembered for the democratic initiatives he took.

The most salient one was the prosecution and trial of those who had committed human right abuses. This was the first time in Latin America that such an initiative was undertaken, in a context of several reigns of terror in the continent.

122 The economy was Alfonsín’s biggest challenge. On June 14th 1985 President Alfonsín announced the “Austral Plan” which featured a new currency that was installed with the hope of curbing inflation. At first people were optimistic, but that waned quickly. Alfonsín’s government also temporarily prohibited imports in order to stimulate local industries, which were never competitive. The plan also tried to decrease public spending, increase the liquidity of the Central

Bank and privatize estate companies that were very inefficient due to overstaffing. By decree

#414/84 — not a decree of necessity and urgency — Alfonsín tried to privatize a national airline and the Siam Group. Unions were up in arms against him. Alfonsín, a clever politician proved to be very inefficient in terms of economic management.

Upset by the present conditions, the labor movement and CGT managed to organize thirteen general strikes that paralyzed the country and created great popular dissatisfaction with the Alfonsín administration. With elections approaching, investors´ speculations and capital flight brought the economy to the verge of collapse. Widespread looting once again destabilized the country. Afraid of a new military upheaval, Alfonsín decided to hand in the presidency to a democratically elected president, Mr. Carlos Menem. The fact that for the first time in

Argentina´s history, a newly elected president took power from a predecessor from a different political party was a historical event.

1989 – 1999, La Década Infame II: Menem´s Administration

Elections were due in 1989 in the midst of an economic turmoil. Argentina´s pendulum had started to move in the opposite direction. The winner of the 1989 election was a populist provincial governor, Carlos Saúl Menem from the Peronist party. Given the state of the economy and the number of social protests, Raúl Alfonsín resigned his post six months prior to the end of

123 his mandate.

To say that the Menem administration was surprising is an understatement. Menem was the quintessential delegative president: he did not fulfill any of his campaign promises and he governed as he saw fit. On the political front Menem was a true populist. Menem “did little to strengthen political institutions, and in many respects he weakened them” (Levistsky 2005, 27).

He concentrated as much power as he could, manipulated the Supreme Court and amended the

Constitution in order. This allowed Menem to be the first President that could be relected. The new constitution changed the presidential term from 6 to 4 years, so Menem lead the country for ten. He did everything he could to accumulate as much power as possible. Menem also enjoyed a majority in the Chamber of Deputies, which also ensured the passage of his preferred legislation.

Even with legislative support Menem still ruled by decree. When it came to the military, he reduced their budget (as stipulated by international agreements), which further debilitated the armed forces. The Menem administration took advantage of its popularity and tried to concentrate power, not only the president’s, but also that of his ministers. While all the ministers had more power and more spotlights in the media, the most important one was the minister of finance Dr. Domingo Cavallo´s. Menem completely shifted to the right after assuming office. He had not only stopped looking like a provincial caudillo; he tried to embody a playboy. He changed what were presumed to be his values.

The most important issue highlighting his abuse of power was his manipulation of the

National Constitution. Menem’s ultimate goal was reelection, which he achieved with the new constitution. The second element that was crux was the stipulation of the use of Decress of

Necesity and Urgency, which were also agreed in the new constitution and Menem got to use

124 frequently. According to the 1993 Olivos Pact,20 the UCR committed itself to supporting an amendment regarding presidential reelection. Menem was reelected in 1995; his first mandate was for six years long as specified in the 1853 constitution. His second term was four years long; the new constitution foresaw the possibility of having two four-year terms. Scholars doubted seriously whether Menem would leave power peacefully. Some observers were afraid that

Argentina could suffer a “Mexicanization” of its political system — the de facto formation of a one-party system. Menem governed unilaterally as he violated “the sprit — if not the letter —of the constitution” (Stokes 2001, 56).

On the economic front, the changes enacted by the Menem administration were radical and unprecedented. His administration embodied the Washington Consensus (Riz 1996, 147). He quickly liberalized the economy. He could manage to pass such drastic changes through two main channels: one a legislative majority, and two, dispensing with consulting the legislature and ruling by decree. Menem, a populist provincial governor had been used to controlling his province as a caudillo. Much of the literature in Political Sciences is pessimistic about the possibility of implementing strong political reforms during democratic governments. At least they are believed to require a substantial concentration of executive power (Przeworski 1991;

Haggard and Kaufman 1992, 1995)

While Menem had a strong authoritarian side he was democratically elected and had the

people´s support. He implemented changes that Latin America had not seen under any

democracy. Chile, Bolivia and Mexico had each implemented reforms under authoritarian rule;

Peru did it under a self-coup (autogolpe). Accordingly, “among fully democratic cases,

Argentina carried out the fastest and most far reaching economic reforms, among the cases of

20 Olvios Pact was the accord between President Menem and the former President Raul Alfonsín in year 1993.

125 deep and radical reform, Argentina was the most democratic” (Levistsky 2005, 27). The

government privatized national enterprises, reduced the role of the state, eliminated price

controls, and reduced restrictions on foreign capital. It lowered trade barriers, it replaced the

previous federal pension system for a private one, decentralized public education and the

provision of health care to the provincial level. The collection of changes undertaken by the

Menem Administration was responsible for bringing in large sums of direct foreign

investments.

Probably what brought Menem such remarkable support was the way he curbed hyperinflation through the Convertibility Law in 1991.21 Inflation went down from 2,300% in

1990 to zero in 1994. Later it developed into deflation. Another factor that helped bolster the

Menem Administration was that his Peronist Party, unlike others, remained strong and united

(Riz 1996, 147). In spite of its profile, the Peronist party did not lose support among the lower and working classes. Its new policies brought on board business leaders and those who were benefited from the economic bonanza. Union leaders that had proved to be a great destabilizing force, especially during Alfonsín´s administration, were satisfied within the Peronist party and the number of strikes decreased dramatically.

Drastic Reforms

The model imposed by Menem´s administration broke completely with Juan Peron´s model. In fact, Menem became a Peronist who deviated from the founder’s path. Menem privatized almost all state owned enterprises. Unfortunately, when privatization took place the

21 Argentina imposed a currency board that pegged the Argentine peso to the US dollar between 1991 and 2002 at the rate of one peso to one US dollar. This was done in an attemtp to eliminate hyperinflation and stimulate economic growth. At first it proved to be very useful’ but after a decade it created deflation and brought economic growth to a halt. Country embarking on measures like this it lose control of their monetary policies.

126 highest bidder was not always the winner. Menem ended price control restrictions on foreign capital, lowered trade barriers and encouraged imports and exports. He reduced the role of the welfare state and privatized the pension system. The most important figures in Argentina´s history — Rosas, Yrigoyen and Perón — shared an authoritarian model (Levistsky 2005, 231).

Menem’s style was in sync with these predecessors.

During this period elections were regular and fair and civil liberties were respected. Civil society grew. The media operated without censorship. Menem loved the media limelight; he was not shy about playing soccer in front of the cameras, inviting celebrities to the Casa Rosada or having his economic model argued or discussed. Menem had an unusual relationship with the military. On one side he forgave them for the crimes committed during the Dirty War; and on the other he reduced the military’s budget from 2.6 to 1.7% of GDP and privatized military-owned enterprises (Boix 2003, 150). Also, during Menem’s government military service was eliminated as a prerequisite before someone could hold elected office. The Radical Party electoral base decreased significantly from 52% on 1983 to 17% in 1995.22 It has been unable to act as an effective opposition since then. As far as human rights were concerned, Menem pardoned high- level officials involved in the Dirty War. In 1995, the Armed Forces Commander, Martín Balza, publically apologized for the events that had transpired during the Dirty War.

While many things were moving in a positive direction, institutions were actually debilitated.

Menem needed weak institutions to suppress the opposition and concentrate power. The high number of decrees of necessity and urgency and the little respect he showed for judicial independence bear witness to that. The modification of the constitution is another example. The

127 Peronist Party in the Olivos Pact tied the Radicals’ hand to get their support for these constitution modifications. Levistky uses the word “bully” to express how Menem treated Alfonsín to get this done. According to Levitsky and Murillo “Argentine democracy was characterized by both unprecedented stability and president institutional fluidity”(Levistsky, 2005, 237). Menem was the embodiment of the delegative leader. He did not need a vice president, soon after the election, his Vice President Eduardo Duhalde resigned and ran for governor of the Buenos Aires province.

The Convertibility Law

One of the greatest successes during the Menem administration was the eradication of hyperinflation, an endemic problem in Argentina. Inflation was curbed using a much-criticized procedure. The country’s currency was pegged to a basket of currencies. The new currency would be pegged, one to one, with the US dollar. In order to print money the government had to back it up with foreign reserves. The government had secure dollars and store them in the

Central Bank. This was typically how Argentina paid its debts. So, by tying down the government’s hands, inflation vanished at the very moment the law was passed. While this brought inflation down from 2300% in 1990 to almost zero fourteen years later. Consequently

Argentina managed to grow from 1991 to 1997. The currency board stabilized the economy, which also stabilized the political arena. But Argentina began to suffer deflation, a situation eroding the country’s competitiveness and limited the government’s ability to deal with external shocks. Many economists, politicians and scholars, believe those reforms were the cause of the post Menemist crisis. Similar effects were seen with neoliberal reforms in other countries such as

128 Bolivia, Dominican Republic and Peru, which decreased support for democratic government in those countries.

The Second Term

Menem was elected for a second term without much effort. As long as the economy was on the right track there was little to fear. But the opposition managed to better organize itself and regained strength. Menem was unsuccessful in promoting yet another constitutional reform — allowing him to run for a third term.23 Menem was forced to leave after the end of his second term. Fernando De La Rua, who led an alliance between the Radical Party and other smaller movements, ran against Eduardo Duhalde, a short term VP during Menem´s office. De La Rua won the presidency. When his rule ended, Menem left no heir apparent since Eduardo Duhalde, who raised the banner of Peronism, publically questioned Menem´s economic model

(Archiblaldo Lanus 2012, 488).

De La Rua and the Neoliberal Failure

When De La Rua took office in 1999 it was the first time that the Argentine democracy experienced two consecutive transfers of power from one party to another. Most importantly, it was the first time that the Peronist party was removed from office by democratic means. De La

Rua, a life-long member of the Radical party, ran as part of the Frente por un País Solidario

(FREPASO, Front for a Country in Solidarity) — the first real coalition in Argentina’s modern democratic history. De La Rua was definitely not an outsider — a very fashionable trend in Latin

American politics for the last decade and a half. De La Rua actually campaigned claiming that he

23 Fujimori in Peru also sought a third term, arguing that the first one undertaken under the “old” constitution did not count. President Santos from Colombia is another example. None of them managed to secure a third term

129 was boring in a bid to distance himself from the flamboyant, fun loving, charismatic and populist

Menem. De La Rua based promoted the image that he was a family man in contrast to Menem.

He carefully continued pursing the neoliberal model. De La Rua promised to curb the rampant corruption of the previous administration and to moderate the excesses of the executive.

According to Lariqueta, Both Raúl Alfonsín and De La Rua shared a common feature: they tried to instill hope and optimism into the people (Larriqueta, 2010, 8).

Aware of the social effects of neoliberalism, the De La Rua administration promised to create a fairer country that alleviated its harsher attributes. De La Rua also promised to govern more democratically and not by decree. Unfortunately, his government failed every expectation except being a boring president. Corruption continued being an issue during this administration, even though De La Rua presented himself as a new type of president. The Vice President resigned. De La Rua passed 65 decrees during his short presidency. On the economic front, the convertibility plan started to fall apart. External shocks debilitated the currency and monetary policy was no longer in the hands of the government. The US dollar gathered strength, which raised the value of the peso, making Argentine goods uncompetitive. Socially, with an expensive currency and fewer opportunities for trade unemployment grew and people’s living standards deteriorated. De La Rua was seen as an indecisive president. While Menem was extravagant, no one doubted his ability to make decisions.

In a desperate attempt to improve the country situation President De La Rua appointed

Domingo Cavallo, a cabinet officer in his predecessor’s administration, as Minister of Finance.

Cavallo, the father of the Convertibility Plan, was unable to reverse the situation. He imposed some adjustment measures, “updated” the convertibility plan to a basket of currencies that would include neighboring countries as Brazil and made the exchange band fluctuations more flexible.

130 Cavallo was granted “superpowers” - but it was too late to fix the model without hurting millions of people (Lipset, 1959, 151). The De La Rua administration not only suffered from the consequences of the policies implemented during the Menem administration, but it also had to deal with external shocks. Once again in Argentine history the pendulum was swinging. Now people understood that the economic neoliberal model (or orthodox as Diamond would have called it) was the cause of all their problems.

Fernando de la Rua was elected president in 1999. As he lost popularity the economic recession worsened. The majority of the Congress was in the hands of his political rivals. The government lacked unity. Due to constant riots and protests, the President and many ministers were forced to resign. There was no vice-president to take over, as he had resigned shortly after being sworn into office.

The crisis in Argentina started in 1998 with a recession that could not be reversed for four years. In 2001, Argentina suffered its worst economic collapse in more than a century. The long recession had its origins in the excessive spending by the provinces financed by banks at high interest rates. As a result, the private sector was crowded out of the credit market.24 On the verge of a crisis, the international press forecast a debacle, which created a speculation crisis

(Coppedge 2003, 152). Some Argentine politicians advocated suspending payment on the foreign debt. In response, the financial crisis developed into a bank run. Depositors feared that bank assets were being deteriorated and the massive withdrawal could push banks into bankruptcy. The IMF bailed out Argentina with different emergency packages, but the effect of

24 The crisis was very complex. Excessive spending and constant borrowing continued during devaluations and continuous depreciation of its partner currencies, namely the Mercosur (especially Brazil) and the European Union. This is relevant as the Argentine peso was pegged to the US dollar, making it a strong currency. This crisis also affected the country’s exports.

131 the bailout was limited. In November 2001 the government launched a Debt Restructuring plan.

As soon as people heard that, they started to withdraw their savings (particularly from those banks that had lent large amounts of money to the provinces).

During the years 2000 and 2001 ordinary citizens, in droves, withdrew their deposits. In

March 2001, $6 billion dollars flew out; there was another bank run in July and August. During the last run, from October 2001 to the beginning of December, $3.5 billion dollars were withdrawn — an average of 200 million per weekday (Shock 2005, 153). Some money was transferred outside the country; others stored their funds in safe-deposit boxes in banks. Together with the economic crisis there was a political crisis. The bank run continued and the banks ran out of liquidity, despite the government´s efforts to restore confidence in the system. On

December 1st, the President intervened. He issues a Need and Urgency Decree, which restricted the withdrawal of cash from the banks and halted financial transfers abroad. People and companies could not withdraw over 300 Pesos (an equivalent to 100 US Dollars per week).

Depositors could still use their funds to write checks, use debit cards for purchases, and conduct

Inter-account bank transfers. People were also limited to how many pesos they could exchange into dollars or make payments abroad.25 The president considered that these emergency measures would be taken for a short time; otherwise the lack of funds would be detrimental to the run of the economy as a whole due to the lack of liquidity.

The most important factor for the crisis was Argentina´s unstable politics and weak and corrupted institutions. According to The Economist “The rule of law has repeatedly turned up trumps by the executive power ever since. That is why the state has been able to expropriate

25 As a result of endless crisis and long periods of inflation and hyperinflation, Argentines do not trust their own currency and for years have used dollars for transactions. The convertibility plan imposed in 1994, which pegged the peso to the dollar allowed people to legally use dollars in transactions.

132 private savings so often, through hyperinflation or devaluation” (Acemoglu and Robinson 2012,

154). At the time, social pressure was terrible. There were riots and people on the streets banged pots and pans at the cacophony “que se vayan todos” (they [politicians] should all leave). That produced the political system implosion.

Devaluations are a painful economic policy for ordinary citizens because it means that the money in their pockets is worth less. While the United States adopted the US dollar as the official currency in 1792, Argentina has had several devaluations. According to the government, the people´s “lack of confidence” had generated the crisis (Przeworski 2004, 155). See Figure

3.1

Without prior congressional authorization the president issued a decree. This policy was called “corralito” (fence) and affected many people who could not access their own bank deposits. All of the sudden, Argentinians ran out of currency, there was no access to money in the country. Freezing bank deposits enraged the middle class and plunged the economy into a free fall. The 20-year old democracy had not ended corruption or favoritism. In the face of unmanageable protests and riots, President De La Rua and several ministers resigned. The country was in a terrible state of chaos for days and there was a succession of presidents who only lasted a few days.

It would not be accurate to say that Mr. De La Rua´s presidency collapsed due to the

1570/2001 Decree. The decree was simply the last straw that broke the camel's back. Riots across the country repeated the same message to their elected officials: “que se vayan todos”

(“they should all leave”). But Argentines clearly have a very short memory. Most of the same

133 people are still in office today, and abuse of decrees is constant, and they take place now at a faster pace. When Mr. De La Rua took office, there were many irons in the fire.

Argentinian inequality expanded dramatically. In 1991, the richest ten percent of the population received 17.8% times more income than the poorest 10%; in 2003 the top decile received 29.7% more income than the poorest. According to the INDEC the richest 10% now receive 37.3% of the national income, while the poorest get only 1.3% of the income.

Argentina’s 8% economic growth in 2003 did little to alleviate the plight of the poor and unemployed. The record expansion was due to the soybean harvest rather than by an increase in an overall production of the economy. See figure 3.2 and 3.3

The Barter Clubs In response to the country’s severe economic crisis the first barter club opened in May

2000. By the end of 2000 there were 400 barter clubs and 320,000 people exchanging goods and services. The barter clubs increased enormously between October 2001 and May 2002 when there were 5000 clubs and 3 million people participating.26 After that time, the phenomenon disappeared. The barter clubs made it possible for the common citizen to trade homemade and used commodities. The success of the barter clubs was due to the accessability of paper currency.

As people could not withdraw over $300 per month, money had to be used very wisely. The barter clubs allowed people to attain products and services outside the cash economy. As the barter clubs evolved, they also developed their own currency. Those currencies only had value within the club. The barter clubs are an excellent example of entrepreneurship, desperation and informality during a crisis. As the economy recovered and people could once again access their

134 funds,27 (), the barter clubs disappeared. The disappearance of the clubs hurt a new set of people being hurt: those who holding currency from the barter clubs could never use that “paper money” ever again.

Throughout the 1990s, Argentina was the poster child for Washington Consensus reforms

— it sustained growth and equitable prosperity. Argentina was used as a model for other developing countries. The reforms were implemented in record time. Now it is again a poster child for Latin America economics. Though unfortunately, it is the example of what not to do.

The Crisis

De La Rua had no more credibility and Cavallo lost what little he had. Capital flight was out of control and which made the economy collapse. The natural way to stop that was to make people rely again on their leadership. That was just impossible. The measure known as

“corralito” (playpen) had been imposed. It entailed to strictly limit bank withdrawals. People could no longer accede to their life savings or their business accounts. People were allowed the equivalent to 300$AR per person, per month. That would not cover the payment of salaries, or food or medicines. People did not accede to their own money. At the same time, the informal economy that depends on cash was out of business, which meant that many poor people had neither work nor hope in working.

On December 19th and 20th the crisis in B.A had reached a peak, and there were demonstrations all over the Argentine territory. The demonstrations were almost constant since

December 12, 2001, when people from small business, small entrepreneurs association and labor unions separately demonstrated their anger by banging pots and pans. From December 13th to

27 Most of them were transformed in Argentine bonds which could be be cashed decades later.

135 December 20th there were over 800 massive looting actions on supermarkets and other shops registered (Ibdi, 182). There were also many attacks on public buildings, street struggles, protests against banks and confrontations with the police. People started to march asking for the resignation of all politicians. The outrage was directed towards banks (especially foreign banks) and privatized as well as foreign entities. The government decided to use armed force to control and discourage demonstrators, but this proved to be a factor of further anger among the people.

Outbreaks exploded all over the country.

According to Carrera and Cotarelo since the mid 1990s the social protests in Argentina were articulated through general strikes. During 2001 public pots (ollas populares), marches and roadblocks, meetings, escraches (groups of people meeting in front of a private house or building with the purpose of pointing out that its inhabitants or owners deserve public and popular condemnation), open radios, blackouts and attempts or threats of looting throughout the country.

Different social fractions used different instruments of struggle. The pickets’s purpose was to prevent commercial trucks, trains and private cars from circulating, as well as make shops and banks close when the people protesting were former employees of those firms. Wageworkers mostly organized marches that went along the main streets of the cities and included in many cases stoning and destruction of public buildings, foreign banks, privatized corporations and shootings. Unions mostly organized public pots. Roadblocks reorganized by employed and unemployed workers, students returned. People from slums were responsible for most of the lootings (some of these lootings were manipulated and stopped when shops offered free food)

Escraches were organized mostly by left party militants. Students organized “open radios”. In some cites, the middle class and shop owners, small entrepreneurs and neighbors, organized blackouts. Carrera and Cotarelo believe that the systematic forms of struggle such as general

136 strikes, demonstrations and roadblocks show the central role of the working class. According to the authors employed workers from both private and public entrepreneurs are at the center of the general strikes and main demonstrations.

The main criticism to piqueteros comes from workers who see their every day activities interrupted by the protests. Piqueteros have been very aggressive towards those who try to circulate through the roads they block and have attacked people and destroyed their cars if they try to pass on. Piqueteros do not allow anyone to drive where they protest, ambulances included.

Some of the piqueteros cover their faces and use sticks as weapons. Other ways of protest have included occupation of private and state buildings, and demands for money and supplies. A common protest was for Piqueteros to occupy Mc Donald’s and demand the store to feed them all. Piqueteros are highly disliked among business leaders and people from the upper classes.

Desperate for not being able to accede their own funds and without any idea whether they would ever be able to get their money back, people protested and rioted. On December 18th and

19t 2001 people were on the streets shouting “que se vayan todos” (they should all leave). That was a clear message towards the political class; people felt politicians were all the same. It was everyone’s fault that Argentineans had got to such point. This time they were middle class people; small and medium size business owners. People chose to protest banging pots and pans.

The police were instructed to repress the demonstrators (which was impossible as the number of protesters was overwhelming), but that repression costed the life of over 20 people. During that time a new way of protesting was to block highways, entrances to the cities, and roadways to neighboring countries where trade good were delivered.

137 On December 20th, President De La Rua had to resign and flee the Casa Rosada in a helicopter caring for his own safety. As there was no vice president to take upon the post, the

Congress elected the president governor Adolfo Rodriguez Saa to serve as an interm president.

He immediately declared a default on Argentina’s debt for US 132 million. It was the largest default in history. Moreover, members of the Congress applauded vigorously when Mr

Rodriguez Saa announced his measure. Somehow Argentineans tend to blame others for their own mistakes.

On December 30th, after another round of mass riots, Rodriguez Saa resigned too.

Eduardo Camano served as interim president for two days. The situation did not improve in any way: Argentina was still broke. People could not accede to their own funds, New Year was approaching and people were getting ready to celebrate it. There was anger and frustration on the streets. Rodriguez Saa, though elected by congress, had no legitimacy, and no tools were enough to calm down the population or to stop the protests. The president could not control the situation and he resigned in December 30th. The country was again headless. On January 1st the Congress again selected a President, this time Senator Eduardo Duhalde, who had lost the presidency against Mr. De La Rua. A politician by training, a short vice president, a former governor of the

Buenos Aires province and a Senator, he had the skills necessary to govern a country. As soon as he was inaugurated, President Duhalde ended the convertibility system (peso that was pegged to the dolar), which created more instability, chaos and distrust. The peso lost value very rapidly and people feared hyperinflation. The peso then met its market price, which was 70% lower than its former law imposed value. Now, whatever little savings could have been saved in a shoebox or in safety boxes, they were worth almost 2/3 than a month before. Inflation started quickly to take off. There was no money in the market, and even if there had been, people would not have

138 trusted banks to save it in them. On the other hand, people could not keep it at home since crime was rampant, nor could they take it out of the country. Argentina’s GDP contracted by 16% in the first quarter of 2002 and unemployment was over 25% Mand L 39. Over 5 million people fell into poverty between October 2001 and June 2002. By June 2002, over 50% of the Argentine population was living in poverty, while only 22% of the population had been poor in 1994. “The distinctiveness of the 2001-2 crises in relation to past democratic experiences is that this time, removal of trust in the existing political parties and leaders did not imply removal of trust in representative institutions” (Levistsky 2005, 248). There was no way out and no way to protect oneself. International organizations had also lost faith in Argentina and were unwilling to bail out the country yet one more time. With no money on the streets, people started creating neighborhood clubs and trading services. Haircuts, homemade food, … As there was no money to do business with, GPD contracted 16% during 2002. (Ibid, 146) Naturally, unemployment was widespreaded. Businesses could not offer work. The economy was paralyzed. Unemployment was over 25% and over 50% of the population was under the poverty line (the figure in 1994 was

22%). Children started to present malnutrition symptoms, and the country so rich that can grow all kinds of food in its land, started to accept charity shipments from other countries. The government was broken, and so was everyone else.

Meanwhile Duhalde was trying to finish De La Rua´s incomplete mandate, and managed to maintain power for over a year despite the constant protests from people. He agreed to call for elections in April 2003 and depart power sooner than it was due (May 2003 instead of December

2003). Elections were rescheduled four times. It is surprising that the military were so weakened that they did not attempt to regain power. No one dared to take the country out of such a mess.

After the terrible job performed by the center right, there was little doubt that it would be a

139 Peronist who took the post. But the Peronist party was deeply divided at the time. Former presidents were fighting for the post, Menem and Duhalde and interm Rodriguez Saa, who promised that they would do a good job managing the situation next time around. Duhalde presented a candidate that was not known outside his province, Mr Nestor Kircher. Kirchner was the governor of a wealthy province in the South of Argentina (Santa Cruz) with the lowest population in the country. Having such a low profile, people did not have a given image of

Nestor Kirchner. Meanwhile, Menem, Duhalde and Rodriguez Saa were running as candidates from outside the party. Duhalde had the advantage of being an incumbent one, he tried to benefit from the slight economic recovery (the only way the economy had to go was up: there was no more room to go down), and he tried to book social programs providing subsidies.

The elections were highly fragmented. Within the Peronist platform, Menem was running as a conservative, Rodriguez Saa was running with a populist campaign and Kircher was representing a centre left order. The Radical party was also highly divided into small parts, and the two members of the party that ran, did so on their own formed platforms. Elisa Carrio was another centerleft runner whose campaign was based on an image of honesty; she promised to fight corruption as she had done along her whole political carrer, but she failed to show that she would be able to represent the country well overseas or that she knew how to manage the economy. People referred to her as “la gorda” as she was rather obese. In people’s minds’ she did not confer the image of a president. The other ex-Radical was Ricardo Lopez Murphy, a MA holder from Chicago University, who had beena Minister of Economics for a few days during the

De La Rua administration. Lopez Murphy had anything but charisma and his economic language was hard to understand. Furthermore, he represented that market oriented platform that had been praised ten years ago, but was now seen as the mother of all evils.

140

La Decada Infame III: The Kirchner Administrations

I never asked nor pretended to get a “blank check”. Instead of that I have come to propose to you a dream: to reconstruct our own identity, both as a population and as a nation; I have come to propose you a dream: truth and justice; to propose you a dream: an Argentina for all and with all; I have come to remind you of our forefathers, immigrants, and pioneers, and of our own generation, that invested all they had and left all aside chasing the dream of a country of peers. I have the certainty that in this historical symbiosis we will find the country we all deserve. I am here to propose you a dream: a united Argentina, an normal Argentina, I want a serious country, and what is more, I want a fair one. I wish a new nation arise from this path: our nation. Thank you very much. Long live our homeland!!! Inauguration Speech (Kichner 2003).

Consitent with the ‘que se vayan todos’ (they should all leave) idea, over 20% of the electorate submitted a blank vote. Menem finished with 24.5 % of the vote, and Kirchner with

22.4%, which was not bad for such an unknown candidate. Without a clear winner, ballotage between Menem and Kirchner was expected. Menem kept claiming that he had never failed an election. But as he was in serious jeopardy of losing this one. He handled the presidency to

Néstor Kirchner.

For a president that was elected by only 22% it was questionable whether he was going to be able to manage the situation and how much support he had. President Kirchner was not known internationally and little known domestically. He had been the Governor of the province of Santa Cruz. According to Sarlo, for the great majority of Argentine citizens, Kirchner was rather unknown. Far from being a hindrance this was his best feature because it let him recreate himself. His wife was a member of parliament, which beared certain intellectual prestige (Sarlo

2011, 172). But President Kirchner, who was rather rough around the edges, did a good job in

141 restoring authority as president of the country. Naturally, economy was his first priority concern and he strove to undo everything that had been done in the 1990s.

Kirchner was a man centered in the present (O'Donnell 2008, 7) which was useful for the time being. Beatriz Sarlo describes him harshly. “A lot of adjectives can be used to describe this man: despotic, authoritarian, quick, hot tempered, ambitious, sectarian, intelligent and hypocrite”

(Ibid, 8). The Kirchner administration reopened the files on the Dirty War, and the leaders that had been pardoned by Menem, were judged again. These popular measured brought Kirchner public support and confidence he lacked while campaigning. Néstor Kirchner’s main focus was to restore political credibility to a society long deceived by many traumatic experiences.

However, he established an authority based on the hegemony of the Executive Power, indifferent to the balance provided by the National Constitution concerning the other two branches

(Archibaldo Lanus 2012, 527). While the rhetoric was different from Menem´s, Kirchner also concentrated all the power he could get. “Kirchner´s initiatives were more transparent and more oriented towards institutional integrity than those of the early 1990s – perhaps because the primary crisis he faced was one of public confidence, not of hyperinflation” (Levistsky 2005,

43). Thus, while Menem had routinely sacrificed institutional integrity in the pursuit of short term political and economic goals, Kirchner’s government faced an important dilemma between process and outcomes” (Ibid, 43). When Sarlo (2001) tries to summarize the main characteristic of the Kirchner administration she says that corrupttion is allowed, public works flourished, the

Supreme Court was reorganized but republican institutions were ignored, and clinetelims is rampant. Led by economist Roberto Lavagna, Kirchner consolidated his power with a period of economic prosperity (Ibid, 44). Néstor Kirchner was very much in charge of all major economics

142 decisions. Under his administration the influences his economic ministers diminished compared to that of other administrations. Its power was further diminished by formally partitioning this impressive ministry. The Ministry of Economics was divided into four: Ministry of Production and Commerce (lead by Debra Giorgi), Agriculture Ministry (lead by Dominguez), Ministry of

Plannification, and the Ministry of Economics per se (led by several during that administration).

President Néstor Kirchner left office after finishing his first term. Constitutionally he was allowed to run for a second term, but his image had deteriorated. So he chose his wife to be his succesor. They intended to run after each other. Hence, Néstor planned to rule for a second term after Cristina’s first. In the end mortality quashed these plans; Néstor Kirchner died while his wife was in office. Néstor Kirchner was in charge of the country at a critical time and regained respect for the Presidency. The economy was growing; there were major improvements in living stardards and some reduction of poverty (mostly due to the welfare system). Kirchner cancelled the debt with the International Monetary Fund, and replaced it with a debt to Venezuela — a lender that charges Argentina much higher interest rates but supports its policies. Kircher supported unions and promoted several minimum wage increases. He also raised retiree pensions. Néstor Kirchers’ style was similar to other peronists who are prone to concentrate power in their hands. Like Menem, he governed by decree a great deal. The world economic conditions were favorable, together with the structural changes undertaken during Menem´s rule, particularly the decreasing taxes and privatization of public services. All these provided

Kirchner with a wide latitude to manage the economy. He could free the country of its debts better than any other president before him, so he did. He governed his own way and times, opposing many established rules.

143 From Kirchner to Kirchner

“ …from the moment Kirchner concentrates power and nominates Cristina as his succesor without appealing to internal elections, his becomes an absolute monarchy disguised as democracy… Nestor makes the decisions and Cristina announces them: this is how the division of roles works in the presidential couple, open even to their adversaries. We still refer to theirs as an “interdemocratic dictatorship”, but if in the legislative elections in 2009 or presidential ones in 2011 some shadow of fraud arises the weak democratic trait that still makes them legitimate would disappear to give way to an ordinary dictatorship”. (Grondona 2012,23)

Argentina had a new demoratic presidential election in October 28th, 2007. She won the post with 45.3% of the votes, and had a lead of 22% over her nearest rival, avoiding the need for a runoff. Cristina Fernández de Kirchner (CFK as she is known) is the first woman elected president of the country, and second to hold the post.28 Fernández de Kirchner has vast political experience and at the time her husband was running for President she was more widely known than he was in Buenos Aires. CFK served one term as a National Deputy and three terms as a

National Senator, for both the provinces of Santa Cruz and Buenos Aires.

Between mid 2002 and mid 2007, economic reactivation produced an important fall in the

Argentine county risk. It fell from 7000 basic points in July 2002 to 180 in January 2007, it stopped (did not revert it) the drain of capitals and it also increased the added demand and the production. Since then there has been an economic expansion which precipitated a remarkable increase in the country’s export commodities as well as in public spending.

28 As previously mentioned, Isabel Martínez de Perón was President after the death of her husband Juan Domingo Perón.

144 Figure 3.4 in the appendix shows that since the Kirchner administration the level of formal employment has risen and the level of informality has diminished.

It was expected that the two Kirchners would have a clear difference in terms of foreign policy. Other than Venezuela, Kirchner had no interest in foreign ties with other countries.

“Kirchner is precisely not what could be qualified as a public relation champion. He seemed not to care at all to get on well with the rest of the world” (Oppenheimer 2010, 166). According to

Andres Oppenheimer, who interviewed President Kirchner in January 2004, his vision of the world was obsolete. It was based on old concepts of national sovereingty that were left aside by almost all moderm democracies. For example Oppenheimer asked Kirchner how he could support Cuba’s governments without reproches while he condemned the miltiary’s human rights abuses in Argentina. He had an interesting response as he claim not to like to interfere in the domestic affairs of countries. But when the journalist pressed him about the Cuban situation and its dictatorship, he claimed that it was the problem of the Cuban population. In that case,

Kirchner was not bothered by the human rights abuses from Cuba (people cannot vote, nor have an independent press, nor broadcasts, nor social programs) (Ibid, 180).

Subsidies

During the Kirchner administration, the government resorted to subsidies in order to support national enterprises. According to official data, Aerolineas Argentinas already spent 99% out of the 216,4 billions US estimated, while railways spent 98% out of 1600 and the car

145 transport 90% out of 860 billions of the original budget. The radical deputy Oscar Aguad stated that this populist and conservative model can be easily seen in the application of the budget.

Unproductive expenditures come first while social programmes and financial help to the provinces are left aside. Besides, the dynamic feature of economic activity and prívate investment is lost together with the programmes assigned to the industry and the medium business.(Serra 2012) Official reports state that the Ministry of Industry headed by Debora

Giorgi spent only a 31% of her budget. The same happened with the Ministry of Education: the programs to improve the quality of education used just 16% out of 105 millions US, and

Equipment and Structure 28%.

Deputy Eduardo Amadeo from the Frente Peronista said that there is no logic beind the budget. “Ours was a blind vote [when voting for the budget], since we do not know why some social plans are not carried out nor what the impact of these programmes on the population is.”

The paralysis in public works is another of the main problems affecting the provinces and it can be seen in the distribution of the budget, too. According to the Ministry of Federal Planification the programTecho Digno (Dignified Housing) concentrates the greatest part of the Home Federal

Plans but has spent just 37.8% of its allotment. Meanwhile, the assignment to improve the use of water resources is 17% and for the urbanization of slums, 40%. See figure 3.5

Uninvestments

The US Government warned that President CFK´s decisions could discourage investments. The most concerning issues are exchange control, poor statistic quality as well as regulatory and contractual uncertainty, which constitute a “challenge” to those American businessmen who intend to start some business in that country. The document reports that the

146 Argentine Government decided some to nationalize some industries in the course of three years, and that continues to be a risk for investors.

On the other hand, the harsh control rules imposed by the state generated an informal currency market. The American dollar is now worth 80% most than the official one. The price freeze policy failed before it started. As regards controls and selective agreements, Guillermo

Moreno´s economic measures have been failing for 7 years now. In its lust to accrue dollars, the

Government took a series of measures that produced the opposite result of the one expected: dollars are in short supply and most exports have been suppressed. Almost all economic activities are affected. See Figure 3.6

Cristina on her own

On Wednesday October 27, 2010, Néstor Kirchner died. Cristina was at his side. While the president had a history of heart disease, the government informed the public that Néstor died because he worked so hard he could take care of himself. His supporters interpreted his passing, dying while worrying about Argentines, as martyrdom, like Eva Peron.

Until the day of his death, Néstor Kirchner’s image was debilitating; his approval rating at the time was 30%. Cristina’s popular was also in the came ballpark. Promoting her image as a widow in mourning Cristina has worn, since then, only black. "A widow is somebody who's harmless, with whom it's easy to empathize" (Ferreira Rubio 2006, 74). Right after Néstor’s death, CFK’s approval ratings doubled. Furthermore, it can be argued that his passing benefited her reelection, which she won with 54% of the votes.

147

When Cristina now makes speeches she stands in frong of the image of Eva Perón in the background. She likes to highlight the fight that women had to get equal opportunities than men, and highlights the difficulties she had beign a woman in politics. As a president she created the

"Hall of the women of the bicentennial" at the Casa Rosada, which features portraits of notable

Argentine women, or with the building of the ministry of health, which has a giant image of

Evita. But since Néstor’s death, his image is always besides her.

Cristina’s success was not a surprise; as she had a clear lead over her opposition.

Cristina’s campaign was based on the work of her husband and used the image of Nestor and was easily won with 54% of the votes. Cristina’s continued leadership can be explained by the support she created with the image of her death husband and now Hugo Chavez combined with a very fragmented opposition. When Cristina finishes her second term, the Kirchners will have governed for twelve consecutive years, a record that not even Peron himself could achieve.

While Cristina had a strong start, she quickly started to face serious issues during her second term: her health, issues with the farm sector (in March of 2008, her administration introduced a new sliding scale taxation system for agricultural exports raising the levies of soybean exports). This led to a nation-wide lockout. The CFK government also started to have different issue with the management of the economy.

Cristina’s second term

CFK blames the outside world, the media, the Greek debacle, and decisions made in

Washington for her country’s economic spiral downwards. The government chose to print more

148 money in order to buy popularity ahead of the October 13, 2012 legislative elections. In the process it created more inflation. The government had benefited by the high prices for soy, one of Argentina’s main exports. But the recipe of “Soja y suerte” (Soy and good luck, in Spanish) seemed to be running out during her second term.

Conclusion

At the end of this chapter it is important to go back to the idea of the pendulum theory, the idea that Argentina goes oscillates between policies. There is little policy consistency, rather each administration starts from scratch. While each administration chooses a different path economic growth and sustainability keep eluding the country. This suggests that the fault may not be in the hands of those applying neoliberal models, nor those who choose leftists policies.

There is no program for sustainable growth. In Argentina, , broadly speaking, two models have been in use. One was inherited from Juan Bautista Alberdi. It was first used in the 1860s and has an international focus. Another emerged in the 1930s, which is a more nationalistist. Its main characteristics are industrial protectionism and state management of all industries

149

Chapter 4: The vicious circle of Delegative Democracies

“In an economically free society, individuals succeed or fail according to their individual effort and ability. The institutions in a free and open society do not discriminate against or in favor of individuals based on their race, ethnic background, gender, c lass, family connections or any other factors unrelated to individual achievements. Government decision-making is characterized by openness and transparency, and the bright light of equal opportunity replaces the shadows where discrimination can affect most individuals. In an economically free society, the power of economic decision-making is widely dispersed and the allocation of resources for production and consumption lies on the basis of free and open competition so that every individual or firm has a fair chance to succeed. (Heritage-Foundation 2012, 19)

Argentina’s delegative democracy is a pervasive phenomenon. It has been in place for many years now. And rather than serve as a stepping-stone towards a full liberal democracy it appears to be here to stay. This chapter examined delegative democracies in terms of its political and economic aspects. Argentines presidents have picked and chosen different sets of policies, but with few exceptions the goal was always to maintain themselves in power and rule as few limitations as possible.

On the political front the chapter will explore the following:

a) how Argentine presidents have used, overused and abused Decrees of

Necessity and Urgency

b) how international affairs have been handled, and how the regime has chosen its

allies abroad in order to maintain support

c) how the judicial system has been manipulated to support the party in office

d) how the media have been manipulated in order to improve the image of the

administration in power

150 e) how the role of the Vice President has been degraded, leaving the president

with more power but few options in case he needs to step down.

An extremely important right that Argentineans are denied is autonomy over their own

money or incomes. The Heritage Foundation measures the principles of economic freedom –

empowerment of individuals, non-discrimination, and open competition. In other words

“individuals in an economically free society would be free and entitled to work, produce,

consume, and invest in any way they choose under a rule of law, with their freedom at once

both protected and respected by the state” (Heritage-Foundation 2012, 19).

1. The use of Decrees of Necessity and Urgency

Governments in many countries manage to rule authoritatively by using different legislative tools. One of the most remarkable tools is the Decrees of Necessity and Urgency

(DNU). As described in the National Constitution, Congress should make laws. Decrees should not be issued merely for political convenience; they are tools of last resort. DNUs replace the rule of law with a presidential fiat. DNUs are meant for extraordinary crisis or emergency situations. It is the president who decides whether the situation is sever enough to warrant rule by decree and if there is any impediment that forbids the Congress to legislate. Once the decree has been issued the legislature must ratify the DNU. After a given period the DNU expires whether the legislature has acted on them or not. This work will study when and how democratically elected leaders use DNUs in order to bypass Congress and govern at will, rather than use them for emergency situations as stipulated by the national constitution.

151

Decrees before 1994

Only 15 decrees were issued between 1853 and 1976. After 1976, President Alfonsín was the first to use them again, but he used them as a last resort in critical situations. Although decrees had not been constitutionally guaranteed before 1994, they had been utilized nonetheless. Until

1983 “political anomaly” was the only constant in Argentina. Some actions needed temporary solutions, such as a state of siege. Others became permanent — for example, the implementation of new economic plans. The restitution of democratic governments since 1983 has been accompanied by greater instability. Before 1994, the constitution did not provide any formal guarantees on the president’s power to issue special decrees of necessity and urgency, yet several president like Mitre and Yrigoyen had used them successfully to pass reforms that otherwise would have been unlikely to attain legislature approval. There were only two types of legal decrees prior to the constitutional reform of 1994: rulemaking and delegated decrees. Presidents have exploited financial emergencies — and there have been many in Argentina —to consider a different way of balancing power

Decrees after 1994

“Currently in this country, republican check and balances are frequently undermined by the eagerness of the power to advance in the institutional territory of another”

(Nacion 2012, 11)

152 The 1994 Constitution established several changes from its predecessors. A four years presidential term, with provision for one consecutive re-election, replaced the previous six-year term. The president is elected in a two round direct election.29 Voters in each one of the 23 province elects its own governor and legislature.

DNUs became constitutional with the inclusion of Article 99.3. The constitution specifies that DNUs should be used only “when exceptional circumstances make it impossible to follow the ordinary lawmaking process established by the constitution” and that the president cannot issue DNUs of penal, fiscal, electoral or political party matters. Some understood that the inclusion of DNUs in the constitution was a recognition of existing constitutional custom (Lema

1993, 205). Ferreira Rubio and Goretti understood that the inclusion of DDNUs will only serve to strengthen the president’s power and foster concentration of power in the executive (Ferreira

Rubio and Goretti 1998, 54). Article 99, section 3 reads:

The executive power shall never issue lawmaking decisions. These kinds of measures will be considered null and void. Only when exceptional circumstances make it impossible to follow the ordinary law making process established by this Constitutions, the Executive can issue DNUs as long as they do not regulate penal, fiscal, electoral or political party matters. DNUs must be decided by the Cabinet assembled and must be counter signed by the Cabinet Chief and the Other Ministers. Within ten days the cabinet chief will personally submit the DNU to a Permanent Bicameral Committee, which will be composed proportionally, according to the political representation of the house and senate. The committee will send its opinion to the floor within 10 days. The house and the senate must immediately consider the opinion. A special act, passed by the positive vote/of/ for/ the majority of the members of the house and the Senate will determine the proceedings and effects of Congress’ intervention in this matter.

29 A second round is not needed if the winner receives more than 45% of the votes, or at least 40% but has a 10% point lead over the second candidate.

153 Another related article in the Reform of 1994 was article 76, which forms part of the Pacto de Olivos: Legislative delegation to the Executive is forbidden except in the case of determined matters of administration and public emergency, with a limited term for its effectiveness and within the standards for the delegation of authority established by Congress. The expiration of the term mentioned above will not cause the revision of the legal relations born under the rules issued as a consequence of the legislative delegation.

This article actually establishes certain limitation to DNUs. DNUs will be null and void in 4 area of public policy: penal, fiscal, electoral or political parties. It includes the intervention of the cabinet chief and other ministers and the mandatory communication of the DDNU to Congress for ratification or repeal. It is still unclear who will determine the existence of exceptional circumstances and whether this can be challenged or not. It is also unclear what determines the inability to follow the ordinary lawmaking process.

There are currently four types of decrees in Argentina

a) the statutory decree, that enacts laws passed by congress without altering its spirit,

b) autonomous decrees, which are written by the executive on everyday practical issues,

c) delegated decrees, which require a previous authorization by Congress as they are related

to the legislative power,

d) decrees of necessity and urgency, which give the executive powers inherent to the

legislative realm without Congress’s previous authorization; these are based on matters

that need immediate attention.

154 Scholars who study decrees of necessity and urgency claim that this practice exists in other countries. Examples of comparable articles around the world include: article 77 in the 1948

Italian Constitution, article 86 in the 1978 Spanish Constitution, article 16 in the 1958 French

Constitution, and article 62 in the Brazilian Constitution. The following table will summarize the characteristics of those decrees.

Country Control Validation needed Efficacy

Italy Afterwards by both Written They lose efficacy if chambers they are not made law within 60 days

Spain Afterwards by both Written Within 30 days chambers Congress should pass it into a law or derogate it.

France Can be accepted There is a from the beginning consultation before or after discussion in the decree is passed. chamber.

Brazil Afterwards by Written They lose efficacy if congress they are not converted into law within 30 days

Source: (Serrafredo 2005)

Scholars have expressed their concern with the use of Decrees of Necessity and Urgency. In the words of Moe and Howel “this is the president’s formal capacity for taking unilateral action

155 and for making laws on his own” (Moe and Howell 1999, 851). According to the ability of issuing DNU creates the sensation of “presidential omnipotence” and so that presidents tend to feel more powerful and omnipotent (Ferreira Rubio and Goretti 1998, 55).

Topics:

There is a great variety topics covered by DNUs. In terms of economics, decrees cover issues such as:

1. Budget: Modifications on the National Budget,

2. Taxation: taxes, duties, exemptions, tax benefits, etc.,

3. Salaries: salaries, labor hours, pensions,

4. Public debt: issue public debt, redefinitions of the terms of Treasure bills,

5. Trade: trade, marketing, imports and exports regulations,

6. Real Estate: sale of public real estate,

7. Utilities emergency, benefits and prices,

8. Industries: incentives, taxes and regulations,

9. Finance and Banking: limitation of access to assets,

10. Welfare: create welfare programs or assign funds to them.

In terms of politics, DNUs cover issues such as:

1. National-provincial relations,

2. Benefiting friends politically.

156 3. Civil and Political rights,

4. Public Agencies: restructuring of public corporations, labor rules, and firing

compensation,

5. Proceedings against the state: suspension of the litigation against the state

Other:

1. Cultural issues: promotion of culture,

2. Holidays: creation of non-working days or moving the dates of existing holidays to

new dates in order to generate longer weekends,

3. Civil Rights: allowing gay and lesbian couples to adopt.

4. Ministries: creating or joining ministries; can also changing their names/the name of

them.

Non emergencies

Another common use of DNUs for all the administrations, except Alfonsín´s, are for non- urgent matters. For instance, there is a constant change of national holidays whose sole purpose is to encourage domestic tourism by creating 3-days holidays weekends().30 Sometimes non- working days were created just once, as was the case on the 24th of May 2010 — one day before the bicentennial of country’s independence. Cristina Fernández decided to give that day off to public sector workers, workers in banks and schools so they could prepare for the celebration

(DNU 615/10). When it comes to entertainment, DNU 1022/03 created the Theatrical National

Institute (Instituto Nacional del Teatro) with the purpose of promoting and supporting theatrical

30 Examples include DNU 521/11 and DNU 750/01.

157 activities plays. Moreover non-public sector employees can also benefit from executive dispositions. This was the case with the prestigious Children’s Hospital of Buenos Aires, Prof.

Dr. Juan P. Garrahan. Medical residents, via the the Health Ministry (Ministerio de Salud), benefited with a raise by decree (DNU 530/06).

The height of the omnipotence of presidential decrees is exemplified by using DNUs been used to establish the salary of the incumbent President. A good representative example is the case of DNU 1357/03 wherein President Kirchner established his monthly salary at $3000AR. At the time that amount was equivalent to US$1,000. The decree established that no public servant could receive a salary higher than that. A year later DNU 685/04 doubled the salaries of the

President and his Ministers. According to a law passed in 1862 the president cannot alter his salary while in office. In 1994 the President increased his salary to $6,000, and in 2006 he doubled that. The salary was against modified in the year 2010, by decree 799/10 when Cristina

Fernández increased her salary, which was repeated in 2013.

Decrees by Alfonsín

President Raul Alfonsín was the last president who, objectively speaking, used DNU for emergencies and urgent matters. During his term in office he issued 10 DNUs — all related to economic matters. The economy proved so difficult to manage that he resigned 6 months before his term expired. Alfonsín´s decrees were:

• DNU 1096/85, the “Plan Austral”: due to a severe economic crisis the government

changed the national currency as well as implementing other economic changes. A year

later the DNU was ratified by Congress (Serrafredo 2005, 134). The DNU reads that

“given the extremely serious (gravísima) economic situation that Argentina is going

158 through, the adoption of urgent extreme policies is required to protect institutional life in

order to keep the life of the institutions. The DNU repeats that the situation is so pressing

(apreminate) that it requires measures to end the inflationary process that is hindering the

growth potential of the country.”

• DNU 2192/86 repelled a series of laws setting salaries for public sector employees. The

decree cites that the state is responding to the countless number of protests, strikes, etc.,

carried out by state employees which the state cannot satisfy monetarily due to

insufficient resources and that these protests negatively impacted the quality of service,

order on the streets and “rational coexistence.” The state realized that due to these

demonstrations the situation was untenable (insostenible) and getting worse.

• DNU 2196/86 declared the emergency in the pensions system and suspended pension-

related judicial claims against the state. The executive justified this DNU on the grounds

that Congress was in recess.

• DNU 632/87 declared an emergency in agricultural and cattle breeding economic

activities.

• DNU 1411/87 cancelled the intervention of the state audit in the execution of

administrative acts during a strike.

President Alfonsín, who governed during severely critical times, worked hard to preserve democracy despite the economic crisis. Rampant hyperinflation forced him to leave his post, but he is considered a president who epitomized high democratic values.

159

Decrees by Menem

Menem, who was a populist leader during his campaign, behaved very differently once he was in office. He performed a radical reform of the country’s economy. He replaced state-led institutions for a market-oriented model and Argentina became a poster child for Latin American development. Previously o other country undergoing such reforms had been able to so under a democratic government and with such speed. Of course, DNUs were the tool President Menem used to pass the legislations he needed quickly. During the decade of 1989 to 1999, there was a remarkable power concentration in the President´s hands. Menem did not work towards strengthening political institutions; on the contrary, he weakened them. Menem manipulated legislative and judicial institutions at his will. His most significant success was economic. With the help of Harvard-trained economist Domingo Cavallo, Menem managed to curve inflation, pegged the Argentine currency to the US dollar (a measure that was very useful at the beginning) and achieved impressive economic growth. Menem held a close relationship with union leaders who were all supporters of the Peronist party. Also, corruption was rampant during his administration.

Scholars agree that the case of Argentina is one of “hypermajoritariansim” (Levitsky 2000, 1).

The quality and stability of the country’s representative institutions is under threat. Menem could easily govern as a delegative leader, with a high concentration of power, since he looked like the savior of the country after he resolved the hyper inflation crisis of 1989. As it usually happens in times of crisis, many people celebrated Menem’s strong hand in fighting hyperinflation. DNUs

160 served several purposes: Besides expanding the power of the president: they were the way to pass reform at record speed as well as to introduce legislation.

While Menem was in office scholars doubted seriously whether he would leave his post peacefully. Some observers feared that Argentina could undergo a “Mexicanization” of its politics: the institutionalization of a one-party state. Menem governed unilaterally; he violated

“the spirit — if not the letter — of the constitution” (Levitsky 2000, 57). For example, in 1990, he increased number of justices in the Supreme Court from five to nine — all of them were the

President´s own choice. The number of decrees issued during his administration was another significant trait of abuse of power. Another abuse was Menem’s reckless pursuit of a constitutional reform with the aim of letting his reelection was another feature of his abuse of power. In 1998 Menem tried to run as President for a third time, which was clear unconstitutional. His administration not only avoided working with the opposition but also and managed to weaken it. Nevertheless the government failed to seek multiparty consensus even on constitutional issues such as enlarging the Supreme Court or allowing the President to serve a third term.

According to Levistky, while some aspects of Argentine democracy were weakened during

Menem’s administration, others such as freedom of the press, civilian control over military and basic political liberties were strengthened. In contrast with other Latin American countries the liberalization process that took place in Argentina left these democratic rights untouched, unlike

Chile and Mexico before 1989, Fujimori´s self coup in Peru, the violent repressions of protests in

Venezuela, and the labor repression and states of siege in Bolivia.

161 Argentine presidents used different instruments (enumerated in this chapter) to hold power. In the case of president Menem, DNUs, were the most widely used tool by President Menem who issued 545 DNUs. They were addressed as issues in taxation, salaries, public debt, trade, transport, nation/processes, privatization, political and civil rights, proceedings against the state, promotion of industry and many others. Scholars would not consider these DNUs legitimate since they were not issued under circumstances of actual need nor urgency. Also, not all the

DNUs issued included the clause “Give notice to the Congress,” which should indeed have been included. According to Delia Ferreira Rubio and Mario Goretti, in 91% of the cases when DNUs were issued under Menem’s government, the Congressional reaction was silence, in 8% was ratification and in 1% was repealed (Ferreira Rubio and Goretti 1998, 135) . Many people think that in most cases the Congress would have passed whatever the DNUs stated since Menem had enough parliamentary support. His behavior of permanently passing over the Congress created a precedent followed by his successors.

162 Number of DNUs

90 85 80

70 69

63 62 60 56 50

Nr of DNUs 40 37 37 35 36 35 30 30

20

10

0 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

The graph shows that President Menem issued most of his DNUs before the constitutional change. It should be noted that the core of the neoliberal legislation was already passed at that point as well. Menem’s last decree was issued in December 9th, 1999, his last day in office. During his last month in office President Menem issued 12 out of the 56 decrees issued of his last year.

Necessity and Urgency?

The need and urgency of decrees during Menem´s administration can be seriously criticized, but it was reflected by other presidents as well. DNUs were a way to cover up

163 corruption and manipulated political appointments. Many examples can be cited: one of the is the case of SOFREMI, a French public corporation that received a state monopoly permission to print national identity cards for $200 million, as well as a series of important extensions of taxes and other benefits (DNU 603/91) This DNU did not include the clause “give notice to congress” and was published in the press.

Another decree considered that was understood as urgent and necessary by the President was the one related to the transmission of soccer games. “DNUs have been used and misused: in some cases the emergency was real, on others there were only emergency was merely a vehicle for Menem to exercise personal discretion” (Ferreira Rubio and Goretti 1998, 51). DNU 1563/93 established that there would be no exclusive broadcasting rights for soccer games on TV when the National Team played. The Congress would have taken longer to pass the law allowing this, but the President was deeply concerned that “the population being deprived of the right to watch on TV the team´s progress.” Companies that had previously bought the rights had to broadcast the soccer games had to renegotiate them without the “exclusivity” for which they originally paid. The urgency lied on the fact that Argentina was taking part in the 1994 World Cup

Championship and people would be deprived of watching the National Team matches on TV.

The DNU was revoked by another DNU 1747/93. When it comes to entertainment, another example is the “cinema tax.” DNU 2736/91 establishes that the tax already applied to movie tickets would also be applied to film exhibitions and videocassettes. In 1993, President Menem was supposed to attend a national cattle show. Since there was an unfavorable economic situation, the president expected to face some hostility. So with DNU 1684 Menem favored the cattle farmers with tax benefits and announced them during his speech at the national cattle show. These taxes were just a temporary measure, as not as he presented them.

164 One of the excuses used by presidents is that DNUs were needed during Congress recess; but in really, many were passed while Congress was actually in recess. Many others were passed during ordinary sessions or when the President could have called for extended or extraordinary sessions.

Only 38% were written while Congress was not on session; the majority (62%), were issued in time when Congress was in session. Minister Domingo Cavallo claimed: “to pass bills is more difficult than to issue DNUS. But ruling through law produces a greater legal stability because it creates a sense of more legitimate and persistent solutions that brings about the necessary conditions to foster investment and consequently economic growth” (as cited by Ferreira and

Goretti 1998).In 1993, Cavallo acknowledged that without Menem’s DNU’s only 20% of the measures involved in the economic reform would have been implemented (as cited by Ferreira

Rubio and Gorreti 1993). From 2005 until December of 2006 the official majority in Congress approved without any observations every DNU presented to them.

Unfortunately there are many DNUs that were not issued in a time of necessity and urgency and those matters should have been resolved in another way. Such is the case of DNU

186/00 which established a time change and adjusts the Argentina’s time zone, clearly a topic that did not seem to require the President´s urgent attention. Figure 4.1 in the appendix shows the

DNUs signed by President Carlos Menem during his first term in office.

165 Mega DNUs

Mega DNUs involved many policy areas. Additionally they modified or repealed some acts of Congress. It was usual that one decree cover several topics. The following decrees present three Mega DNUs that were especially important during the Menem´s administration.

• Mega DNU 36/90. It was passed on January 3, after a bank holiday, over New Year. It

established that deposits will be returned in Treasury Bills rather than cash. The

government created a public loan system. The decree forbade the Central Bank from

covering treasury’s operating deficits, it suppressed all public contractual relationships

and actions, extended the term of the Economy Emergency act, established public

salaries, regulated industrial promotion and provided for the management of public

corporations. In terms of taxation, it modified the Value Added Tax Act (increased from

18 to 21%), and established regulations on fiscal and taxation polices. In January 23, the

Executive communicated the DNU to Congress. This DNU was one of the means to

“rationalize” public administration and reduce expenditures. It was modified by other

DNUs (612/90 and 2154/90) and 249 decrees were written to establish exemptions to this

mega DNU. The decree only has two signatures, the one of the president and the one of

the Minister of Finance.

• Mega DNU 1930/90. This DNU established different polices in order to overcome the

financial and economic crisis, and suspended subsidies and other obligations from the

National Treasury for a year. The decree reads “new indispensable measurements are

established with the purpose of overcoming the financial and economic crisis.”

• Mega DNU 2284/91. Following the guidelines of the Washington Consensus, Minister

Cavallo worked on deregulating the economy. This Mega DNU aimed at reducing

166 restrictions, taxes, duties, quotas and any type of control that would interfere with the

market normal functioning. DNU 2284/91 directly changed more than 43 laws. It also

included a clause that stated “ all rules that oppose the rules issued in this decree are

repealed.”

The main modifications introduced by this Mega DNU were:

• Repealing policies that hampered free supply and demand, or that distorted market

prices,

• The Deregulating the transport of goods,

• The Deregulating professional practices,

• The Deregulation the sale of medicines,

• The Authorizing medical imports

• The Closing regulatory and audit agencies,

• Reforming taxes

• Reforming the Stock Market

• The Creation a unified system of Social Security

Figure 4.2 in the appendix presents a summary of important DNUs during the Menem administration.

Decrees by De La Rúa

De la Rúa, who criticized Menem heavily during his campaign for imposing decrees instead of allowing Congress to passing of laws, imposed 60 decrees in the first two years of his administration. Eight were dictated in his first days in office, and 29 in the last days of his

167 government. Issuing decrees has become a norm, usually pushed by lobbying when a president needs a law or when he sends a law project to the legislature. Then the executive announces that due to different political reasons Congress might not pass those plans as laws. In the case of

Fernando de la Rúa, the opposition in Congress held the majority, and it disagreed with his way of running the country, as well as it did with the economic measures taken. President De La Rúa signed the most controversial decrees in Argentine history, and in so doing his term in office ended abruptly. De La Rúa was not able to govern due to the Congress opposition and his diminished credibility meant he was unable to govern.

The straw that broke the camel´s back was DNU 1570/01, which imposed restrictions for all

Argentineans to access their own private funds. This smashed popular confidence in the banking system. It was the beginning of his end as president. Such restrictions revived the parallel dollar market, very well known to the population, but forgotten for about twenty years. La Nación assures that these restrictions have saved governments over US $30 billion and have allow them live with inflation. However the huge gap between the official and parallel market has had several impacts. For starters the “feeling” of inflation is not just a threat but a reality. Besides,

Argentineans do not forget the way it works: hyperinflation cannot be forgotten. What is more, foreign investors are more and more reluctant to invest there since it is risky to invest in a country where currency does not hold its value, properties persistently deteriorate and profits are not substantial. Consequently they leave and eventually remove them from the country. The building industry has been seriously affected construction industry is also damaged since the prohibition to get dollars. The balance of payment is also affected since restrictions are a quick effective fix to restrain foreign currency from draining, as well as the tourist industry.

168 Eduardo Duhalde, who was in power as a transitional president for less than a year before Mr.

Kirchner took office, issued 158 DNUs decrees of necessity and urgency. He was in office in times of great distress. Figure 4.3 in the appendix shows important DNUs signed during the De

La Rua administration. Figure 4.4 in the appendix show the decrees signed during the Duhalde

Administration.

Decrees by Néstor Kirchner

Néstor Kirchner proved an excellent example of a ruling-by-decree President. During his second period in office, Néstor Kirchner signed 73 DNUs, 1 every 5 days. He not only exceeded previous governments; he also broke his own record of 67 decrees issued during his first half term. Néstor hated to be considered “authoritarian.” He said it was just a senseless, “empty” opinion from a disintegrated opposition. Nevertheless, since the return of democracy, no other president had issued as many DNUs per year as he did. During his first 3 years in office, decrees were freely used practically for all purposes: economics, finance, culture, health, agriculture, welfare, national holidays, budget and so on. Kirchner cancelled the IMF debt with the Central

Bank reserves. He also took less important measures by decree such as rising low salaries and freezing public officer ones, establishing a number of meaningless new holidays, and many other well seen measures that would not have been rejected by party-liners nor by the opposition, having had the chance, since they were highly popular. Congress did not intervene: there were no debates nor public consultations, so from the simplest to the most complex matters, DNUs were used as commonplace measures, they were commonplace. Goretti stated: “Most DNUs have to do with a discretional use of monetary funds. It can be seen that the Constitution and its intrinsic

169 powers are not respected.” Having a contrary policy in mind that the one from Menem’s (e.g.

DNU 2778 privatization of the oil company YPF), the Kirchners started a process of renationalization of companies, as in the case of Aguas Argentinas. It is also possible to see that the south of the country, especially Santa Cruz, Mr. Kirchner´s native place, was highly favored by public works, and that Néstor was in office at advantageous economic times, being soy the country´s main and most rewarding commodity all over the world and the Argentine crisis well behind. He held a majority in the Houses and was supported by people. The following chart shows the Argentine economic situation during the 10 years of Kirchner´s administration.

Figures 4.5 show the changes that happened over a decade under the Kirchner leadership. The figures in grey show the values for the year 2003 and the ones in blue the values for the year

2013. Figures 4.6 and 4.7 shows the topics and percentages of the DNUs signed by Néstor

Kirchner. Figure 4.8 shows the DNUs and number of laws passed during the Kirchner administration.

Decrees by Cristina Fernández de Kirchner

When Fernández de Kirchner (CFK) was a senator, she was highly critical of the use of DNUs and she worked hard to regulate their use in La Comisión Bicameral Permanente de Tramite

Legislativo (The Permanent Bicameral Commission on Legislative Process), organism that controls the President´s use of them. While Néstor Kirchner had the highest average of DNUs signed, Cristina had the lowest. Yet, once in office, the first decree that Cristina signed was the one that changed the National Budget, reassigning at her will 380 million pesos.

Despite CFK´s well-known dislike for DNUs, two decrees should be examined for their improper and authoritarian nature.

170 Argentina’s prosperity started fading and CFK´s government appealed to the National

Bank reserves to pay their debts. In December 14th, 2009, Vice President Amado Boudou announced the creation of the Bicentennial Fund for Debt Reduction and Stability, planning to use the Central Bank reserves with the aim of clearing away “uncertainty” and lowering the interest rate for both the government and the private sector. DNU 2010/09 contains the following resolutions:

Article 1: This replaced Article Six of the Convertibility Law

(referring to assets included in reserves, their non-attachable nature,

and the definition of the monetary base) with another article, which

added that "freely available reserves shall be applied to the payment of

obligations contracted with international financing agencies and to the

payment of services on the public debts of the National State." What

this meant, in essence, was that the Central Bank had to clean up the

messes (pay the debts) generated by the Economy Ministry

Article 2: This created the Bicentennial Fund for the

cancellation of services on debt, falling due in 2010 under the

administration of the Economy Ministry which would regulate the fund

Article 3: The fund would total US 6,569 billion,

corresponding to debts falling due with multilateral agencies for total of

US 2.187 billion and debts coming due with private holders totaling US

4.382 billion and which the Central Bank would transfer to the National

171 Treasure from freely available reserves. In Exchange, the monetary

authority would be presented with ten year non-tranferrable Treasure

bill in dollars.

Article 4: The corresponding Permanent National

Congressional Committee would be “made aware” of this

Article 5 Signatures on the executive order includes those of

President Cristina Fernández de Kirchner, Cabinet Chief, Interior

Minister, Foreign Minister, Defense Minister, Economy Minister,

Industry and Tourism Minister, Agriculture Minister, and so on…

CFK´s administration intends to access the funds through a DNU. The fund was created by taking “surplus and free” reserves totaling USS 6569 billion that were administered by the

Central Bank. As the then President of the Central Bank defended the funds and stated that the purpose of the funds has to be the one regulated by the central bank. Given them other purpose is against the law. Indeed the funds were used for political purposes of the administration. This

DNU was drafted at a time when Congress was in recess, and it intended change the core mission of a Central Bank. Redrado explains “the role of the central bank is to be neither a branch office or the economics ministry, as happened in the 1980s nor an “autistic” agency (a bank withdrawn into itself and closed to society), as happened in the 1990s, when no monetary plan existed and we had an expansive fiscal policy, fixed exchange rate and growing debt, a combination that ended up exploding. Argentina’s central bank should be, then, an agency that exercised control by opposing whoever spend money (e.g. The National Treasure) in order to ensure the savings,

172 stability and tranquility of the Argentine people as a whole” (Redrado 2010, 16). He continues:

“the concept of “freely available reserves” as included in the executive decree # 2010/09, which opened the way to the use of foreign reserves to pay private creditors and which was first declared null and void by justice and later repealed by the government itself when it was faced with the impossibility of making it sick legally (Ibid, 44). Figure 4.9 shows the evolution of the reserves at the Central Bank (BCRA).

Martin Redrado fought to safeguard national reserves until January 6, 2010, when the

President “asked” for his resignation using yet another DNU. Mr. Redrado went to great length to get Congress involved to decide if it was appropriate to make use of the reserves in a way that was not the one established by the BCRA’s charter and to make this discussion public in order to create awareness. DNU 18/10 removes him from his post as to the President of the Central Bank of the Argentine Republic citing “bad behavior and mischief as a public servant” (conducta e incumplimiento de los deberes de funcionario público). The DNU explains that at that time the

Congress was in recess (January 7, 10) and it states that the President hands the resignation//mandates that the President hands in his resignation. Not being allowed to enter the

BCRA and having been removed from his post, Martin Redrado prepared his resignation letter, a mere formality at that point, and emailed it to the President. The resignation reads:

“I hereby comply with the duty of writing to you to present my resignation from the post of President of the Central Bank of the Argentine Republic, for which I was designated by means of decree 1468/04, with the agreement of the Senate and in keeping with Article 7 of the Constitution. Later, your decision as President of the Nation to dismiss me from that post by means of DNU 18/2010, was refuted in a federal administrative court, where I maintained that the requirement established in Art. 9 of the Charter prescribing that the causes for my removal require the prior counsel of a Joint

173 Congressional Committee, had not been met, and that no cause existed for my removal This was recognized both in a lower court decision and in that of the Administrative Court of Appeals and I must hereby state that a certain part of this last Tribunal did validate my removal.”

Judge María José Sarmiento, of the Eleventh Administrative Court, who was on duty during the summer judicial recess, accepted the precautionary action presented before him. The

Judge ruled that no Central Bank money should be transferred “until the constitutional and legal terms for this formality and the scope of congressional intervention for DNUs have been complied with.” She stated the following:

The Constitution prohibits the Executive Branch from issuing legislative provisions. This stipulation was specifically established in the constitutional reform of 1994, with the clear intention of amending an omission in the historical Constitution, as a means of guaranteeing the republican form of government established in Art. 1 of the Constitution… the possibility of the executive Branch’s issuing Decrees of Necessity and Urgency requires the existence of a functional impossibility on the part of the Congress to perform as such, an impossibility that, prima facie, does not appear to exist in this case since, in accordance with the provisions of Art

99, Paragraph 9 of the Constitution, the president has the faculty to convene extraordinary sessions wherever a grave question of order of progress should so require. (Nacion 2012, 232).

Figure 4.10 in the appendix show the most salient DNUs during the CFK administration.

174 Constant Emergencies

“emergency government in Argentina has given birth to a new institutional balance of power”

(Ferreira Rubio and Goretti 1998, 58)

DNUs were a central strategy during Menem´s administration. And the way to use them was the permanent creation of emergencies. President Alfonsín left his post when he could no longer handle the hyperinflation crisis. So, though Menem arrived in times of an economic and fiscal crisis Argentina grew economically and experienced a fairly stable phase. So there was no real need for DNUs. Economic emergencies have been resolved by using DNUs. The first modern attempt was Alfonsín´s Austral Plan. The next major change was done by the

Convertibility Law (Law # 23928), passed in 1991, which established that 10,000 Australes were the equivalent to 1 US Dollar and since 1992, the new currency, the Peso was pegged to the dollar at a 1=1 rate. The other changes that were required to conform to the neoliberal system were established by decree. When that model failed, new decrees were needed to stabilize economy establish quick rules in the economy. An especially important DNU was #1570 that established the rules that banks and financial institution had to follow. This decree was highly restricting and people sued the state as they considered that this DNU was not constitutional.

First of all the decree establishes that people, businesses or any account holder cannot withdraw more than 250 Pesos or Dollars form their accounts per week. The decree also forbids wiring

Pesos or Foreign Currency outside of the country. Not being able to access one´s funds, or savings or assets caused people and business all sorts of problems. DNUs proved to be the best way to force the leaders’ wishes onto people without any discussion. Under the excuse of

175 emergencies, everything goes. This is an especially powerful tool for populists in office. Given that some welfare plans or tax brakes were meant to be used while the economic situation was happening, the financial emergencies are extended by decree several times.

DNU 1584/01 was written in the midst of a desperate economic situation. It was a declaration of principles, especially the idea of austerity in times of crisis. But it also reads as a declaration of impotence. A desperate government with its hands tied, on the verge of an abyss

(the government ended up collapsing few days after the DNU was signed), was asking other agencies for cooperation. DNU 1584.0 is not an operative decree it states that it “ratifies the agreement for independence, supports institution and a federal compromise for economic growth and fiscal discipline” (DNU 1584/01). It begs to lower the deficit that is suffocating the country.

The DNU ratifies two treaties signed between the federal governments and the provinces.

Basically the decree serves as a reminder that provinces promise to be fiscally responsible, just as the government claimed to be. The decree was an attempt to get provinces to help by lowering their expense and helping the government in times of need. In order to overcome the country’s very difficult situation the government needed to stabilize the provinces fiscally. In section 3 of the DNU, it begs the Justicialist Party (the opposition at the time) to support the project. The decree reminded of the agreement that the judicial and legislative branches will apply the same principles of the government, it was that they would not to waste during those times.

Alberto Bianchi, states that “at this point there is no need to demonstrate that in Argentina the emergency is not only a recurrent fact but also that it is constantly used with political purposes to rob the extraordinary power that she brings” (Bianchi 2011, 23). Bianchi believes that far from feeling limited by the article 99.3, all the presidents from 1994 onwards, have taken advantage of the DNUs they can write (Ibid, 26).

176

The other emergencies cited by DNUs include:

• Farming emergencies (example DNU 3/93). They can take place during a natural disaster

in any area and the government decides to give tax breaks or subsidies

• Health Emergencies. Such was the case of the N1H1 influenza. (DNU 2792/09).

Provinces can also declare health emergencies, for example, DNU 4/08 in Rio Negro.

Also the health system can be in a crisis, and a DNU would also be used in that case

(DNU 4/08)

• Flooding emergency (emergencia hídrica), such is the case of DNU 620/09 which

granted the legislature the power to act as needed to resolve the issue.

• Education System Emergency (DNU 8/2006), as the economic crisis pushed more people

into the public school system, the state had to face higher expenses in education,

maintenance of buildings, and so on.

• Aeronautical emergency. In 2002 given the critical economic situation of the country, and

the terrorist events that took place in the United States the previous year, the commercial

aeronautical industry underwent a crisis, so the decree established the minimum and

maximum amounts that could be charged for domestic flights. Related to aero

transportation issued, DNU 2085/02 authorizes the Ministry of Defense to buy a radar for

the airport of the city of Mar del Plata.

• Railroad and Subway emergency. DNU 2075/02 declared the emergency of the railroad

and subway system in the metropolitan area of Buenos Aires given the financial system

of the country freezing the token price to access the service and providing subsidies so it

could go on working.

177 • Fishing Emergency, (DNU 189/99) declared that the common hake fish (Merluccius

hubbsi) was under risk of extinction, so fishing it was forbidden.

• Nutritional Emergency, DNU 3818/11 issued after the flood that affected the province of

Salta and its inhabitants, regarding their access to food and other essential utilities such as

food and potable water.

What was the true meaning of DNUs?

Decrees have been used for many purposes, the main one being bypassing Congress and getting legislation passed at a speed a democratic government would not allow, even if the

President had the support of both Chambers. The process of deregulation of the Economy, was not a simple one, as the Argentine economy has been heavily regulated for decades, as it followed very closely the tenants of ISI, was done through DNUs.

The president was not the only one accumulating more power by governing by decree; he also delegated more powers to his cabinet. During the Menem administration cabinet officers were given more power to apply different policies. This was especially true for Minister of

Economics and Finance Domingo Cavallo, who was called the “Superminister”. Examples of decrees that expanded the powers of ministers are the DNU 435/90 Article 59, that gives the

Ministry of Economics and the Defense Ministry the power to administer the resources and assets of state companies — companies where the state owns the majority of the assets, and different state accounts. The decrees stated that many of the regulations in place had been sanctioned through executive orders in times when the country was ruled by de facto governments and that those executive orders regulated and imposed rigorous restrictions to the

178 exercise of economic rights of Argentines. Another remarkable issue during the Menem administration was its explanation of the government’s values. The decrees acknowledge that they were doing the legislature’s job. DNU 2284/01 reads “the institutional emergency forces the executive power to exercise the legislative role, urged by the need of liberating Argentines form the restrictions and limitations and enjoying the constitutional guarantees that were imposed to them in other times.” The government also used the decree to implement

Washington-Consensus-like policies quoting the constitution’s support for free trade. It is also explained that the existence of unnecessary interventions in the international and domestic markets do not grant stability, and the prices of goods and services are notoriously higher than those of a free and competitive market. The decrees states that the free importation of medication will allow a better and wider offer of the market. Overall, the neoliberal government favored completion and much improved customer service, as retails will be allowed to offer better products. Another basic thing that was modified was that retails could choose the time in which they operate. The country changed rapidly, and Argentines enjoyed better goods and services, much better and cheaper utilities. Obsolete industries that operated though subsidies, or that was never forced to compete, suffered greatly because of these changes. The government understood that the restrictions to the exports imposed by previous laws (Law 22802 is cited) are a “self- imposed barrier “to growth for existing national exports. Despite deregulation the state will still do its job of controlling quality and safety to assure quality.” The government modified custom procedures so the times products could reach the market are less, forcing companies to place products in storage before they can reach the market. All of this improved the quality of live tremendously.

179 Decree 772/96 gave the Labor Ministry the central job supervising inspections throughout the country. Also through a decree, the government decided to intervene the province of Corrientes,

(DNU 241/92) and called for election for a new governor and lieutenant governor. Decrees were also used to extend all sort of times industries, producers, branches of the government needed to get the job done. Decrees modify laws for many things, for example taxes on financial issues

(example DNU 58/91). DNUs modify laws related to maritime space (DNU 2623/91). A very recurrent issue when decrees were used was the modification of the national budget. This can be seen across all the administrations that use DNUs intensively. The budget should be discussed in legislative chambers, but it is constantly modified by decree. Decrees have been used to increase or decrease the budget. DNU 1801/09 signed on November 23rd, 2010 modifies the budget to increase the allowance for credits, investment programs and others. DNU 1798/10 also modifies the budget to increase the credits and expenses of the state, specially some welfare program agencies, purchase of new buildings, increase of cultural programs, space programs, continue anti-discrimination programs, cover expenses of the prison system, increase the number of state employees, cover military expenses, pay for fuel for a the LADE airline for government and humanitarian flights, cover expenses from the judicial branch, cover expenses from several hospitals specified in the DNU and others.. A month later, there was a new DNU to modify the budget one more time (DNU 2052/10) that explained the need of coverage of expense for the

National identity System, National Guards, Coast Guards, Agricultural Commercial office,

Payments in the Ministry of Planning and Public Investment, ANSES, and National Universities.

What this shows is that the budget is not planned and accounts are always covered on an emergency basis.

180 Another usual use of DNUs is the creating of Ministries, renaming Ministries, or joining several ministries into one. Some examples are DNU 849/12 when the Ministry of Internal Affairs

(Ministerio del Interior) became the Ministry of Internal Affairs and Transportation (Ministerio del Interior y Transporte). DNU 919/10 created the Ministry of Tourism.

On March 1, 2010, the Commission to Decrease the National Debt was created (DNU

298/10), to finish the work started 2003, with the purpose of helping the country out of its crisis and helping national and private parties reach better financing opportunities. The DNU cites that the international reserves have five folded since the beginning of 2003, so the DNU expresses how Argentina has been affected by the default has improved since it. The Commission has as a purpose to get Argentine out of debt by using funds from different sources. This document is highly technical and highly criticized, as the opposition does not believe that using Central Bank reserves freely is a good idea. The Commission was established so it would depend from the

Ministry of Economics and Finance. Given the practice shown in this text, it seems that DNUs will continue being used by the executive power, especially to rule over economic issues.

Comisión Bicameral Permanente de Tramite Legislativo

The Comisión Bicameral Permanente de Tramite Legislativo (The Permanent Bicameral

Commission on Legislative Process) was created to control of the emission of DNUs. This commission was incorporated in 1994 (law 26122), 12 years after the reform of the constitution.

The Commission is mostly formed of people aligned with the PJ party members and since

November 1, 2006, when it started functioning, it has approved all the DNUs ever signed.

According to CIPPEC during its first semester the Commission met 16 times, and had

181 recommendations for 160 DNUs and later approved them. CIPPEC also informs that the activity was much less during its second semester of existence when it only met 7 times and cancelled 4 meetings. During the second semester it approved the 391 DNUs that it was presented to (Araujo and Iraola 2008, 2). During the months of electoral campaigning the Commission ceased working. The constitution mandates that DNUs will be presented to the Commission within 10 days after they have been signed. First, it took 12 years for the Commission to come into existence, and when it did, they rarely meet and they passed the DNUs without much consideration.

The web site cited by CIPPEC in their report no longer exists. The one in existence at this point, is http://www1.hcdn.gov.ar/dependencias/cbtlegislativo/. That web site only mentions 6 meetings total (on 12/19/07, 02/13/08, 04/23/08, 07/08/08, 09/17/08, 09/23/08) and it has transcripts of only three meetings. It is almost impossible to know whether the Commission continues meeting and they simply fail to update the web site, or if they no longer meet. The only way to follow the Commission trajectory is through newspapers, which rarely mention the

Commission’s meetings. The most recent article — as of the moment this work was written —is dated January 16th, 2012 in La Nación Newspaper. It states that the Commission was meeting that day after two years of inactivity. The article mentions three main fallacies that DNUs have 1.

The Chambers do not express themselves on time, 2. That DNUs need only the approval of just one chamber, and 3 that DNUs are valid as long as no one expresses they should not be valid

(Sabsay 2012). The Commission is a useless and unreliable institution.

182 2. The use of economic restrictions

The literature review explored how economic growth and democracy relate. The following chart, produced by Latinobarometro 2012, shows that most of the people surveyed believe that democracy creates the necessary conditions to thrive. But, aren’t economic restrictions a way to limit the liberties that democracy should bring? This section will enumerate what restrictions have been applied in Argentina and how they have limited severely the access people have to their own assets. Figure 4.11 show data gathered Latinobarmoetro in 2011. The graph shows how people believe that democracy create conditions to thrive.

Argentina’s freedom has been decreasing steadily. The Heritage foundation measures economic freedom and in 2012 Argentina proved to be the 158th freest country in the world.

Argentina’s freedom score is 48/100. It declined 3.7 points which is the third worst decline in

2012. The report states:

Argentina’s foundation of economic freedom has weakened in light of extensive government intrusion into free markets. Aggravated by corruption and political interference, the lack of judicial independence has severely eroded limits on government. ... Regulatory encroachment on private business has continued to increase, undermining previous years’ structural reforms. Populist spending measures and price controls distort markets and undermine productivity growth, and the financial sector remains hobbled by government interference. (Heritage- Foundation 2012, 87)

183

Source: Heritage Foundation 2012 http://www.heritage.org/index/pdf/2012/countries/argentina.pdf

184 2-The use of economic restrictions.

This section will study what are the “government intrusions” to use the words of the

Heritage Foundation that impact the economy.

Since ordinary Argentine citizens no longer trust, or rely on, banks and their restrictive measures, thousands of them keep their savings in the most unsuspected places.

Thought the history of Argentina the government has imposed countless restrictions. For started the ISI mentality prevented trade, both imports and exports. The ISI mentality persisted in many ways, the idea of isolating from the world was justified through nationalistic appeals.

Argentina has imposed a myriad of economic reforms, which has harmed its economy in different ways. Argentina’s strengths are its agricultural resources (cereals, oleaginous plants, meat, fruits), energy resources (natural gas, oil, hydroelectricity) and minerals (gold, silver, copper). The country also has several tourist attractions that appeal both people and capitals. It has also had education and human development indicators above the regional average and a skilled labor force. But this achievement affected the very unpredictable business environment, the dependence on raw materials, the historically inadequate invest in energy and transportation, the recurring inflation, the inequality and social tensions that have developed into very serious crime.

Since this thesis studies in depth what happened in Argentina since the return to democracy in 1983 until December 2012, two periods of economic restrictions will be highlighted. At present Argentina blames the world for its economic problems, “se nos cayo el mundo encima” (“The whole world fell upon us”) is what the President usually cites (Veron

2012). Argentina’s leader blames the outside world, the media, the Greek crisis, and Washington,

185 for the downturn of the economics, instead of blaming itself for the irresponsible fiesta (party).

This seems to serves to understand that it is by isolating itself that Argentina understand that it will protect itself. This seems to explain that the way to protect itself goes hand in hand through isolation from the outer world.

The first President to impose these restrictions was Juan Domingo Perón, when in 1952 he created the National Commission of Prices and Salaries in order to avoid unnecessary price increases. He used to say “Prices go up by lift while salaries do it by stairs” (Justicialista). At that time inflation was also an issue: 38% in 1952, decreased to 3.8% in 1954. Perón again appealed to this strategy again during his third presidency. Again this measurement was seen in the year

2006, with the Kirchner administration.

Compared to the first term of the year, capital flight increased 22.4%. Since October 2011, shortly after president CFK´s the reelection of President Fernández de Kirchner, every month new economic restrictions have been adopted.

The most important restriction was the “cepo al dolar” (clamp on the dollar). It is a prohibition on buying foreign currency with the purpose of saving or buying properties. Nowadays people willing to travel overseas have to get a special permit that can only be administered on line to buy foreign currency. The web site rarely works, and when it does it considers how much money

(Dollars, Euros, British Pounds, Reales) people can buy according to their incomes. People travelling abroad and buying goods and services with their credit cards, must pay an additional tax of 20%. Figure 4.12 shows a series of restrictions imposed by the CFK administration.

In November 16th, 2011, soon after the first restrictions were applied, there was a 35% drop in exchange operations. The total amount of monetary exchanges, around 500 million pesos

186 in mid-October, was reduced to 370 million in a week. By December 2011, the dollar market started to widen between the official price and the black (colorful in this case) market (Nacion

2012). Also, 80% of the exchange rate bureaus closed in Buenos Aires downtown, as they went out of business as soon as dollars cannot be bought nor sold freely (Blue 2012).

The government analyses, case by case, when to allow people and businesses to wire funds abroad in order to pay for goods and services. And all entities need a permit well in advance in order to prevent companies from conducting business with foreign markets. This makes businesses very slow and complicated. During 2011, US $5 billion left the country as payments; but the government needs to decrease the amount the foreign currency that leaves the country. According to La Nación, these limitations have been so successful that between January and September 2012, only US $ 60 million could leave the country legally (Blanco 2012a).

These regulations affect trade with foreign countries, debt payment, wire transfers, imports and exports. Business needing to use foreign currency need to start a complete tedious paperwork and go through a long process that includes the AFIP, the Central Bank and the Secretary of

Commerce. Aníbal Fernández, a national senator and one-time Minister, admitted that he had savings in US dollars, and that he will not exchange them for pesos “because I am not an idiot”

(DolarBlue 2012). Marcelo Elizondo, Chief Director of International Development Business, said that exports have fallen on any and every item, which shows a competitive problem.

The Index of Economic Freedom has a comprehensive view, testing every country’s performance in 10 separate areas of economic freedom. Some of the tested aspects are devoted to calculate a country’s interactions with the rest of the world (the extent of an economy’s openness to global investment or trade). But mostly the index measures economic policies within a country, evaluating the liberty of individuals to use their labor or finances without any neither

187 restraint nor government interference. This does not mean that the index appreciates anarchy, but “the goal of economic freedom is not simply the absence of government coercion or constrain, but the creation and maintenance of a sense of liberty for all” (Foundation 2013, 20).

The 10 economic freedoms have been grouped into four broad categories or pillars:

• Rule of law (property rights, freedom from corruption);

• Limited government interference (fiscal freedom, government spending);

• Regulatory efficiency (business freedom, labor freedom, monetary freedom);

• Open markets (trade freedom, investment freedom, financial freedom).

The latest report ranks Argentina in the 160th position, and regionally it ranks 27 out of 29 countries in South and Central America and the Caribbean. The overall score is below the regional and world average (Foundation 2013, 1). The report clearly blames the Kirchner administration for the decline in rankings “Under President Cristina Fernández de Kirchner, respect for markets and the rule of law has deteriorated and corruption has boomed” (Ibid, 1) and also cites how the Kirchner administration has strong ties with “strongmen” such as Chavez and

Castro.

The overall score is shown at the beginning of the chapter. Each of the freedoms within these four broad categories is individually scored on a scale from 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms. Besides in the following graph it is possible to see how Argentine economic freedom is undergoing a in free fall.

188

Restrictions under the Kirchner administration

According to the Freedom House, under the three Kirchner administrations “rule of law and market principles have been weakened dramatically and corruption has increased” (Heritage-

Foundation 2012, 87) the report cites the close ties with Hugo Chávez and Fidel Castro.

“Although Argentina’s economy has benefited from booming commodity prices, President

Kirchner’s pursuit of expansionary fiscal and monetary policies has fueled already high inflation, which appears to be been unreported in official statistics” (Heritage-Foundation 2012).

189

In the absence of major tax reforms, the top individual and corporate tax rates remain at

35 percent. Other taxes include a value-added tax (Zovatto), a wealth tax, and a tax on financial trans- actions, with the overall tax burden now at 31.6 percent of total domestic income.

Government spending has risen to 37.9 percent of GDP, and the budget deficit hovers around 2 percent of GDP. Public debt amounts to about 50 percent of total domestic output.

The government has increased regulatory interference, undermining efficiency and productivity growth. Establishing a business takes almost twice the world average of seven procedures, and getting necessary permits is costly. Reforms of the rigid labor market have long been stalled. The government regulates prices of electricity, water, and retail-level gas distribution, pressuring companies to fix prices and wages. Figure 4.13 located in the appendix shows Latinombarometro Data from surveys gathered in 2011, and show how people feel that private property is protected in Argentina.

190

The trade weighted average tariff rate is 6.2 percent, with more non-tariff barriers imposed in the form of import and export taxes and fees. New import restrictions were imposed on 200 goods in 2011. Hostility toward foreign investment persists, and the government exerts heavy control in the financial sector. Through an emergency decree to bypass Congress, the government increased its voting rights in partially state-owned companies in 2011.

These restrictions created all sorts of effects into different domestic sectors. Just in 2012 alone, the following chart shows how some sectors have been affected. It was not the weather spoiling the crops or the international arena complicating the economy: it was the policy implemented at home, what significantly slowed down the economy. The downturn in the agricultural sectors is very worrisome for Argentina, since it was soy trade that helped the country overcome its worst recession crisis. The most affected area is the real estate one. Real estate has always been quoted in US dollars, so forbidding people to carry on their transactions in foreign currency makes that neither buyer nor seller to a fair price to a property. No one is willing to accept large sums that devaluate so quickly. Also, having several quotes for the dollar, it is hard to agree on a fair market price. Which is the dollar’s actual, fair, price? Retail has also been affected since less goods from abroad can come in, and those that can get into the country are very expensive, that there are less and worse goods to sell. All this downsides bring along another problem: unemployment.

191

As it was described in the previous chapter there are some recurrent issues in the

Argentine economy. The most important one and one that proved to be very disruptive through the years is inflation

Inflation

In Latin America the combination of slow economic growth and high inflation is the new norm. This is especially true in the cases of Argentina and Venezuela. Argentina bears a history of unmanageable inflation under very different governments. Neither military governments nor democracies could manage the economy in a stable and sustainable manner. Argentines are used to the constant loss of value of their currency, hence the constant use of the dollar, which will be discussed shortly. But inflation was not the only problem, hyperinflation is also a known phenomenon. “Hyperinflation, the argument goes, is more than just an earthquake (the analogy for severe crisis); it is an atomic bomb. Unlike the most devastating earthquakes, no single structure from the old world emerges unscathed. Hyperinflation is a crisis of a different degree.

Even the most recalcitrant enemies of reform, especially financial speculators, suffer a serious beating” (Corrales 1997, 628).

As stated in the previous chapter, it was Alfonsín who could not manage the inflation and had to hand in the government six months before the end of his term. During his government inflation was between 10 and 20% per month and it spired out of control in 1989. In July 1989

Argentina’s inflation was 200% per month peaking at 5,000% for the year. Argentina managed to control inflation with a currency board that pegged the peso to the US dollar. Javier Corrales

192 points out that hyperinflation crises create a sense of urgency that allow certain reforms that would not be possible at other times (Ibid, 642).

After the currency board, Argentina experience a rare effect, deflation, which is what happens when thing get cheaper to say it in every day terms. Deflation occurs when the inflation rate is below 0%. Deflation can be caused by a decrease in government, personal or investment spending, even though in the case of Argentina having the currency pegged to the US Dollar was the main reason. Deflation comes hand in hand with increased unemployment as there is a lower level of demand in the economy, which can lead to an economic depression.

The Kirchner administration came to power in times of low inflation, but due to severe printing policies to sustain the “K model” inflation started to be an issue again. The policies implemented by the government in the last five years have terribly failed to prevent or stop inflation. But interestingly, the government denies the increasing inflation and tries to mask it.

No other administration has masked it by changing or hiding statistics. The current administration blames the rest of the world for its local economic problems. Rogelio Frigerio, economist, CEO of a consulting firm, states "The foreign restrictions the Government refers to exist just in Argentina. Nowadays, the rest of the world is fighting floods and other climatic catastrophe that makes them lose competitiveness. Governments do not fight against the lack of dollars. And competitiveness in Argentina is being lost due to inflation, not to dollar excess”

(Sanz, 2012).

While independent economists agree that Argentine inflation is one of the highest all over the world (25% per year) the INDEC states it on 9.7%. Victor Beker, ex-Statistic Chief from

Clarín Newspaper said this index “should be registered in the Guinness Book of Records.”

193 According to La Nación newspaper, for the 1st time in decades, Argentina defeated Venezuelan inflation record and placed it to a 2nd place. Regarding other regional countries, inflation in

Argentina is far from being a problem, for the rise in international food prices do not influence them , as the Argentine Government states. Except Argentina, Uruguay and Venezuela, the other

South American countries have had an inflation rate just above 5% in 11 months. Ecuador,

Bolivia, Paraguay and Brazil are good examples of this, while Uruguay is rather alarmed since its 9% inflation rate was not expected by President Mujica, who calculated inflation not over.

Figure 4.14 a shows inflation in Latin America showing that the worst countries are Venezuela and Argentina. Figure 4.14b shows the difference between the official inflation rate and the one measured by independent think tanks. Figure 4.14c shows a polemic figure that was published about CFK and how her government lies about important indicators.

The IE (Índice de Expectativa de Inflación / Inflation Index) is especially interesting to follow in times when the government when the government is not transparent about the real rate.

Just one question is asked to build this index. There is just one question in order to build this index. People are required to calculate the price increase within the next 12 months, that is, the inflation percentage. If they cannot give a percentage, they are asked to put it in cents per peso- the price rise within the year. People are asked comparing the prices form now with a year ahead, what percentage do you expect on average that inflation will be in the next 12 months?, If people cannot answer by saying a percentage. They are asked how many cents per peso, you expect on average that the prices will raise in the next 12 months?) In December 2012, while the official inflation rate was about 8%, the expected inflation was 30%. In terms of people´s perception of inflation, there is a slight difference between Buenos Aires and the rest of the country. Those living in the province of Buenos Aires believe inflation to be 5 points higher than the rest of the

194 country. Furthermore, those with a low income expect inflation to be around 37.8% while those with higher incomes expect 33.4%, the media is about 30% for both groups. This index has been studied since August 2006 and the expected inflation has always been higher than the real one.

However, people´s trend is quite accurate but people can guess the trend correctly. b) The US Dollar

Given that Argentines never trusted their own currency, the US Dollar is the currency of choice for saving, real estate, trading domestically and internationally and any type of economic activity that requires products or services to have a stable price in order to do transactions. Argentines always quote valuables in dollars. The only time of stability was during the currency board.

Now, as the graph shows there is a great distance between the official value of the dollar and the one that people can access. This creates great instability. The figure 4.15 shows the gap between the official rate and the black market. Figure 4.16 shows the different values of the dollar at the end of this study on December 2012.

Other than this, another deterrence to manage the dollar availability is to control the brooders, which is usually done with trained dogs that snif those leaving the country to see if they hide currency in their bodies. c)Devaluation

Devaluations are a painful economic policy for people, because for the common citizen, it means that the money they carry in their pockets is worth less. While the United States adopted the US dollar as the official currency in 1792 (222 years ago), Argentina has had several devaluations. The following graph will summarize them:

195

Name of Currency Date Years used Zeros it eliminated

Peso Moneda November 5, 1881 88.2

Nacional

Peso Ley January 1st, 1970 13.4 2

Peso Argentino June 1st, 1983 2 4

Austral June 15th, 1985 6.6 3

Peso (convertible) January 1st, 1992 21 4

In the meantime there have been several “threats” of a new currency, product of a new devaluation being used. A strong rumor took place at the end of 2001 during the time of the debacle, where the idea of the “Argentine” — a new currency was discussed during the very brief presidency of Rodriguez Saa. Another rumor happened at the end of 2012 there is a rumor of a new devaluation, that would move the value of 1 zero, and would be called “Peso federal.”

A new currency brings every time a new hope. This is implemented when people (mostly due to high inflation), lose trust in the country’s currency.

The Índice Líder (IL) has been constructed in order to maximize the information available and to prevent the turns of the economy. The index is not meant to forecast the economic activity but to foresee the turns in the economy. In a way it is the Argentine version of

196 the leading Indicator done by the Bureau of Economic Analysis at the Commerce Department in the United States. The Índice Líder has ten components: 1. Buenos Aires Stock Market, Merval

(it is the most important index of the Buenos Aires Stock Exchange. It is a price-weighted index that calculates the market value of a portfolio of stocks selected based on their market share, number of transactions and quotation Price), 3. Cement Market, 4. ICC, Índice de Confianza del

Consumidor (Consumer Confidence Index — an index constructed by the Di Tella University to measure trust of consumers), 5. Number of bankruptcies presented in court, 6. number of deeds registered in Capital Federal, 7. M2, 8. Surface where constructions will take place, 9.

Metallurgical production, and 10. Production of intermediate goods. Figure 4.17 in the appendix shows the graph for the Indice Leader and 4.18 shows the graph for ICC. d) Capital Flight

As a result of all the restrictions imposed companies and people try to safeguard their funds by moving them overseas. This is a clear indicator of lack of trust in the government. The most important ones were during the year 2000 and during the 2008 Kirchner administration when the government was having a conflict with the rural sector. It was estimated that almost $

8.4 billion dollars left the country then. While the numbers on capital flight are by nature very hard to calculate, the Central Bank estimated that in the third trimester of 2011 $ 8.44 billion dollars left the country. It is also estimated that in 2011 around $ 18.2 billion dollars were moved overseas. The following graph will show the estimated capital flight from Argentina from 2007 until 2011.

197 During 2012 things became worst, and regardless of the clamp to the dollar, the capital drain rose

22% during the 2nd trimester, US $1.97 billion left the productive sectors. In five-and-a-half years capital flight reached US $81 billlion.

Graph 4.19 shows how much has capital drain prevailed during Kirchner´s administration. For 7 years the country expelled threw out capital and attracted some modest ones in just one year.

(Blanco 2012b)

The Índice General de Expectativas Económicas (IGEE —General Index of Economic

Expectations), is a survey carried on by the Argentine Catholic University and TNS Gallup measures perceived economic expectations. This index is measured monthly and those surveyed are asked about the present and future economic situation, their perception about employment, family income, and ability to purchase goods and services.

The last report from 2012 shows that 17% of Argentineans consider the economic situation is good or fairly good, while 36% think that it is neither good nor bad and 43% think that it is bad or very bad. When it comes to the expectations for the next six months, 23% of the people consider that the economic situation will improve, 34% think that it will remain the same and another 34% observe that the economic situation will get worse. When it comes to employment, 41% of those surveyed believe that there are few of very few opportunities, 31% think that there are neither too many nor too little (ni muchos, ni pocos) and 23 % believe that there are many or enough jobs available. Regarding prospective employment opportunities for the next 6 months 20% of the people believe that employment chances will increase, 40% believe that the employment opportunities will remain the same and 30% believe that there will be less working chances. Figure 4.20 in the appendix shows the values for the IGEE.

198

e) Privatizations

In Argentina the government has been involved in almost all public utilities companies. It was a consequence of the political policies implemented by the ISI mentality that prevailed from the 1950s to the 1980s. The state-owned enterprises offered very expensive services in exchange for poor quality. Not having to compete with anyone for its customer, and receiving large subsidies from the government, the companies could afford to hire more people than necessary and offered in exchange scarce poor quality services. These enterprises engaged in corruption practices, nepotism ran rampant, and they also employed friends of those in power with no need for an official explanation. A famous example was the difficulties most Argentineans faced getting a phone line. Since people had to wait years to get a landline, properties were sold at a much higher price if they had one already installed. Transferring a line was a nightmare. While

Alfonsín tried to privatize some state owned companies in 1988, he was unable to do so since he lacked the Congress support. The Menem administration implemented neoliberal policies and sold the majority of state owned enterprises. Unfortunately, these enterprises were not always sold to the highest bidder; privatizations were tinted with a great deal of corruption.

Nevertheless the kind of services that people started to receive from privatized companies was better than those they had been used to. Privatized companies had to lay off large numbers of redundant or ill-suited workers. The companies created a new and more efficient business environment where competitors contributed with new and better technology. This also helped to attract more FDI into the country´s economy. With privatizations productivity increased. The money the government received was used to reduce the fiscal deficit.

199 In 1990, TV stations, petrochemical enterprises, a branch railway, the national telecommunication company, the public aviation enterprise, and some oil wells were transferred to private hands. Moreover, the most travelled highways became toll roads. In 1991, the transference of oil reserves continued. During 1992 steel companies, electricity generation and distribution companies, the local waterworks enterprise, the natural gas company, the Buenos

Aires underground and new and new oil wells were privatized. In 1993, the state oil company was privatized, accesses to the city of Buenos Aires was conceded to private ownership and became a toll road. By 1993 the market value of privatized assets was estimated to be US$ 18 billion. The privatization program has a significant impact on the economy: until 1993, it has generated more than US$ 8 billion at a normal value and US$ 4 billion at a market value (Llanos

2002, 95).

Finance Minister Domingo Cavallo became a media figure, using radio and TV to make announcements, or just lecture, in order to put pressure on legislators to pass policies or threatened with the use of DNUs to get things done Llanos (2002) argues that despite facing several difficulties — mostly due to personality clashes and rivalries — lobbying congress proved to be effective, at least with respect to privatizations (Ibid, 131).

f) Nationalizations

Nationalizations represent the flip side of privatizations. The same way that Latin

Americans saw many of their companies being sold to international bidders in the 1990s, during the 2000s their governments started renationalizing companies. International investors are not prone to invest in Latin America because it is not safe and they have no property rights. During

200 her second term in office, CFK realized that the economic situation was worse than she thought.

She was reelected to a second term with 54% of the vote and her opposition was weak. The

Kirchner administration shifted from interventionism to nationalizations. CFK nationalized YPF

(Yacimientos Petroliferos Fiscales) the national oil extraction company through a decree of necessity and urgency. The NDU (530/2012) established a temporary intervention for 30 days

“with the purpose of assuring the continuity of the company, the preservation of its assets and patrimony, the supply of oil and the endorsement of the country needs guaranteeing the coverage of the needs for the country”. Cristina Kirchner announced the nationalization of YPF as she pondered about the state administration. She did not mention the great deficit this generated nor the poor services provided, and she stated that it had been her late husband’s dream to renationalize YPF. Curiously, both she and her husband had been strong enthusiastic of privatizations during Menem´s administration.

Another nationalized flagship company was the former state airline, Aerolineas Argentinas.

This company was nationalized in June 2008, and since then the state has invested in it US$ 3.57 billions, which would equate to buying American Airlines three times.31 (Olivera 2013). In 2011

Aerolineas Argentinas lost US$ 898 million. La Nación claims “the more it flies the more it loses” (Olivera 2013). 70% of the losses are due to the flights taken to Europe, Oceania, Miami and Mexico. For every dollar that the company earns it loses 1.75 dollars (Olivera 2013). Figure

4.21 shows the amount of subsidies that Aerolineas Argentinas have received since 2009.

31 American Airlines was reported to be worth US $1 billion in March 2013.

201 e) Decreasing Foreign Direct Investment (FDI

The $ 5.4 billion dollars the country received through direct foreign investments just placed Argentina in the 6th place after Brazil (u$$43175), Mexico (u$$12275), Chile (u$$9622),

Colombia (u$$7798), and Peru (u$$5440). Graph 4.22 shows how Argentina is is deteriorating the levels of foreign direct investment despite being at a great historic time in terms how well it could sell its commodities.

According to a specialist companies are disinclined to invest their capital in a country that lacks freedom to send their profits or products to their head offices. (Blanco 2012b). In 2012,

Argentine economy was unproductive. Graph 4.23 shows a comparison among Argentina,

Brazil, Chile, Colombia, Peru and Uruguay. Argentina is the country with the lowest level of foreign direct investment of them all. Table 4.24 shows how different sectors of the economy have been affected in percentages in Argentina by the end of 2012.

g) The National Budget

The government budget is a complex document that is specified in a law that has over 80 articles long and has over 100 attached forms that forecast and explains the national accounts. It also contains 83 fascicles (fascículos) for each ministry and each program of each ministry is detailed. This information is publicly accessible. But this is not enough for people to understand how money will be spent. After all, this is a difficult technical document to read. So the government should make this accessible to make the accounts transparent, explain them. Many government produce what are called “presupuesto ciudadano” (literally: citizen budgets). The

IBP (International Budget Partnership) has constructed an index that evaluates over 100

202 countries and studies how those countries make their budget available for public consumption, how detailed they are and so on. In the latest edition (2012) Argentina was scored with 50 points out of the 100 possible, and dropped 6 points from the previous year. Argentina’s score which is higher than the average score of 43 for all the 100 countries surveyed but is lower than the scores of its neighbors Brazil, Chile, Colombia, and Peru. Argentina’s score indicates that the government provides the public with

The report shows a concern about how challenging it is for citizens to hold the government accountable for its management of the public’s money, since information about the budget and the financial activities of the government is not divulged. Figure 4.25 in th appendix show the data published by the Open Budget Survey and where Argentina falls in terms on budget transparency. h) Country Risk

The banking sector makes use of what is known as “country risk” — an indicator measure of risk implied when investing in a country. It is not followed by the common citizen and even though sometimes the term “political risk” is used instead, “country risk” is more accurate and widely used. It depends on refers to the changes in business environment, the way operative profits are affected, the value of assets, the policies taken, the currency value, business conduction, political disturbances, social turbulences, protest or demonstrations, and so on. The policies that are taken in a country, that dictate the value of the currency, the difficulty to conduct businesses, the political turbulence, social protest and so on affect how investors can be impacted. Some refer to this term as political risk, yet country risk is a more general term and more widely used. Argentina’s country risk can simply be described as a rollercoaster. The most

203 critical time took place in the year 2001. The best way to understand how bad Argentina’s risk rating is we should to compare it with other countries. Figure 4.26 show the countries with the highest country risk in the world.

The country bearing the highest risk is Greece, followed by Argentina. Venezuela and

Ecuador go next in the ranking. The highest ever recorded was 7300 points in the year 2020 and lowest around the 300 points in the year 2005. While the country risk at the end of this study

(December 2012) was around the 1600 bases points, which denotes the high risk of doing business with Argentina, it is not the worst figure the country has recorded. In October 2012, country risk for Argentina rose 188% after a United States Court of Appeals granted Argentina until March 29, 2013 to submit a plan for the repayment of $1.33 billion debt that the country had defaulted on 11 years ago. President Cristina Fernández comes to terms pay what she calls

“vulture funds” according to the same conditions agreed upon for other creditors.

The ICG (Índice de Confianza en el Gobierno), the Index of Trust in the Government, is a tool developed by the Di Tella from Buenos Aires to monitor in a periodic manner the trust people have in the government. It consists of five questions about the performance of the national government: 1. general evolution, 2. preoccupation for the general interests, 3. efficiency of administration and public expenditures, 4. honesty of the public servants, 5. ability to resolve the problems of the country. This was a phone survey performed country most populated urban areas, where a sample of 1200 individuals was surveyed.

The following graph shows the evolution of the ICG since 2001 when it started to be measured. It can be seen that the lowest point took place in 2002 when Argentina was struggling with several presidential changes, neither of them was able to manage the economic crisis, and

204 people asked for every and all politicians resignation (“Que se vayan todos”, explained in chapter 3). Since Néstor Kirchner took office the graph shows an increase in the trust in the government. That trust in the Kirchner administration was lowered again at the end of 2009. The possible scoring goes from 0 (minimum) to 5 (maximum). At the end of this study, in December

2012, the ICG scored was 1.84 points. In December 2012, the ability to solve the country’s issue reached is the highest sub index, with 45% of the people considering that the administration of

Cristina Kirchner would find a solution for the country´s problems. In the second place honesty is mentioned: where 44% of the people consider that the members of the government are honest.

In the third place it is possible to see that 33% of those surveyed seem to have a positive image of the government. 31% of the examined believes that the government acts in favor of most of the people and in the last place 30% consider that public funds are well spent. Figure 4.27 in the appendix shows the total ICG and its sub-indexes. It also shows the years 2001-2002 as the most critical times in the time observed.

3. International Relations

As stated several times in this work, Argentina lacks a coherent international relations plan.

Every administration decides how to manage international relations, foreign trade, diplomacy, and so on. The return to democracy was cherished by the world and so was the Alfonsín´s administration and so was the way in which is handled the issue of the disappeared. Even though

Alfonsín had a tense relationship with President Regan, he took the first steps to reinstate diplomatic relationships with the United Kingdom after the 1982 Malvinas/Falkland war. The highlight of foreign affairs was the way president Alfonsín solved the issue of the Beagle

Channel with a treaty (Treaty of Peace and Friendship of 1984 between Chile and Argentina)

205 signed by both countries at the Vatican which ended decades of dispute. The argentine population was consulted in a referendum and 82% voted in favor of signing the treaty.

During the decade President Menem was in charge, the country opened to trade and investment. Relationships with the US as well as with neighboring countries were restored, the

Mercosur Customs Union was signed and Argentina became part of the world politics. The decade when President Menem was in charge of the country opened doors to trade and investment. President Menem has very restored relationships with the United States as well as with neighboring countries. During his government the Mercosur custom union was signed.

Argentina started to be a part of world politics and political instances, for example Argentina was the only Latin American country to participate in the 1991 Gulf War and all phases of the Haiti operation. It also contributed to United Nations peacekeeping operations worldwide.32 . As recognition of its contributions to international security and peacekeeping, President Clinton in

January, 1998 appointed Argentina a major non-NATO ally.

Things changed radically when the Kirchners took office and began to take autocratic measures. Argentina started distancing form the US and making alliances with other Latin

American countries. Argentina stopped supporting the UN Commission on Human Rights

Resolution assuming a critical position towards the "Human Rights situation in Cuba" and calling upon the Cuban Government to "adhere to International Human Rights norms," but has then chosen to abstain. Figure 4.28 shows the values of the Balance of Trade in Argentina.

In November 2005, in Mar del Plata City, Argentina hosted the Summit of the Americas. The objective was to discuss the Free Trade of the Americas, but they failed to reach an agreement,

32 Argentina contributed army-soldiers, engineers, police, Gendarmerie in El Salvador, Honduras, Nicaragua, Guatemala, Ecuador, Peru, Western Sahara, Angola, Kuwait, Cyprus, Croatia, Kosovo, Bosnia and East Timor.

206 since Argentina and Venezuela teamed up on one side while the United States, Mexico and

Canada teamed on the other. Hugo Chávez, Evo Morales, former soccer player Diego Maradona and Cuban singer Silvio Rodríguez organized a counter Summit or People’s Summit or Anti-

American Summit to bash President Bush and American politics. Needless to say, that further distanced Argentina from the United States.

The sixth Summit of the Americas took place in the beautiful city of Cartagena in April,

2012. It brought together 34 Presidents of the different countries from North to South America.

The name of the meeting was “Connecting the Americas: Partners for Prosperity.” In that summit Mexico’s President Felipe Calderón took the unusual step of denouncing Argentina for its protectionist policies. President Obama also complained about Argentina´s import restrictions in a 20-minute meeting with President Kirchner. The president´s criticism was not the first one.

In March 2012, forty countries — including the US, EU members, Japan, Mexico — complained before the WTO about Argentina’s latest trade barriers. They stated that the Argentine trade system was arbitrary and unpredictable. Argentina responded that among the 157 members of the

WTO, the UE and the EU had accounted for the highest amount of complaints; therefore the country will not accept any external pressure. Figure 4.30 in the Appendix show a comparison between Argentina and other Latin American countries. Figure 4.31 show trade with western and non western countries.

But Argentina not only put a barrier to trade development, but it also chose to trade with countries bearing very authoritarian governments. Not only Argentina puts barriers to trade, it also chooses to trade mostly with countries that have authoritarian governments. In the last years

(more precisely since 2008), Argentina increased by 70% its trading relations with authoritarian governments and dictatorships: 24% of the sales in 2012 (of the year 2012) headed towards those

207 countries, being Iran and Venezuela the most benefited ones. Other than Iran, Argentina increased trade with Algeria, Egypt, Saudi Arabia, Vietnam, Turkey and China with a sales volume of U$$ 2033 billions in 2012 versus U$$1224,5 billions in 2009. (Kanenguiser 2012).

Since Cristina Kirchner initiated her administration, sales to Iran increased 234%. (Turzi 2013)

Iran buys mostly food and technological products from Argentina. The following graph conceived by La Nación newspaper shows the Argentine exports on the left and its imports on the right, its trade volume with the West-Europe and America- in light blue, and the rest of the countries in dark blue. Argentina mostly exports commodities and a few manufactured products

(such as automobiles) but those are meant for the domestic market.

In this section what needs to be highlighted is Argentina’s relationship with Venezuela.

The Kirchners had established a very close relationship with Hugo Chávez and now with Nicolas

Maduro. Argentina is aligned with leftist Latin American governments (Bolivia, Ecuador,

Nicaragua) but the strongest tie is with Venezuela. “We are very happy with how our bilateral relationship is proceeding … in South America, we can see the changes of the new order and the new ways of linking countries with each other” claimed Néstor Kirchner in April 21st, 2010

(Oviedo 2012). Both countries have signed numerous commerce and cooperation agreements.

The two leaders share the same values and similar political, social and economic policies.

Furthermore, either country shares the same enemies, being Venezuela more outspoken about this. Both countries consider the United States as a foe. The bicentennial of the Independence was celebrated by both countries with only months apart. Fernández de Kirchner compared the last 100 years of the region with the first, “which found us with the consolidation of the republic into a model of division of labor, where we provided natural resources that were industrialized far from these lands.” She added, “1810 forefathers thought exactly the opposite, because if one

208 analyzes the economic thinking of Manuel Belgrano and Mariano Moreno, they considered generating richness in our own countries…. “During the first 100 years the idea of the founders and liberators had been far removed from the concrete political practices of our societies and of those who had the institutional responsibility of leading our countries” (Oviedo 2012).

Hugo Chávez was a great support to the Kirchner administrations. (Serrafredo 2005).

The support from Venezuela was apparent in financial issues, Argentina repaid the debt it had to the IMF, and traded that for a much more expensive one with Venezuela. There was also a scandal that implied a serious case of corruption, as suitcases with money arrived to Argentina from Venezuela, supposedly to finance CFK´s presidential campaign.

Another step taken towards unifying the two countries. The Mercosur was established in 1991 by the Treaty of Asuncion. Venezuela was provisionally admitted in 2006, and definitely as a full member in 2012. The Mercosur implies the free transit of produced goods, services and factors among the member states. Customs rights were eliminated and non-tariff restrictions lifted. The countries of the Mercosur adopted a common trade policy, and had the idea of coordinating macroeconomic policies in relation to foreign trade, agriculture, industry, taxes, monetary system, exchange and capital, services, customs, transport and communications.

In 2012 The UNCTAD (Conferencia de las Naciones Unidas sobre Comercio y Desarrollo —

United Nations Confererence and Trade and Development) emitted a report about world investments. The report states that the clamp on the dollar, the fallacious statistics from the Index and insecurity are the main reasons people and companies are not willing to invest in Argentina.

Furthermore, the “uncertainty” about regulations transforms business into a challenge in the

209 country. The document also states that Argentina has nationalized several companies in the last three years and reminds how YPF was nationalized and Repsol has yet to receive the compensation for it. The documents also bring out how Argentina ignores the World Bank regulations. Also the report warns about the parallel market for the dollar and the restrictions imposed by the government.

It states that Argentina has over 500 American companies that employ over 155000

Argentines and that the political policy is to discourage investments and create challenges for anyone willing to invest in the country. Furthermore, while the government expresses its intention to increase the amount if FDI, the recurrent questions about the solidity of investors and property rights as well as the instability about policies backfire such desires.

4. The restrictions on the media

Argentina’s use of media has never been as complicated as it is in the present. After the return of democracy in 1983 the press was able to voice its opinions freely and during the 1990s, in times of Menem´s administration there were high criticism towards him and his environment but the president liked attention so much that even bad press was a good way to stay in the front cover of newspapers. Menem portrayed himself sports, attending all sorts of events, talk shows, and interviews. He did not care about being ridiculed, he was a showman (and portrayed himself as a Latin lover, a sportsman, in any activity that would show him young and active. While campaigning he was no friend of debates, but once in office he spent hours on TV. During the De

La Rúa administration, the dry character of the President made his relationship with the media more complicated by nature. Also, he blamed the press for the deterioration of his image.

Things became more complicated during the Kirchner administration. The Kirchners

210 understood very well the power of media; therefore they were very careful about the way they are portrayed. Néstor Kirchner was not known nationwide, since he had been governor of a distant south province. His wife Cristina was better known, a national Senator, attractive, with firm ideas she had had more press coverage than her husband. Neither Néstor nor Cristina liked being interrogated, neither they have been prone to expressing their thoughts in camera. Needless to say, the current administration debate of ideas is definitely out of the question for the current administration.

The Kirchners have a paranoid relationship with the media. The current administration has either bought or co-opted most radio and TV networks through subsidies and official advertising.

"Throughout the region, we are seeing an unprecedented concentration of media in government hands," said Carlos Lauria of the New York-based Committee to Protect Journalism, "These government-controlled media networks often work as propaganda machines, and as platforms to smear critics" (Ferreira Rubio 1998, 180). Oppenheimer understands that “there is a growing and increasingly dangerous media dictatorship in Latin America. But it's in hands of power-hungry populist leaders who are building formidable government media empires and silencing the opposition press. They claim that their countries are threatened by an evil capitalist media dictatorship, when in reality it's the other way around (Ibid.)”

Unable to control all media, the Kirchners have pushed for a media law. The Law of

Audiovisual Communication Number 26522 sets the laws for radio and TV media in Argentina.

This law was issued in October 10, 2009, by the Fernández de Kirchner administration and replaced a law that was previously promulgated in 1980 under a “de facto” government (Law

22.285). The government claims that the objective of the law is to prevent monopolies from forming and to attract new inventors into the media sector, as well as to get more and better

211 digital technology. The law reads as follows: “ARTICLE 1: the purpose of the law is to regulate the audiovisual services in the whole territory of the Argentine Republic, and develop mechanisms destined to the promotion, dispersing, and encouragement of competition with the aim of reducing prices, democratizing and offering universal access to new technologies of information and communication.” Two things need to be seen here: first the use of the word democratization, which is a constant staple in the vocabulary of the Kirchner administration, and second that the law has been used in selected cases when the government needs to reduce the power of the opposition media.

Cristina is extremely selective and cautious as regards her contact with the press, but also and manages such instances with great care. The only way the President appears on TV or radio is through by talks to the media is by giving a presidential speech on national broadcasts. These appearances are carefully choreographed, with all her supporters applauding her. In those cases conferences the president does not respond to any question to the media. According to Isabel

Sarlo, a typical feature of the Kirchners is the vertical pattern that divides people into friends or foes. The “evil” is on one side and the “good” is on the other. There is a clear division between them (Sarlo 2011, 523).

The government spends large sums on advertising. The latest amounts published are from

2011 when the government spent A$$ 771,157,683; this was 18% more than the previous year.

The Auditoría General de la Nación (AGN — Auditor General of the Nation), criticized the government for its lack of objectivity in the distribution of funds. In 2010 the government spent

$ 654.360.501 (20% less than the previous year). This sum is almost double what it spent in 2007

—$ 381.365.668. As the government invested less in independent media, it stopped publishing the numbers invested, or delayed those publications. Several local as well as international NGOs

212 have been following this issue.33 The Committee to Protect Journalist (LeDuc, Niemi, and

Norris), which defends freedom of speech around the world, claimed that “The government of

President Cristina Kirchner ignores justice and continues distributing official publicity in a discriminatory manner"(LeDuc, Niemi, and Norris 2010). Editorial Perfil, the country's largest magazine publisher, sued the government over its advertising policies and in March 2011, the

Supreme Court of Justice ruled in Perfil’s favor, saying the government must apply reasonable balance in its distribution of advertising.

State spending on publicity represents 9% of all the country’s spending on advertising, which makes it the single most important advertiser in the country, (Crettaz 2012).

The Heritage Foundation studies how free the use of media and Internet is in Argentina. It reports that the penetration of Internet has improved dramatically. It reached 75% of the population in 2012; an improvement from 21% in 2006 (Freedom-House 2012a, 2). The

Heritage Foundation found no notable political censorship over the Internet and did not find any blogger or ICT user arrested for posting his opinions online. The report reflects that the country has a legal framework that protects online freedom for express but highlights the issues that the current administration has with some opposition media. The report states that journalists have complained about the lack of access to government representatives and the only way that the government is reached out is through press conferences where the reporters cannot ask any question. (Ibdi, 5). The report also notices that there is a large gap between large urban areas

(Buenos Aires, Córdoba and Santa Fe) versus other provinces. The report also claims that there are no restrictions on the access to news, whether foreign or international, and that online people can express themselves freely. (Freedom-House 2012b, 4-5).

33 Locally the Asociación por los Derechos Civiles (ADC) and Poder Ciudadano, among others.

213

The Freedom House Report on Freedom of the Press warns that during the last covered period (2011-2012), there have been tensions between the President and the most important media outlets. In 2009, the legislature passed a controversial Law on Audiovisual

Communication Services that had the purpose of diversifying ownership in the media sector. The law has been used against the government’s media opponents and has prompted lawsuits that delayed implementation for about a year, but in September 2010 the measure came into effect.

Critics are also raising concerns regarding the composition, independence, and authority of a new broadcast regulatory body. Article 161 of the law is one of the most controversial, as it is intended to be used in few cases, which would force certain media companies to sell off assets.

This remained suspended during 2011 as it awaited a Supreme Court decision on a challenge filed by the Clarín media conglomerate in 2010. Furthermore, in 2011 there was another provocative amendment to the Antiterrorism Law that increased penalties for terrorist acts. This law is widely open to interpretations and media outlets could be held accountable under the expanded clauses if they published material that terrorize the public. Figure 4.32 show the data collected for Argentina at the Freedom of the Press index.

214 4 )Justice

The ICJ (Índice de la Confianza en la Justicia),34 is an index that measures trust in the judicial system. Since March, 2004, the Law Department of the Di Tella University, Rogres and

Fundación Libertad have been compiling the Index of Trust the population has in the Justice

System. The ICJ measures the evolution of the public opinion with respect of the administration of Justice. Such index is composed of two sub indexes, a behavioral and a perceptional one. The behavioral sub index helps us understand how people would behave when confronted with judicial issues in terms of their patrimony, labor and family issues. The perceptual sub index measures what people expect in terms of impartiality, efficiency and honesty of justice. The index can vary from 0 to 100 points. The measurement is performed every three months, but the author of this work has contacted the person in charge at the Di Tella University and the index is not being continued due to “lack of time to do it.” The latest available data is from March 2011.

Surprisingly the index was not measured in times of crisis and changes. There are no measurements for 1994, when the constitution was changed, neither the 2001 crisis and the times of “democratization of justice” in 2012 are stated. Figure 4.33 shows the level of confidence in the judiciary according to the survey done by Latinobarometro.

Graph 4.34 shows the following: the first line refers to the behavioral subindex. It shows the highest values and this refers to what individuals are willing to do in concrete situations in which they would have to look for help in the judicial system. It does not coincide with the image they have of justice, which is much lower. The general index is in between the two sub indexes. It

34 The ICJ is built using three questions for each sub index. The first question measures people´s attitude regarding, in front of certain judicial issues; the second sub index, measures people´s perception in front of the attributes justice should have: impartiality, efficiency and honesty. Overall, the index shows the following: women tend to trust in justice more than men do. The youngest age group surveyed (18-29 yrs old) is also the one that trusts most in justice more (compared to the two other groups, 30-50 and over 51 yrs old).

215 means that people believe in justice in an abstract way but not in the real practice but in practice the judicial system does not deliver and has not earned the trust of people. There is no great variation in the ICJ index, and by the time it was studied it has always been in a range between

45 and 55 points, which denotes that there is much room for improvement in the delivery of justice in order to improve the perception people have.

5. Change the national constitution

The Olivos Pact was an extraordinary event in Argentine politics. Signed in November 1993, the then President Menem and ex-President Alfonsín agree to a pact to reform the national constitution without modifying the declarations, rights and guarantees of the first constitution and making it more modern and effective. Taking the American Constitution as a model, the

Argentine National Constitution was drawn up in 1853. Since then it was modified seven times

(1860, 1866, 1898, 1949, 1957, 1972), being the last change in 1994. The current administration has been hinting its desire for a new amendment.

The last reform took place between May 25 and August 22nd, 1994, in the cities of Santa

Fe and Paraná and it introduced the most important changes since 1853. Many of the changes are not directly related to the aims of this study (changes in articles 39, 40, 42, 75, 43, 86 and so on) which discuss issues of environment, procedural issues about passing laws, taxation. The related modifications are the following:

The length of the presidential and vice presidential terms was shortened from six to four years and both posts are now eligible to one reelection,

• National senators term in office was also shortened from nine to six years,

216 • The presidential election came from a direct election rather than from the indirect vote

of an electoral college,

• Decrees and Necessity and Urgency were regulated

• The doctrine of the de facto governments was repealed, and it was established that any

further attempt at breaking the constitutional order was to be deemed illegal, as severe

penalties were to be established for the perpetrators and the right to resist a coup d'état

was validated. This is discussed in the Article #36 that has as a purpose to protect the

democracy government.

• The right to vote was not mentioned in the Constitution of 1953 but it was implied in the

Article 33. In the constitution if 1994, Article 37 specifies the right to vote as

universal, equal, secret and mandatory (argentines that are over 18 years of age must

vote in elections).

• Article 38 recognizes the important role of political parties and established the states

must contribute to the financing of political parties and the education of is leaders, it

also recognizes that political parties has the right to access public information and the

diffusion of ideas. Political parties can ask the three powers for information

• The office of Chief of the Cabinet of Ministers was established, with the object of

lessening the strong Presidential trait of Argentine government (article 100)

• An independent institution, called Judiciary Council (Consejo de la Magistratura),

was established with the aim of administrating, regulating and controlling the judiciary

functioning, selecting the candidates for Federal Justices, and initiating impeachments

to destitute them if necessary,

217 • Citizens can introduce bills before the House of Deputies and they have to be

considered by Congress within the following twelve months (article 39).

• Article 40 established that the population can be consulted express yes or no before a

law proposal

7. The lack of Vice Presidents

Vice Presidents never probed to be crucial in Argentina. VPs are elected by popular vote.

They perform functions in the Senate, carry out protocol services, as well as many other tasks; but their main role is to take the place the president if needed. It happened six times in Argentine history-. The image of the VP has been devaluated maybe due to the fact that some of them resigned their position. Last but not least, bring attention to the lack of respect that the Vice

Presidents have for its role. Besides being there because they were elected by popular vote and having functions in the Senate and serving for protocol led functions, the main role of a Vice

President is to replace the President if needed (which has happened six times in the history of

Argentina). The many people that resigned to this post, devalued the image of the vice president.35 But since the restoration of democracy, resigning to the post became a common practice. Once back to democracy, the Vice President accompanying Ricardo Alfonsín resigned with him to make way for the Menem Administration. Carlos Menem campaigned with Eduardo

Duhalde who was in office for a very short time, only sixteen months. Mr. Duhalde, led by his strong political ambitions, resigned to as VP to become Governor of Buenos Aires, situation that

35 The first VP who quit was the 15th one, a “de facto” VP, Mr. Enrique Santamarina, the second was the 25th VP, Mr. Alejandro Gomez, and the 3rd, was Mr. Vicente Solano Lima, who resigned to give room to Peron to take over come to power.

218 provided him more power and visibility. During the whole second term of Carlos Menem´s there was no VP on duty, which furthered the image that all power was in his hands.

President Menem´s prival, Dr. de la Rúa, campaigned promising to fix the shortcomings resulting from the Menem administration. The way to make to power was creating an alliance with other opposition forces. But de la Rúa and Carlos “Chacho” Álvarez had very different styles. De La Rúa was a conservative and Álvarez had a Peronist past and wanted to embody a new political image of a new politics for the country. The de la Rúa Government had to face a very serious trouble when it was accused of bribing senators to pass a law to make labor laws more flexible. In the midst of that scandal Chacho Álvarez resigned his post, leaving the president alone. When Mr. De La Rúa resigned in turn, nobody elected by people could substitute him. The post remained vacant. The popular feeling was that the alliance supposed to have beaten corrupt practices, had failed.

When Néstor Kirchner was elected, he ran with Daniel Scioli, a very well-known sportsman, who had with little or no political experience. Their relationship was tense and even though

Néstor tried to push him out of the VP, Scioli respected the popular vote and remained in his post. Kirchner tried to push him out of his post, but Scioli respected the vote of the people and did not leave his post. As Cristina Kirchner followed Néstor in the presidency, she did so with her Radical VP. In a way it had been a sort of informal alliance, but very short lived. Mr. Julio

Cobos, good relations with the President was short lived. Seven months after being sworn in, he was forced to break a tie in the Senate and voted against the interest of a project proposed by the

Kirchners. It was about a rural tax the Kirchners were trying to raise. The country was strongly divided over this issue, and VP Cobos favored the rural sector over the interest of the President that had chosen him to accompany her. That was the end of the relationship between them with

219 Cristina. Mrs. Kirchner made very clear that she withdrew her support and criticized him on several occasions, and Julio Cobos was asked to resign but he didn’t. Mr. Cobos technically could not be asked to resign since he had been elected by popular vote. While he remained in his post, he had no power and no contact with the President. Mr. Cobos failed to use what happened to become a leader of the opposition.

The current Vice President, Mr. Amado Boudou, remains in his post despite serious accusations of corruption against him. At the end of her first term, Cristina Kirchner, chose

Amado Boudou, who was at the time a Minister of Economics, as the candidate for the Vice

Presidency. Amado Boudou found out that he was the chosen one as Cristina publicly announced him as VP. Amado Boudou is far from being the most adequate person to be in charge of such responsibility not known to be the most prepared person to be in charge of the country’s economy. Martin Redrado in his book, carefully describes him as “the minister with the lowest technical level of any I had ever known, but he had a capacity for media communication”

(Nacion 2012, 12). Amado Boudou is suspected of influence peddling, illegal enrichment, money laundering and the purchase of a bankrupt money printing company. The opposition has asked him to resign, but he claims that the accusations are only a maneuver from the opposition media.

In 2012, Mr Boudou made it to the top 5 of the most controversial VPs in 2012. He has been ranked fourth, compared to the most corrupt and scandalous Vice Presidents of the World (The

Price of cooking the books 2012).36

According to Julio Cobos, who was interviewed by Castro for his book “The Surprising

History of the Argentine Vice-Presidents” (La Sorprendente historia de los Vice-Presidentes

36 The other VPs mentioned are in first place Mohammad Qasim Fahim from Afghanistan accused of human rights abuses, drug trafficking, the second is Tariq Al-Hashimi accused of terrorism, third Ali Osman Taha accused of abetting war crimes and the fifth is Samuel Sam-Sumana from Sierra Leone accused of graft and illegal logging

220 Argentinos) published in 2011, where Cobos claimed that “the hardest part of his job was to live with the alienation that was forced upon them” Castro states “it is a contradiction, because, on one side the most important role is to be prepared to serve as Presidents. But they are not involved in any government decisions and they do not take part in any of the meetings with ministers. … In the Senate, they can only voice their opinion on the case they are needed to break a tie” (as happened with Julio Cobos)(Blue 2012) and (DolarBlue 2012).

221 Chapter 5: Statistical Analysis

The purpose of this study is to show that democracy in Argentina has much room for improvement. The evidence presented here strongly suggests that Argentina continues to experience a Delegative Democracy and is far from experiencing a fully liberal democracy. This chapter will be divided into two sections, the first one will describe the variables that are important in measuring democracy and in the second part a model will be devised. The model to be studied here will study the relationship of four variables Democ (institutionalized democracy),

Decrees of Necessity and Urgency, Number of laws sanctioned and inflation. The model devised in this study is a transfer function model that establishes a relationship between an output variable Y and one or more input variables X.

Descriptive Analysis:

For starters it is important to focus attention on the data provided by Polity IV. The Polity data series is widely used to measure democracy with the purpose of creating date for comparative and quantitative analysis. The data series includes most years, covering the period from 1800 to 2011 for territories with over 500,000 people. Countries are coded for the years in which they their first independent government was formed, which is usually the year of its independence of a few years earlier or late. The indexes are based on an evaluation of state elections for competitiveness, and levels of participation. Democracy is measured in terms of competitiveness of political participation, competitiveness of executive recruitment, openness of executive recruitment and constraints on the chief executive. Each country can be scored on a

21-point scale ranging from -10 to 10. The lowest score, -10,would be indicative of a hereditary monarchy, at the other end of the spectrum a score of +10 is a consolidated democracy. The scale

222 is divided into the following categories: "autocracies" (-10 to -6), "anocracies" (-5 to +5) and

"democracies" (+6 to +10). There are also three special values: -66 (interrupted options), -77

(Interregnum periods), and -88 (transition periods)37. So, on this 21-point scale, democracy happens within a narrow 4-point bandwidth. Within those four points it is very hard to measure democracy’s grey areas, or democracies with “adjectives” as they were discussed in the literature review. That is the main difficulty that this work had to face. 38

The following is a graph of world values using Polity IV:

37 Polity studies governments that range from autocracies to democracies. In the cases where Polity is not measurable, the codebook establishes certain values to categorize the process that the country is going through. The code -66 is used for times when there is an interruption in the government, such as the times when a country is occupied by an external force. The code -77 is used for “interregnum” periods or periods of anarchy such as periods of internal war, (Lebannon between1978 and 1986) .If the interregnal period results in the formation of a new polity, and it is less than a year, the period is usually incorporated without separate mention in the "transition period" of the next polity. If a country is occupied by foreign powers during wartime, terminating the old polity, then reestablishes a polity after foreign occupation ends, the intervening years are coded as an interregnum if a "new" polity is established. A score of -88 will indicate a period of transition. A "388" is entered in the year of the polity's demise rather than the year of its origin, regardless of the month in which either event occurred. The first democratic elections after that were held in 1983.

38There are other data series that were considered for this thesis, such as the Democracy Index constructed by the Economist Intelligence Unit, which was created in 2006 with updated in 2008, 2010, 2011 and 2012. Those few years would make impossible to study the case of Argentina in depth.

223

One of Polity IV’s weaknesses is that the participation dimension is omitted. There are two salient cases that show how Polity can be misleading. One is the case of Switzerland, which has scored 10 out of 10 on the democracy scale since 1848, even though women were not allowed to vote until 1971.Also turnout is very low (around 30%), which the index does not acknowledge. England also scored 10 points despite the fact that universal male suffrage was not achieved until 1918 and female suffrage was not instituted until 1928. The US also had a perfect score of 10 since 1871, but women could vote until 1920. Another interesting case is South

Africa — a country that suffered from racial exclusionswhichaffected over 80% of the population. That was not well represented in the coding. It is hard to anticipate how this flaw affects Argentina, a case where suffrage is not only universal but mandatory, and the rankings are high. The latest report for Argentina from Polity was conducted in June 2011, and did not show any change from the previous year.

224

The graph shows a major change in the tendency in the 1980s, when Argentina transitioned to democracy despites political turmoil. The graph also shows that democracy has remained strong regardless of the serious economic turmoil of 2001.The report shows that in terms of competitive elections Argentina ranks 8, while in terms of executive constrains it ranks

6 (near parity), due to the abuses of Presidents. The report mentions President Menem and his

“rule by decree” as well as the change in the constitution. In terms of Political Participation,

Argentina ranks 9, and it is quoted to be “close to being ‘competitive’ in nature, still suffers from factional tendencies” (Bosin 2007, 2). The following variables are the most salient of the report:

225 XRREG (Regulation of Chief Executive Recruitment) 3 XRCOMP (Competitiveness of Executive Recruitment)3 XROPEN (Competitiveness of Executive Recruitment) XCONST (Executive Constraints Concept) 6 PARREG (Regulation of Participation) 2 PARCOMP (Competitiveness of Participation) 4

226 The graph for Argentina shows that there was high instability until 1983, when Argentina became a democracy again. The sharp declines have are years that are coded -8. And the last year for that code is 1982. Since the year 1983 the variables behave within the bandwidth of democratic government. This clearly reflects the induction of a democratic government — at least one under a minimalist definition. The variable XCONST that measures the regulation of the executive power dropped its value for the period 1989-1999, which covers the Menem administration.

Other data sets were considered such as Freedom House. It is an NGO that has been publishing democratic ratings since 1972; therefore it cover many fewer years than Polity IV. It includes 191 countries. Democracy is measure on 2 dimensions: political rights and civil liberties. And the ranking can range from 1 to 7. Countries scoring 1 to 2.5 are considered free, 3 to 5 are partly free, and 5.5 to 7 are classified as not free. There is a heavy emphasis on human rights, which “leads to biases against young, transitional and post-conflict democracies. In such democracies, the establishment of liberal values dramatically lags behind the establishment of electoral system. The pressures of authoritarian legacies make the transition to full-fledged representative democracy slow and rough” (Bosin, 2007, 9). Young democracies rank lower in freedom ratings than older, more established ones. Argentina is ranked as a free country with a score of 2.0.

The Freedom House Index is showing a remarkable downward trend in the last years. In terms of percentage variation Argentina has suffered the most abrupt changes since the 2001-

2005 period. The sharpest decline occurred in 2003.

227

228

The Freedom House index shows a percentage variation of 5% from 2011 to 2012.

229

Another index considered was The Democracy Index, compiled by the Economist

Intelligence Unit. It measures Democracy in 167 countries. The index is based on 60 indicators divided into five categories: electoral process and pluralism, civil liberties, functioning of government, political participation, and political culture. Countries can be labeled as full democracies, flawed democracies, hybrid regimes and authoritarian regimes. This index, sadly, only has 5 data points since it was conducted in 2006, and updated in 2008, 2010, 2011 and

2012.It is definitely worth keeping an eye on this source but the small number of observations makes it impossible to use in any statistical analysis of just one country. Argentina’s score is the following:

230

The existing indices give a sense of how well democracy operates in Argentina, but cannot be expected to fully measure it. Each index hasa different concept of democracy, employs different methodology and different scales.

Number of laws passed

The following graph shows the number of laws that have been passed by Congress in Argentina from 1984 to 2011. It is possible to see the instability on the amount of laws passed, and a decreasing amount of laws sanctioned since 2003.and there is a downturn tendency that remains until the present time.

231 During the year 2012, 84% of the laws approved by Congress came from the Kirchnerist front

(Frente para la Victoria party). During 2012 there was more legislative production than in previous years. Still, these last years saw fewer laws being sanctioned than in the previous years.

The Kirchner administration had a majority in both chambers.

Variables that could not be used for the quantitative portion of this study:

There were many variables that were considered for this study, but unfortunately due to technical issues it was impossible to use them for the qualitative portion of the thesis. Having said that, historical events shows that they are important in observing a Delegative Democracy and future researchers should have them in mind in future studies.

There are major issues concerning these variables. First and foremost, the independent variable used in this study is DEMOC, which is reported annually. ICC, ICG, IL, IE, IDL, ICJ,

IGEE, and inflation are measured monthly. Country risk and the dollar exchange are reported daily. While all of these could be averaged for a year’s value, the variable would lose information and fluctuations. It does make sense to measure these economic variables monthly, but it would not make much sense to measure democracy on a monthly basis. Reporting Country risk and the US Dollar exchange rate annually would also lose a great number of observations and information. ICC, ICG, IL, IE, IDL, IGEE are fairly new indexes, about 10 years old. While monthly data allows to show greater details in the variation, Polity IV is measured annually, so the observations had to be averaged and computed annually, which would lose great detail and decrease the number of observations in the sample.

232 Furthermore, some of these indexes have been discontinued, such is the case of ICJ or due to lack of resources the surveys could not be conducted every month, which would also decrease the number of observations and veracity of the data.

Variables which are important but not useful for this model

Name Meaning Scale Time and Source Sample:

ICC The Index is 0-100 ICC National Universida Indice de constructed from the May 2001- d Di Tella Confianza del results of 2 surveys one present , other – Buenos Consumidor (Index personal situation and July 2008 – Aires ICC capital of Consumer general situation of the present (Buenos Aires) Confidence) economy. July 1999- It includes a a) Personal present sample that situation represents Capital

b) Macroecon Federal, Buenos omic Aires and other situation provinces c) Predispositi on to buy goods and properties (electrical appliances, car and properties)

233 ICG: Indice de Tool developed to 0-5 March 2003- Universida Confianza en el monitor periodically present, d DI Tella Gobierno the trust of the society conducted every and in the government. It 2 months. Poliarquia has 5 questions about General Variables: variation government performance: general population from with respects to the big cities, people previous month, evaluation, preoccupation for the over 18 years old. general evolution, Type of survey: general interest, general interest, efficiencyevaluation pone survey. efficiency, honesty and ability. general,public 1200 cases are spending observed in 40 administration, honesty different of public servants, spots.Margin

ability to resolve error: problems of the country. +/- 3.2%

IL;IndiceLider It anticipates the Positive January 1993 - Di Tella changes in the numbers present Monthly University tendency of the estimator of economy circles based economic on ten series that activity. represent different economic sectors.

IE: Indice de Through a survey, it Negative People over 18 Universida Expectativas de gathers information values years old are d Di Tella Inflacion about what people (deflation) or surveyed in the y think that inflation will positive values big urban areas. Poliarquia Inflation be in the following 12 (inflation and Phone survey. expectations months. The following hyperinflation) question is asked: how 1205 much do you think that observations. inflation will be in the Margin error: next 12 months. If +/- 3.5% people are unable to answer that question, they ask: if x cost 100 pesos today, how much do you think it will cost in one year?

234

IDL: Indice de It measures the Positive January 2000 - UDT DemandaLaboral demand for labor by numbers present counting the number of Index of Labor job offers in the La The areas Demand Nacion and Clarin covered are Newspapers since the Capital and Gran year 2000.An index is Buenos Aires, constructed comparing Rosario and Gran the number of monthly Rosario, job offers. Mendoza, Northeast of the country, South area of the country.

IGEE:Indice The IGEE, is Positive Monthly data Universida General constructed with 6 numbers since October d de la Expectativas questions that have 2007 to the Catolica Economicas. pre-coded answers present Argentina, Subindexes:Buy, with 5 categories (R1 TNS and Preent, Future, to R5), that includes a 1013 Gallup Variation (points), neutral answer (R3) observations, Variation and a question of does population (percentage). not know/does not covered: over 18 answer (R1). It asks yrs. old Q1: how would you It records the describe the argentine opinion of the economic situation? population about the current and Q2: How do you think future economic that he economic situation and the situation will be in the perceptionabout next 6 months? employment, family income and Q3: How would you ability to purchase describe the goods and services. employmentsituation in Argentina?

Q4: how do you think that the economic situation will be in the next 6 months?

Q5: How do you think

235 that the income in your home will evolve in the next 6 months?

Q6: Thinking in the cost of goods, and the economic situation, do you think that it is a good time to buy electric appliances?

The IGEE is calculated like this = 0,4 Current Situation + 0,3 Future Situation + 0,3 Buy

Inflacion Inflation measued by Negative January 2011- Private consulting firms rather values present Consulting IPC Congreso thatn the state oficial (deflation) or firms measurement positive values

(inflation and hyperinflation) www.inflac ionverdade ra.com

Country Risk It is the risk involved 0-∞ Dec 1998-present S&P in economic investments. It is Daily related, to the measurements possibility that the state might not be able to fulfill its obligations (default).23 methodology questions and 109 indicators divided into three broad categories covering the legal, political, and economic environment ICJ: Indice de It measures people’s Positive March 2005, Di Tella Confianza en la trust in terms of number conducted every University Justicia. Index of opinion for the respect 3 months until & Trust in Justice of administration of March 2008. Fundacion

236 Justice.It has 2 Libertad indexes, one behavioral and one perceptual. The index is calculated by averaging the two sub indexes.

Freedom of the Measures level of Yearly data, 0 (most free)to Freedom Press freedom and editorial 1995 - 2013 100 (least free). House independence enjoyed by the press in different nations

Freedom of Corruption erodes Yearly data, 10-point scale: 10 Heritage Corruption economic freedom, 1995-2013 indicates very Foundation introduces insecurity in little corruption economic transactions. and 0 indicates a very corrupt government.

Capital Flight Volumes of currency Private that flee the country. estimations This is extremely hard to measure as people try to do this as a secret operation.

National Budget Quality of budgetary 4 observations: 1= low, World and financial 1993-7;1998- Bank CPIA quality of management assesses 2004;2003-07; 6= high Group, budgetary and the extent to which 2008-12 CPIA financial rating there is a database comprehensive and (http://ww credible budget linked w.worldba to policy priorities, nk.org/ida). effective financial management systems, and timely and accurate accounting and fiscal reporting, including timely and audited public accounts.

Argentina’s Studies the relations each country 1995-2003 HeritageFo Freedom Score between economic and territory undation Index of freedom and social and has been 0 to 100, where

237 Economic economic values. assigned two 100 represents Freedom numerical the maximum ratings—one freedom. The 10 for political economic rights and one freedoms are for civil grouped into four liberties— broad categories based on a 1 to or pillars of 7 scale. economic Underlying freedom: 1.Rule those ratings of Law (property are more rights, freedom detailed from corruption); assessments of 2 Limited country Government situations (fiscal freedom, based on a 40- government point scale for spending); 3. political rights Regulatory and a 60-point Efficiency scale for civil (business liberties freedom, labor freedom, monetary freedom); and4. Open Markets (trade freedom, investment freedom, financial freedom).

Part II: Quantitative Analysis

Description of the Sample

238 A model is a representation that helps us to better understand reality.A model is based on observed events and on the knowledge of the situation to be modeled. For this model, the following are the variables that were analyzed, the table describes them, presets the scale, years available and source of the data.

a) DEMOC :

Name Description Scale Years Source availabl e

Polity concomitant qualities of democratic -10 to 10 1961- Polity and autocratic authority in 2011 IV governing institutions, rather than discreet and mutually exclusive forms of governance. This perspective envisions a spectrum of governing authority that spans from fully institutionalized autocracies through mixed, or incoherent, authority regimes (termed "anocracies") to fully institutionalized democracies.

Democ Institutionalized democracy 0-10 1961- Polity 2011 IV 1.presencia de isntituciones y -88 transition procedures en la que la gente puede expresar sus prefencias sobre 99 state creation alternanaic de politica y lideres

2. existencia de institutionalized 0-10 cotnares on the exerse of power by the executive The Democracy indicator is an 3. guarantee of institutionalized additive eleven-point liberties scale (0-10). The operational indicator of democracy is Institutionalized Democracy: derived from codings Democracy is conceived as three of the essential, interdependent elements. competitiveness of

239 One is the presence of institutions and political participation procedures through which citizens (variable 2.6), the can express effective preferences openness and about alternative policies and leaders. competitiveness of Second is the existence of executive institutionalized constraints on the recruitment exercise of power by the executive. (variables 2.3 and Third is the guarantee of civil 2.2), and constraints liberties to all citizens in their daily on the chief lives and in acts of political executive (variable participation. Other aspects of plural 2.4) using the democracy, such as the rule of law, following weights: systems of checks and balances, freedom of the press, and so on are means to, or specific manifestations of, these general principles. We do not include coded data on civil liberties.

b)

Decrees These are the decrees signed by the 1998- La of president (state DNUs are not 2011 Nacion Necessi included) Data / ty and Infojust Urgenc y

c)

Number These are the number of laws that 1984- La of have been passed by Congress. 2012 Nacion passed Data laws http://dat a.lanacio n.com.ar/ dashboar ds/4608/a

240 ctividad- legislativ a/ d) Inflation

Inflatio Inflation as measured by the Negative and positive Internatio n, consumer price index reflects the values nal consum annual percentage change in the cost Monetary er to the average consumer of acquiring Fund, prices a basket of goods and services that Internatio (annual may be fixed or changed at specified nal %) intervals, such as yearly. Financial TheLaspeyres formula Statistics isgenerallyused. and data files.

Methodology: The above-described data was exported to Excel and analyzed using SAS the Transfer

Models Analysis. Transfer models are simply models that receive variable that serve asinputs and produce one output constructing a linear system. In a transfer function model a series is related to one or more series.39 A times series “is an ordered sequence of observation. Although the ordering is usually through time, particularly in terms of some equally spaced time interval,

39 Transfer Function models are a subcategory of multiple regression models where the regression has white noise. Even thought the model of the function transfer is linear, the parameters are not. In the case of multiple regression models, the parameters are usually linear.

241 the ordering may also be take through other dimensions, such as space." (Wei 2005, 15) There is only one independent variable (output) and several dependent variables (input).

This work will use time series. In economics and politics it is impossible to conduct experiments to study the causal relations between variables. But it is possible to study the historical or temporal evolution among variables. So the observations are ordered in chronological time, , where the series is represented

Yt with t: 1,…n where

Y1: is the first observation

Y2: is the following observation and so on, (where yt-1 precedesyt, and where ytare years in this case).

As yt-1 is measured beforeyt.It is possible that yt-1has an influence over the value ofyt. This correlation with itself is called autocorrelation, which refers to the correlation of a time series with its own past and future. Thus, this data cannot be modeled with classical models of regression. For results to be valid, the dataobserved needs to come from a stationary process. A process is a stationaryprocess if the function of autocorrelation and auto-variance follow the following properties:

Ø Cov(yt;yt)=Var(yt)=γ 0 ; ρ o=1.

Ø γ k ≤ γ 0 ; ρk ≤ 1.

Ø γ k =γ −k y ρk = ρ−k Where

Autocovarariance function =γ k = Cov(yt;yt-k))=E(yt - µ)(yt - µ),

242 Autocorrelation function = ρk = Cov(yt;yt-k))/ Var() yt * Var() ytk−

Var(yt)=Var(yt+k)= γ 0

Model 1: For starters the relationship between the following two variables was studied:

Ø Democ (1984-2011) and, Ø Number of passed laws (1984-2011).

For this it was necessary to analyze both series as stationary. According to the following graph the Numbers of Passed Laws is a stationary series. This can also be seen through the following graph as well as the table.

190 180

170 160 150

140 130 120

110 100 90

80 70 60

50 1980 1990 2000 2010 2020 Año

Number of Passed Laws Autocorrelations LagCovarianceCorrelation-1 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 1Std Error

01123.1671.00000||********************| 0 1 322.7480.28736|. |****** .|0.188982

243 2 114.2270.10170|. |** .|0.203991 3 15.9515760.01420|. | .|0.205794 4 156.5810.13941|. |***.|0.205829 5 283.7140.25260|. |*****.|0.209174 6 134.1910.11948| .|**. |0.219799 7-127.081-.11314| .**|. |0.222106

Partial Autocorrelations

LagCorrelation-1 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 1

10.28736|. |****** .| 20.02085|. | .| 3 -0.02225|. | .| 40.15170|. |***.| 50.19602|. |**** .| 6 -0.01756|. | .| 7 -0.18632|. ****| .|

The Democ Series does not seem to be stationary, so it will be differentiated.:

244 8. 0 1

7. 9

7. 8

7. 7

7. 6

7. 5 0

7. 4 7. 3 7. 2 7. 1 -1 7. 0

1980 1990 2000 2010 2020 1980 1990 2000 2010 2020 Año Año

Índice de democracia Autocorrelations

LagCovarianceCorrelation-1 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 1Std Error

00.2295921.00000||********************| 0 10.1893220.82460|. |****************|0.188982 20.1490520.64921|. |************* |0.290316 30.1087830.47381|. |*********.|0.338214 40.0685130.29841|. |****** .|0.361143 50.0282430.12302| .|**. |0.369844 60.000728860.00317| .|. |0.371303 7 -0.026786-.11667| .**|. |0.371303 8 -0.054300-.23651| . *****|. |0.372610 9 -0.081815-.35635| . *******|. |0.377934 10 -0.109329-.47619|. **********| .|0.389749 11 -0.101130-.44048|.*********| .|0.410001 12 -0.092930-.40476| .********|. |0.426567

245

The ARIMA Procedure

Partial Autocorrelations

LagCorrelation-1 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 1

10.82460|. |****************| 2 -0.09613|. **| .| 3 -0.10635|. **| .| 4 -0.11901|. **| .| 5 -0.13509|.***| .| 60.02692|. |*.| 7 -0.12800|.***| .| 8 -0.14679|.***| .| 9 -0.17205|.***| .| 10 -0.20780|. ****| .| 110.34433|. |*******.| 12 -0.10135|. **| .|

Once that the stationary process has been obtained, a model needed to be found, so Number of passed laws (input) is used to pre whiten this series and lately to filter Democ (output). After analyzing the autocorrelation and partial autocorrelation functionsthrough an ARMA (2,1) process, and the results were significant.About the ARMA process, is amodel that provides a parsimonious description of a stationary stochastic process in terms of two polynomials. The first

246 one is the auto-regression (AR) and the second one is the moving average (MA). This is a function that has 2 parts, AR which is Auto correlationand MA which stands for Moving

Average. Following the ARIMA Procedure will be modeled. ARIMA stands for autoregressive integrated moving average and it is a generalization of the ARMA model. The model is fitted to a time series data and is used to understand the data or to forecast the future.It is applied because there is evidence of non-stationary.The model is generally referred to as an ARIMA(p,d,q) model where parametersp, d, and q are non-negative integers that refer to the order of the autoregressive, integrated, and moving average parts of the model respectively

Given a time series of data Xt, the ARMA model is a tool for understanding and, predicting future values in a series. ARMA models can also be sued to remove persistence.For this the model is pre-whitened, a statistical process which is conducted in order to remove related persistence from the series so that the residuals are more suitable for studying the influence of certain factors. The model is usually then referred to as the ARMA(p,q) model where p isthe order of the autoregressive part and q is the order of the moving average. The notation AR(p) refers to the autoregressive model of order p. The AR(p) model is written

where are parameters, is a constant, and the random variable is white noise. It is possible to see that the white noise errors are significant at 5%.40

*

40White noise is the type of that moves around one measure in a constant way and has a constant volatility.Past measures do not have information that is useful to predict future values.

247 In order to model an ARMA model there are defined steps that need to be followed.

First it is necessary to graph the time series data and select the transformations that need to be done. Graphing the data will make it easier to select the appropriate structure (AR, MA, or

ARMA). The second step is the estimate the coefficients of the model. Coefficients of the AR models can be estimated by least square regression. The MA or ARMA model requires a complicated iteration procedure, which is done through the statistical analysis program. The third step is to check the model and see if the parameters are statistically significant. The fitting process is guided by the idea of parsimony, where the best model is the simplest possible model, a model the least amount of parameters that describe the data.

Maximum Likelihood Estimation

StandardApprox ParameterEstimate Errort ValuePr> |t| Lag

MA1,1-0.81319 0.11464-7.09<.0001 1 AR1,1 0.89185 0.0765111.66<.0001 2

Variance Estimate1499.753 Std Error Estimate 38.72664 AIC288.6249 SBC291.2893 Number of Residuals28

248 Correlations of Parameter Estimates

Parameter MA1,1 AR1,1

MA1,1 1.000-0.457 AR1,1-0.457 1.000

Autocorrelation Check of Residuals

To Chi- Pr > Lag Square DF ChiSq ------Autocorrelations------

6 7.23 4 0.1244 -0.223 -0.051 -0.178 0.044 0.349 -0.014 12 12.23 10 0.2698 0.087 -0.177 0.212 -0.109 0.131 0.007 18 20.80 16 0.1863 0.061 -0.030 -0.117 0.065 0.007 0.291 24 36.98 22 0.0238 -0.309 -0.059 0.035 0.000 0.161 -0.107

The maximum likelihood estimate (mle) of θ is that value of θ that maximizes lik(θ): it is

the value that makes the observed data the “most probable”. In this case, the tables shows all the

parameters introduced to the model that were significant at the 5% level, this means that none of

the parameters used were included unnecessarily. The Maximum Likelihood Method is the

method used for estimating the parameters of a statistical model. The methods selects of set of

values of the model parameters that maximize the likelihood function. In simple words, it

maximizes the agreement of the selected model with the data.This is used in modelsthat have

249 normal distributions.

The previous model will be used as a filter for Democ (output) in order to later calculate the AR function and the residuals from both series.

Correlation of res2 and res1

Variance of input = 1760.735 Number of Observations27

Crosscorrelations

Lag Covariance Correlation -1 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 1

-12 -0.022554 -.00223 | . | . | -11 -2.395007 -.23636 | . *****| . | -10 -0.584304 -.05766 | . *| . | -9 -0.451940 -.04460 | . *| . | -8 -0.045645 -.00450 | . | . | -7 3.061380 0.30212 | . |****** . | -6 -4.065331 -.40120 | ********| . | -5 -0.745282 -.07355 | . *| . | -4 -1.101332 -.10869 | . **| . | -3 1.697144 0.16749 | . |*** . | -2 -0.168130 -.01659 | . | . | -1 -0.635532 -.06272 | . *| . |

250 0 -0.622449 -.06143 | . *| . | 1 -1.442629 -.14237 | . ***| . | 2 4.963087 0.48980 | . |********** | 3 -2.720879 -.26852 | . *****| . | 4 0.478532 0.04723 | . |* . | 5 0.612447 0.06044 | . |* . | 6 0.491780 0.04853 | . |* . | 7 -1.335108 -.13176 | . ***| . | 8 0.205650 0.02030 | . | . | 9 0.966332 0.09537 | . |** . | 10 1.328855 0.13114 | . |*** . | 11 0.778215 0.07680 | . |** . | 12 -4.268321 -.42124 | ********| . |

With the obtained results a transfer function is being model and the errors obtained are as follows

Maximum Likelihood Estimation

Standard Approx Parameter Estimate Error t Value Pr > |t| Lag Variable Shift

AR1,1 -0.49350 0.16326 -3.02 0.0025 10 d 0 NUM1 0.0021930 0.0011569 1.90 0.0580 0 Leies 2 NUM1,1 0.0020369 0.0011569 1.76 0.0783 1 Leies 2

251

Variance Estimate 0.049456 Std Error Estimate 0.222386 AIC 1.375294 SBC 5.031921 Number of Residuals 25

These results demonstrate that the residues are white noise and not correlated with the serie input

The ARIMA Procedure

Autocorrelation Check of Residuals

To Chi- Pr > Lag Square DF ChiSq ------Autocorrelations------

6 0.14 5 0.9996 0.023 0.029 -0.029 0.013 -0.001 0.044 12 1.47 11 0.9997 -0.059 0.093 -0.111 -0.081 -0.016 -0.018 18 2.05 17 1.0000 0.037 0.024 0.017 0.022 -0.017 -0.064 24 12.20 23 0.9672 0.052 -0.265 -0.047 -0.007 0.002 0.002

Autocorrelation Plot of Residuals

Lag Covariance Correlation -1 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 1 Std Error

252

0 0.049456 1.00000 | |********************| 0 1 0.0011441 0.02313 | . | . | 0.200000 2 0.0014289 0.02889 | . |* . | 0.200107 3 -0.0014257 -.02883 | . *| . | 0.200274 4 0.00064214 0.01298 | . | . | 0.200440 5 -0.0000681 -.00138 | . | . | 0.200473 6 0.0021794 0.04407 | . |* . | 0.200474 7 -0.0028991 -.05862 | . *| . | 0.200861 8 0.0046159 0.09333 | . |** . | 0.201544 9 -0.0055143 -.11150 | . **| . | 0.203266 10 -0.0040231 -.08135 | . **| . | 0.205697

Partial Autocorrelations

Lag Correlation -1 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 1

1 0.02313 | . | . | 2 0.02837 | . |* . | 3 -0.03017 | . *| . | 4 0.01355 | . | . | 5 -0.00029 | . | . | 6 0.04257 | . |* . | 7 -0.06010 | . *| . | 8 0.09434 | . |** . |

253 9 -0.11292 | . **| . | 10 -0.08491 | . **| . |

Finally, the causal relationship can be described with the following time series model:

1 Democ=(0.022− 0.020 B ) Leyes+ a ttt−2 (1+ 0.49B10 )

When the relationship of Numbers of Passed Laws and Democ is analyzed it is possible to see thatthe numbers of passed laws in the year t-2 explains the democracy index value in the year t.

Model 2: In the following section 2 series will be analyzed, Ø Democ (1961-2011) and, Ø Inflation (1961-2011). series is stationary.This can be analyzed by looking at the graph and by checking the correlation and partial autocorrelation functionsample:

First it was necessary to make sure that the series is stationary, which is possible to see in the graph as well as the table below.

254

700

600

500

400

300

200

100

0

-100

1960 1970 1980 1990 2000 2010 2020 Year

Autocorrelations

Lag Covariance Correlation -1 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 1 Std Error

0 22207.240 1.00000 | |********************| 0 1 13831.387 0.62283 | . |************ | 0.140028 2 7338.867 0.33047 | . |******* | 0.186602 3 8409.309 0.37867 | . |******** | 0.197745 4 5228.718 0.23545 | . |***** . | 0.211486 5 2692.200 0.12123 | . |** . | 0.216565 6 3976.343 0.17906 | . |**** . | 0.217892 7 4412.150 0.19868 | . |**** . | 0.220758 8 4600.402 0.20716 | . |**** . | 0.224237 9 3590.202 0.16167 | . |*** . | 0.227958 10 -1410.900 -.06353 | . *| . | 0.230196 11 -3083.229 -.13884 | . ***| . | 0.230539 12 -1967.303 -.08859 | . **| . | 0.232173

255

Partial Autocorrelations

Lag Correlation -1 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 1

1 0.62283 | . |************ | 2 -0.09386 | . **| . | 3 0.34941 | . |******* | 4 -0.26829 | .*****| . | 5 0.15931 | . |*** . | 6 -0.00610 | . | . | 7 0.13468 | . |*** . | 8 0.07119 | . |* . | 9 -0.11050 | . **| . | 10 -0.32363 | ******| . | 11 0.05020 | . |* . | 12 -0.06775 | . *| . |

As it is was shown that both series that stationary, the Inflation series has been modeled through an ARMA (3,1) model.

256 Maximum Likelihood Estimation

Standard Approx Parameter Estimate Error t Value Pr > |t| Lag

MA1,1 -0.75879 0.09958 -7.62 <.0001 1 AR1,1 0.41329 0.13197 3.13 0.0017 3

Variance Estimate 12074.83 Std Error Estimate 109.8855 AIC 627.7856 SBC 631.6493 Number of Residuals 51

The parameters are not correlated and are white noise.

Estimates

Parameter MA1,1 AR1,1

MA1,1 1.000 0.296 AR1,1 0.296 1.000

257

Autocorrelation Check of Residuals

To Chi- Pr > Lag Square DF ChiSq ------Autocorrelations------

6 3.63 4 0.4584 0.178 0.164 -0.023 0.082 0.004 0.022 12 14.77 10 0.1406 0.231 0.224 0.259 -0.045 -0.011 0.063 18 16.03 16 0.4509 0.043 -0.046 0.061 -0.049 0.072 -0.033 24 16.42 22 0.7946 0.057 -0.006 0.029 0.014 0.015 0.002

Autocorrelation Plot of Residuals

Lag Covariance Correlation -1 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 1 Std Error

0 12074.834 1.00000 | |********************| 0 1 2143.960 0.17756 | . |**** . | 0.140028 2 1975.634 0.16362 | . |*** . | 0.144375 3 -279.372 -.02314 | . | . | 0.147966 4 992.624 0.08221 | . |** . | 0.148037 5 42.561079 0.00352 | . | . | 0.148929 6 266.957 0.02211 | . | . | 0.148931 7 2783.281 0.23050 | . |*****. | 0.148995 8 2705.624 0.22407 | . |**** . | 0.155831

258 9 3123.659 0.25869 | . |*****. | 0.162025 10 -544.660 -.04511 | . *| . | 0.169931 11 -132.507 -.01097 | . | . | 0.170166 12 756.356 0.06264 | . |* . | 0.170179

Partial Autocorrelations

Lag Correlation -1 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 1

1 0.17756 | . |**** . | 2 0.13639 | . |*** . | 3 -0.07622 | . **| . | 4 0.07969 | . |** . | 5 -0.00727 | . | . | 6 -0.00387 | . | . | 7 0.25264 | . |*****. | 8 0.15388 | . |*** . | 9 0.15575 | . |*** . | 10 -0.14190 | . ***| . | 11 -0.07006 | . *| . | 12 0.12177 | . |** . |

259 Once that the model for the input series is found, the model is applied for the output series obtaining then two models. After that the AR function is modeled between the errors of the two models.

Crosscorrelations

Lag Covariance Correlation -1 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 1

-12 25.611212 0.14754 | . |*** . | -11 33.576965 0.19342 | . |**** . | -10 28.654839 0.16507 | . |*** . | -9 -22.626889 -.13034 | . ***| . | -8 -49.397961 -.28456 | ******| . | -7 -5.931286 -.03417 | . *| . | -6 -53.853018 -.31022 | ******| . | -5 11.135130 0.06414 | . |* . | -4 -18.041569 -.10393 | . **| . | -3 -3.695072 -.02129 | . | . | -2 48.556546 0.27971 | . |****** | -1 68.515828 0.39469 | . |******** |

260

0 -2.091434 -.01205 | . | . | 1 13.292013 0.07657 | . |** . | 2 6.269370 0.03612 | . |* . | 3 17.127744 0.09867 | . |** . | 4 -33.665262 -.19393 | . ****| . | 5 1.457792 0.00840 | . | . | 6 -12.461403 -.07178 | . *| . | 7 32.436346 0.18685 | . |**** . | 8 26.428993 0.15225 | . |*** . | 9 -13.803070 -.07951 | . **| . | 10 9.748751 0.05616 | . |* . | 11 5.155077 0.02970 | . |* . | 12 0.929401 0.00535 | . | .

Given the previously shown results, it is possible to model the transfer function and residuals.

The following results were obtained.

Maximum Likelihood Estimation

Standard Approx Parameter Estimate Error t Value Pr > |t| Lag Variable Shift

MA1,1 0.81591 0.25779 3.16 0.0016 7 d 0

261 NUM1 -0.0021827 0.0011973 -1.82 0.0683 0 Inflation 1 NUM1,1 -0.0032716 0.0012097 -2.70 0.0068 1 Inflation 1

Variance Estimate 1.86329 Std Error Estimate 1.365024 AIC 179.85 SBC 185.5255 Number of Residuals 49

Again for this model it is possible to see that the residuals are white noise and not correlated with the explanatory variable.

Autocorrelation Check of Residuals

To Chi- Pr > Lag Square DF ChiSq ------Autocorrelations------

6 4.38 5 0.4963 -0.038 -0.016 -0.171 -0.175 -0.118 -0.060 12 12.19 11 0.3494 -0.017 -0.037 0.004 0.346 -0.001 -0.026 18 12.68 17 0.7571 -0.052 -0.057 -0.006 -0.007 0.029 0.001 24 13.58 23 0.9382 0.015 -0.038 -0.022 -0.004 -0.052 0.067

262

Autocorrelation Plot of Residuals

Lag Covariance Correlation -1 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 1 Std Error

0 1.863290 1.00000 | |********************| 0 1 -0.070825 -.03801 | . *| . | 0.142857 2 -0.029961 -.01608 | . | . | 0.143063 3 -0.319142 -.17128 | . ***| . | 0.143100 4 -0.326398 -.17517 | . ****| . | 0.147225 5 -0.219141 -.11761 | . **| . | 0.151419 6 -0.110984 -.05956 | . *| . | 0.153271 7 -0.031899 -.01712 | . | . | 0.153743 8 -0.069260 -.03717 | . *| . | 0.153782 9 0.0079876 0.00429 | . | . | 0.153965 10 0.644376 0.34583 | . |******* | 0.153968

Partial Autocorrelations

Lag Correlation -1 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 1

1 -0.03801 | . *| . | 2 -0.01755 | . | . | 3 -0.17287 | . ***| . | 4 -0.19545 | . ****| . | 5 -0.15690 | . ***| . |

263 6 -0.13559 | . ***| . | 7 -0.13055 | . ***| . | 8 -0.17719 | . ****| . | 9 -0.15544 | . ***| . | 10 0.25101 | . |*****.

The model that is devised is the following:

7 Democttt=(0.00220.0033)−+ B Inflatión−1 + (10.81)− B a

Here it is possible to see that the causal relationship is the inverse relationship, where the output variable (inflation) is explained by the input series (democ). In the autocorrelation function the error terms are significant and for the values of K<0.

Model 3:

The last model analyzed is the following:

Ø Democ (1989-2011) and, Ø Numbers of Decrees of Necessity and Urgency(1989-2011).

Here again it is possible to see that both series are stationary. The graph and table shows it:

264

300

200

100

0 1980 1990 2000 2010 2020 Year

Lag Covariance Correlation -1 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 1 Std Error

0 1909.996 1.00000 | |********************| 0 1 1104.937 0.57850 | . |************ | 0.208514 2 525.809 0.27529 | . |****** . | 0.269406 3 320.482 0.16779 | . |*** . | 0.281371 4 93.613709 0.04901 | . |* . | 0.285688 5 -323.358 -.16930 | . ***| . | 0.286054

Partial Autocorrelations

265

Lag Correlation -1 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 1

1 0.57850 | . |************ | 2 -0.08924 | . **| . | 3 0.06961 | . |* . | 4 -0.09346 | . **| . | 5 -0.24244 | . *****| . |

After adjusting the model for the series of Number of DNU, the results are the following:

The ARIMA Procedure

Maximum Likelihood Estimation

Standard Approx Parameter Estimate Error t Value Pr > |t| Lag

MU 39.39873 17.23173 2.29 0.0222 0 AR1,1 0.58246 0.17360 3.36 0.0008 1

266 Constant Estimate 16.45049 Variance Estimate 1356.411 Std Error Estimate 36.82949 AIC 233.483 SBC 235.7539 Number of Residuals 23

Correlations of Parameter Estimates

Parameter MU AR1,1

MU 1.000 -0.048 AR1,1 -0.048 1.000

Autocorrelation Check of Residuals

To Chi- Pr > Lag Square DF ChiSq ------Autocorrelations------

267 6 2.16 5 0.8271 0.056 -0.089 0.055 0.115 -0.207 0.003 12 4.29 11 0.9607 -0.113 -0.109 -0.152 -0.075 0.000 0.022 18 5.93 17 0.9936 -0.067 -0.102 0.087 0.018 -0.010 0.036

Autocorrelation Plot of Residuals

Lag Covariance Correlation -1 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 1 Std Error

0 1356.411 1.00000 | |********************| 0 1 76.286995 0.05624 | . |* . | 0.208514 2 -120.602 -.08891 | . **| . | 0.209173 3 75.250534 0.05548 | . |* . | 0.210810 4 156.184 0.11515 | . |** . | 0.211444 5 -280.593 -.20686 | . ****| . | 0.214152

It is possible to see that the parameters observed are significant at the5% level and are not correlated; there is white noise error. A filter was applied and the autocorrelation was studied.

Crosscorrelations

Lag Covariance Correlation -1 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 1

-12 -0.544052 -.07388 | . *| . | -11 -0.960117 -.13037 | . ***| . | -10 -0.279260 -.03792 | . *| . |

268 -9 -1.261715 -.17133 | . ***| . | -8 -1.527943 -.20748 | . ****| . | -7 0.522657 0.07097 | . |* . | -6 -0.282581 -.03837 | . *| . | -5 -2.946532 -.40010 | .********| . | -4 5.345416 0.72584 | . |*************** | -3 3.116817 0.42323 | . |********. | -2 1.028791 0.13970 | . |*** . | -1 -0.940309 -.12768 | . ***| . | 0 0.817459 0.11100 | . |** . | 1 -0.489730 -.06650 | . *| . | 2 0.398458 0.05411 | . |* . | 3 -0.639838 -.08688 | . **| . | 4 -0.210932 -.02864 | . *| . | 5 -1.196402 -.16246 | . ***| . | 6 -0.937496 -.12730 | . ***| . | 7 -0.880637 -.11958 | . **| . | 8 -0.214029 -.02906 | . *| . | 9 -0.104701 -.01422 | . | . | 10 0.107195 0.01456 | . | . | 11 0.153717 0.02087 | . | . | 12 0.106980 0.01453 | . | .

Here the parameters of the transfer function are shown:

Maximum Likelihood Estimation

269 Standard Approx Parameter Estimate Error t Value Pr > |t| Lag Variable Shift

NUM1 0.0002345 0.0001854 1.27 0.2058 0 DNU 4 DEN1,1 2.26127 0.04520 50.03 <.0001 1 DNU 4 DEN1,2 -1.44483 0.06364 -22.70 <.0001 2 DNU 4

Variance Estimate 0.064004 Std Error Estimate 0.252991 AIC 4.213555 SBC 6.713195 Number of Residuals 17

It is possible to see that the first parameter of the numerator of the transfer function is not significant. But the denominators are significant; therefore I deiced to keep them. The reason this might happen, is due to the low number of observations in this sample. The results are white noise and uncorrelated with the variable input.

Autocorrelation Check of Residuals

To Chi- Pr > Lag Square DF ChiSq ------Autocorrelations------

6 1.46 6 0.9623 -0.121 -0.127 -0.123 -0.112 -0.070 -0.026 12 2.07 12 0.9993 0.023 0.044 0.050 0.037 -0.006 -0.074

270

Autocorrelation Plot of Residuals

Lag Covariance Correlation -1 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 1 Std Error

0 0.064004 1.00000 | |********************| 0 1 -0.0077590 -.12123 | . **| . | 0.242536 2 -0.0081419 -.12721 | . ***| . | 0.246074 3 -0.0078874 -.12323 | . **| . | 0.249912 4 -0.0071395 -.11155 | . **| . | 0.253462 5 -0.0044743 -.06991 | . *| . | 0.256333 6 -0.0016846 -.02632 | . *| . | 0.257452 7 0.0014973 0.02339 | . | . | 0.257610 8 0.0028131 0.04395 | . |* . | 0.257735 9 0.0031931 0.04989 | . |* . | 0.258176 10 0.0023551 0.03680 | . |* . | 0.258742

"." marks two standard errors

Partial Autocorrelations

Lag Correlation -1 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 1

1 -0.12123 | . **| . | 2 -0.14402 | . ***| . | 3 -0.16410 | . ***| . |

271 4 -0.18390 | . ****| . | 5 -0.17933 | . ****| . | 6 -0.16604 | . ***| . | 7 -0.13036 | . ***| . | 8 -0.09909 | . **| . | 9 -0.06336 | . *| . | 10 -0.03442 | . *| . |

The final proposed model is the following:

0.00023 Democ=+ Dnu a ttt12.261.44−BB+2 −4

As it happened with the previous model, the there is an inverse relationship. The

Demcoracy Index explains the DNU series. All of these parameters were estimated with the

Maximum Likelihood Method (MLE) and the confidence level that was used was 10%.

Conclusion

After assessing the following models it is possible to see that there is a causal relationship among the explanatory/independent variables (inputs), which are the numbers of passed laws, inflation, and number of DNU with the dependent variable: Democ. In the first model it is possible to see that variable. The number of laws passed explain Democ. While in the models 2 and 3 the inverse relationship was proven, Democ explain inflation and Number of Decrees of

Necessity and Urgency. The evidence shows that the variables are related. This makes sense

272 given the information outlined earlier in chapter four. In simple words, this is like debating the chicken and the egg conundrum. What comes first, a weak democracy or inflation in Argentina?

The model suggests that the level of democracy of Argentina explains inflation, and so do

Decrees of Democracy and Urgency. The practice suggests that a true democracy would pass legislation after it is discussed in Congress,, rather than having a president governing unilaterally. Clearly Argentina does not have an ideal democracy; but where should policy makers start to improve things? The last two models show a healthier democracy would yield a better economy, and a healthier democracy would not have the high level of involvement that the president has in lawmaking.

Problems of this study While explaining delegative democracy is a complicated issue, for starters, measuring democracy with great accuracy is almost impossible. Polity IV has been chosen given that it is the data set most trusted among Political Scientist, it well constructed, and it covers a great number of years. Yet, the range that it uses to measure democracy is only 4 points (from 6 to 10) out of a 21-point scale. “Polity IV simply reflects institutional changes and pays little attention to the social context in which it occurs. It means that democracy can be shut down or brought to life by a state law or a presidential decree” (Bosin 2007, 9) Furthermore, it is hard to measure the

“greys” in the scale. The Polity IV codebook warns users “It must be pointed out that the historical Polity data has been “artificially smoothed,” that is, minor, annual fluctuations in a polity’s authority characteristics are not reflected in the data” (Polity-IV 2011, 10). So, the greys that this study tries to measure have been smoothed by the Polity IV to start with, making this even more challenging, but it is still possible to establish relationships.

While it is possible to see that Argentina’s democracy (8 points) is not like the US

273 democracy (10 points), the scale does not allow to account or measure all the differences.

The modeling of these series faces several issues. For starters, only one country is being considered in this study and only few years are analyzed. Furthermore, during few of those years

Argentina was being considered a democracy. The study was observed at the 10% significance level, also because of the previously explained reason.

The theory show that some variables that are important to explaining a Delegative

Democracy cannot be accounted for, and for the ones for which there are measurements, the measurements are not yet sufficient to run a model.

Directions for future study:

The study of hybrid regimes needs to be considered a high priority by political analyst and policy makers. The current literature shows great disparities. As mentioned in the literature review, Collier and Levtisky account for over 500 democracies “with adjectives”. While we can understand each country or each culture as one case, for statistical purposes it is important to find a common ground, and be able to compare these cases. I believe the Argentine case is worth being followed and recommend that as time goes by and new data is collected, these models can be rerun using another explanatory variable other than Democ, and comparing results.

274 Conclusion

“I feel a deep concern. I am sure that the future of our country depends on a clear issue: it depends on establishing a representative democracy. I don’t know if it will be possible to move toward that direction. That doubt arises because the Executive Power is not willing shows a certain reluctance to move towards in that direction. Besides, it is not clear if the opposition, which has a sector that also bears delegative practices, may drop them if they ever get elected if they win the elections. Still a big question remains unanswered: There is a fundamental question that remains open: if the defects and costs of delegative democracies will stay forever or there will be agreements that help overcome them” (O'Donnell 2009)

“We have a problem, and that is the idea that we need strong presidents. What we need are strong democracies. We need to get rid of that idea that what we need is a strong president because there is a crisis” (Eduardo Duhalde 2013)

Argentina’s delegative democracy failed to evolve into a full liberal democracy.

Guillermo O’Donnell used to be optimistic about this change, but his last writing expressed uncertainty. In 2009, he wrote: “Typically, the evident critical periods undergone by delegative power show great uncertainties. We must learn how to move towards a representative democracy, even through the path is unclear. A Representative Democracy is a necessary requirement to solve the problems we must face” (O'Donnel 2009). Yet four years later,

Argentine’s DD seems to be stronger than ever, and while the country is on the verge of a new economic crisis its leadership still behaves as the poster child of a DD.

To reiterate, in a Delegative Democracy the leader is democratically elected leader during a deep crisis. He has a majority in the legislature. Although he seems very powerful, he clashes with economic interests, foments weaves informal ties, does not accept interferences, lacks transparency, and shows recurrent favoritism towards certain group of citizens. Such a leader is

275 suspected of corruption, has no true allies, trusts no one, and insists on repeating the same behavior in spite of recurrent failure. When things do not work out he reminds the electorate of the previous crisis and threatens people with fatal consequences if he or she leaves office. The implied threat is that once the leader steps down restrictions on freedoms and rights may return

— a reminder of the military’s past involvement in politics.

What O’Donnell, Corrales, Grondona and Levitsky do not mention in their writings is that delegative leaders had time to learn a lot about their predecessors. In the book The

Dictator’s Learning Curve William Dobson claims “the cost of tyranny has never been this high”

(Dobson 2012, 2). The author explains how in a globalized world, dictators cannot longer keep secrets: anyone with a smart phone can show the world what is going on, so heartless forms of intimidation had to be changed for delicate ways of coercion. Furthermore “modern authoritarians understand the importance of appearances” (Ibid, 5) but they are “conscious, man made projects that must be carefully build, polished and reinforced” (Ibid, 8). While regimes may appear all powerful, authoritarians and dictators fear their own people the most (Ibid, 9-10).

While studying the case of the Venezuelan President Hugo Chávez, Dobson sees that elections are “an important weapon … because if properly conducted, they satisfy many of the prerequisites for furthering his rule” (Ibid, 8). So, countries can have elections that “are free, but they are far from fair” (Ibid, 98). This applies to Argentina, among many.

Delegative leaders are far from gone. They have become more adept, more polished, and better actors. This can also happen because there is an opposition that allows it. In the case of

Argentina, the opposition lacks strong forces, organization and in many cases financial resources; but to be fair, it would be almost impossible for an opposition force to be effective, when it is dealing with a party that uses unlimited public government funds for its campaign.

276 While Menem was thought to be the quintessential delegative president, the Kirchners have topped him.

When Argentina’s government became democratic again in 1983 there was no debate about its institutional set up. All what was agreed upon was that the Constitution of 1983 would be valid again. There were high hopes for what a Democracy can deliver, not only in Argentina but in Latin America. Delia Fernandez Rubio claims, “the problem with democracy in Latin

America is that the expectations were too higher than was really possible for democracy. It seemed in the 80s that democracy would resolve all problems people have, and that is not possible.”(IEFS 2011) Democracy is a way to organize the government and guaranteed values and rights but does not guarantee a good management of the economy. Argentines were threaten by military regimes, now their lives are not at risk due to threats of the government. That alone is a major improvement. Each country after each crisis has reorganized the economy, but failed to reconstruct the political and institutional system. After 30 years of the installment of democracy in Argentina it time to assess how the country has evolved.

Politically, the balance of the 30 years of democracy does not yield good results. Starting with President Menem, Argentina’s president all used economic crisis to accumulate power in their hands. In every case the situation seemed extraordinary. So when Menem had to assume 6 months prior to his mandate and for the first six months he did not have majority in Congress.

From the first hours of his mandate he did not hesitate to rule by decree. After reforming the

Constitution to be able to be reelected and continue using decrees, Menem was unstoppable.

Congress lost legitimacy, as it never used its power to control and suppress DNUs.

While President De La Rua did not have qualities of a delegative leader, he also didn’t have the ability to lead the country and could not manage the economy. The 2001 crisis was

277 probably the most severe the country had to face. That crisis swallowed 5 presidencies in 10 days. Both Duhalde and Kirchner had to rule by decree, but they both gained respect and they managed to move the economy forward (Kirchner during the Nestor presidency). Those presidencies systematically undermined institutions, hosted corruption and the latter was very aggressive with the free press. In good economic times, Argentine presidents use, abuse and over use DNUs and it times of crisis they claim that DNUs are the only to pass legislation, which shows they don’t use DNUs because of crises, it is about the convenience and authoritarianism.

When enforcement of rules is low, and there is a notorious discretion on who will and will not comply with rules and the law, and the duration of those laws, institutions are weakened and informal procedures is enforced even further. The basis of a strong democracy cannot be constructed in an atmosphere of unlawfulness. And the basis of economic growth is also based on respected institutions. There will be no investment if there is no respect for property rights, judicial security and rule of law.

Argentina has called these style superpresidentialism or hyperpresidentialimism,41 and in this kind of society the three branches of government are not separated, as they should.

Argentina is not an isolated case when it comes to hyperpresidentialism: Brazil and Peru in the

90s also had presidents that were trying to have more power than the one stipulated by the constitution, all with very different outcomes. Collor de Melo was impeached and removed from his post. The most extreme was Alberto Fujimori and his self-coup where he closed the Congress where he hold a minority and did not support him. Fujimori curbed hyperinflation and criminal activity at the price of democracy. He also managed to be reelected two more times. Menem was

41 On superpresidentialism see Hector Schamis “Argentina’s Troubled Transition” Current History 107: 706 (2008) 71; on hyperpresidentialism see Mugambi Jouet, The Failed Invigorating of Argentina’s Constitution, University of Miami Inter- America law Review 39:3, (2008), 410

278 successfully reelected for a second term. No matter how authoritarian the measures what these examples show is that people will support those that can bring stability and growth to the economy. Emergency laws are also passed all the time losing’s their “emergency” character. The rhetoric of an emergency allows a delegative president to get control temporarily, but it has been too frequently used this card has been played way to often. According to Delia Ferreiro Rubio,

DNUs are justified in extraordinary events that the constant crisis create. “Extraordinary events require extraordinary measures” (Ferreira Rubio and Goretti 1998, 449). Elections are not a sufficient condition for a democracy to thrive, and Latin America is a clear example of that.

Today’s delegative and even authoritarian leaders have been chosen and reelected by popular vote. Two great examples of this are Hugo Chavez and Nicolas Maduro, who rein the country rather than govern it. Their policies are borderline ridiculous and a hindrance to growth and development in Venezuela.

A pervasive problem of Argentina and Latin America in general is corruption. According to the latest report form Transparency International; Argentina is the country in Latin America where the perception of corruption has increased the most in the last 2 years. 72% of the people believe it has increased, 19% believes that it is the same and only 9% believes that it has been reduced. Argentina is also the second country in Latin America where the government is seen as the least as the least effective, when it comes to fighting corruption (Transparency-International

2013). According to the leader of Transparency International’s local chapter “ there is no dot that the majority of argentines understand that corruption increases year by year. This year is particularly alarming as the perception in Argentina is the biggest in the region and one of the biggest in the world” (Mon 2013). The Kirchner administration continues to make further changes that will allow more secrecy and mismanagement of funds through laws. Public servants

279 won’t need to itemize their earnings and assets, they just need to publish the total sum of their assets, and the direct family members of public servants are not longer included in their income declarations. Controlling agencies are not allowed any more to verify the data that is published.

In terms of the economy, Argentina did not present good results. The average growth in the last 30 years has been 2.6%, but this growth has been very uneven, some years growth has been 8% other it has been negative. Twenty years have been of positive growth and ten of negative growth. In 30 years there were three currencies, major devaluations have happened and seven zeros were deducted from the currency. In terms of inflation, the country has gone from an inflation of over 3000% to deflation, back to inflation again. Argentines do not have a consensus over what needs to be done with their economy, whether they should support the agricultural sector, which has always been a traditional staple of the economy, or they should tax it heavily and avoid incentives in that sector. There is no consensus whether Argentina wants to have an autarkic economy or it wants to be part of this globalized world. Having no plan for the future is one of the main deterrents for investors not only internationally but also domestically. And besides the economic rollercoaster that Argentines are used to, the amount of economic that

Argentines face every day begs the questions, whether one really lives in a democracy if one cannot access ones money or do with it as one pleases. Economic restrictions are no more than one element of political control. When businessmen need to contact the Secretary of Commerce and wait months for an answer on whether they can import and export, the government is restricting not only the economy, but a basic right of people. The “corralito” of 2001 and the limitations to buy foreign currency today prevent people to live freely, to carry on do business, and to access to goods and services. Limiting what people can do with their own money is a very serious infringement. So is the lack of property rights for people and business. No business will

280 arrive to Argentina if they know that their business will ne confiscated nor if the taxes will scare them away or it would make it not profitable to do business as it happens in the agricultural sector. A close economy does not offer any incentives for local or foreign business to work and those that work without those incentives face great restrictions if they choose to export or need products to import to be in business. A close economy encourages people to save overseas to protect their money. According to Mauricio Rojas “the protectionist interventions gave as a result not only a deficient industry but also a selection on how to assign resources that worsened the structural problems of the country. This shortsighted protectionism created the … opposite to what the development of the country needed for long term development, … but satisfied the demand of pressure groups to get support, sympathy and votes. That is how it was a century ago, and that is how it is today” (Rojas 2012, 45). Rojas claims that the expansion of public expenses in subsidies comes hand in hand with public employment. The later has expanded and it is today the most dynamic employment sector. (Ibid, 179) Corrales highlights another very important issue “as long as Latin America remains the land of informality – and it’s going to be the land of informality, where so many people are in the informal sector – populism is going to be very appealing because it is an ideology that promises to save from your that” (Corrales 2007, 13).

With a carefully prepared speech, Cristina Kirchner announces a “triumphant decade”

(década ganada). Public spending has trebled in the last decade; yet that investment has yet to make a dent in basic improvements such as drinking water and sewers, which are essential to reduce infant mortality. In Buenos Aires suburban areas 30% of the people lack safe drinking water, 60% a sewing system, and 30% do not have access to natural gas lines. Poor maintenance led to flooding in highly populated cities such as La Plata. In the last decade the number of automobiles has increased by 90%; yet Argentina only has 2,500 km of two-way roads. To meet

281 the country’s minimal needs that needs to be doubled at least (Sturzenegger 2013, 98). But the government chooses to spend public funds on nationalizing companies and subsidizing them.

The problem is not a lack of funds but their mismanagement. So, despite many of the achievements in production, technology and science, it is impossible to confirm whether

Argentina is evolving towards a more sturdy and robust democratic system. Incumbents do not want to be held accountable, do the impossible to prevent the normal process of altering leaders and are focused in a model that allows a single ideology rather than a republican pluralism

(Grondona 2012). In terms of competiveness the triumphant decade does not show in the rankings. The country with the highest ranking in competitiveness is Chile on the 34th spot, followed by Panama on the 40th, Brazil 56, Peru 61, Colombia 69, Ecuador 71, Uruguay 85,

Guatemala 86, El Salvador 97, Bolivia 98, Nicaragua 99 and Argentina 104. At the end of the ranking are Venezuela in the 134 place and Haiti 143”(Forum 2013). In Argentina and

Venezuela the problem is not only the excessive nationalization of the economy, but the incorrect process of nationalization of the economy. The decisions of the government are not based on the efficiency of the economy but on clientelism, and as a punishment of those that “are not on our side” (Peirano 2012). Argentina has lost 10 positions due to inflation argues Miguel

Peirano.

The size of the Argentine state has been increased by 60% since the year 2000. This growth has not been a direct result of an increase of services or infrastructure but it is a direct result of the increase in items the government takes care of. The state intervenes heavily the economy; it has created new taxes and nationalized enterprises and provides jobs to millions of people. Between the years 2000 and 2006, the state represented 25.6 % of the economy, and it was 42.5% ad the end of the year 2012. The major expenses of the Argentina state are subsidies

282 25%, social security 23% and salaries 19%. Out of the increases in taxes 40% is derived form a) export rights and b) check taxes. (Oviedo 2013)

In Argentina, delegative leaders have created a vicious circle of crisis more delegative democracies, which only assure that the next leader will be a delegative one that feed each other.

Crises serve as an incentive to accumulate power, and delegative presidents use that in their favor. The history of crisis has one tendency: the lack of structural reforms. Beradi Grinspun was the first minister of economics of Raul Alfinsin. He failed at curbing inflation by implementing price controls. Juan Vital Sourrouille imposed a new currency the Austral and eliminated three zeros as a way of imposing a major devolution. During the Alfonsin administration the BCRA was depleted of its reserves. Carlos Menem after a first year of presidency with failed economic policies and no way of controlling inflation, imposed the convertibility law where the Argentine economy was pegged to the US dollar as a temporary measure. That plan was widely successful mostly because Menem managed to make structural changes in the economy. Menem dismantled the protectionism-based model that his own party imposed in the country fifty years ago (and that he supported during his campaign). He reduced public spending and debt. That was helping the economy grow tremendously only until 1994 when Menem’s interest to be reelected made public spending skyrocket, and the short lived policies that were trying to change the way the country managed its finances went back to used methods that were proved to failed several times. Fernando De La Rua assumed is administration and also was hesitant to make important changes; he rather increased taxes to finance the government. One of his Finance Ministers, who proposed to reduce public spending by 300 billion annually, only lasted 48 hours in his post. Not being able to manage domestic and international obligations the argentine government ended up confiscating peoples money. The Kirchners use policies know to fail in Argentina and around the

283 world. Countries simply don’t grow when they implement ISI policies, when they turn their back to the world and fight with their neighbors. Printing money out of control every single time in history yield the same result: inflation. The common denominator of all crises was the fiscal deficit that there has been an increase in public spending. All the crises end up the same, no one dares to make structural changes, and the solution that have been used several times are devaluations, increase tariffs of public services, and inflation. This has eroded living standards for years. So, when in a country all the policies that get used over and over again are known failures, the only thing that is for sure is that there will be a crisis coming up any time soon. And every crisis will bring a new delegative leader to power, one that will promise to reestablish the path, and a new path should be reestablished, but obeying the laws and the constitution, not neglecting them or coming with creative ways of bypassing them.

At the start of the new millennium, in Argentina, as well as in many other Latin American countries, it is possible to see that the economic and political crisis did not bring back military regimes but shifted politics to the left. Latin America did not go back to authoritarian governments but shifted to the left. Hugo Chavez from Venezuela (- 2013), Rafael Correa from

Ecuador (2007 -), Evo Morales (2006 -), Daniel Ortega (2007 -), Manuel Zelaya from Honduras

(2006-2009), Menem and the Kirchner couple (2003 -) have taken measure to perpetuate themselves in power, oppress the press, oppress the courts and use the military in their favor.

Latin America did not go back to authoritarians but shifted to the left (being Venezuela an example with a strong authoritarian government). Economic deterioration, political stagnation, and corruption are common. While some countries are more advanced than other when it comes to violating democratic rules (Venezuela is ahead of the game in Latin America), countries haven an electoral façade and rhetoric about helping the poor, economic growth and integration (which

284 at best is regional). For the first time in the third wave there is a threat against democracy. While the rhetoric from these countries is constantly about a more inclusive democracy the reality is different. Political adversaries are seen as a threat to the country and harassed, insulted and even jailed. Now Cuba, a country with open disregard for human rights is the example to follow for any Latin American leaders. These three challenges, sadly, can be applied to other Latin

American countries. Both Hugo Chávez, and now his descendant Maduro seek openly to govern authoritatively. They feel they own the truth and justice; and they do not hide their willingness to govern by decree, to bypass Congress, and expedite the process of their revolution. The government is shamelessly directed to support the supporters and punish the opposition, freedom of expression is limited and the media is manipulated. In Peru Alan Garcia nationalized commercial banks, insurance companies and other financial institutions. Argentina today faces the same challenges that Peru was facing in 1987 —a government that is desperate for power, where the economy and the state are not at the service of the regime rather than the people.

Rafael Correa has been a successful student of Chavismo, and has replicated many policies to accumulate power. He also wrote a new constitution, repressed the old political parties and treats the media as the opposition. He downgraded his relationship with the US and is a fervent opponent of neoliberalism. Cuba has been a precursor in implementing authoritative policies in all the aspects of its government structure and economy. Fidel Castro started imposing blockages in the economy in 1959, creating an autarkic economy, implementing currency controls with the

Cuban peso, imposing restrictions that reduced the opportunities to trade (import and export), taken to the extreme the prohibitions to trade freely among themselves or with foreigners, establishing measurements that paralyzed investments and reduced national production, expropriated companies (both domestic as well as foreign), discouraged American tourism that

285 was one of the bases of their economy, and selected the Soviet block as its main trading partner.

For political reasons, the Castro administration chose to trade with one sector of the world, and that decision proved to be very costly for the Cuban economy. Argentina and Venezuela chose to ally with Iran for political reasons as well, and that will also be costly for those economies. It is well known that restricting the access to foreign currency will only create a black market for it. If we learn the lesson from Venezuela, we see that after 10 years of trade restrictions the gap between the official exchange rate and the black market is 223%. Venezuela employed the same rhetoric as Argentina. Venezuela created the Cadivi (Comision de Administracion de Divisas) that rationed how much foreign currency each citizen could spend per year. The Central Bank of Venezuela (BCV) lost 36% of it reserves in the last 5 years. Venezuela had to devaluate its currency almost 50% in order to avoid limits state expenses and a recession but it increased inflation

In sum, Argentine’s democracy has been resilient and survived serious political and economic crisis. But the institutional set up is pervasive and prevents economic growth and political maturity. In order to overcome this issue and evolve into a developed democratic system the following areas should be addressed:

• Accept the Reality: No problem can be solved without acknowledging it. Trying to mask

the truth with false statistics clearly scares investors away. Lying on inflation indexes has

helped proliferate it instead of decreasing it created several indexes to fill the need of

knowing at which rate prices are rising. Inflation affects people unevenly, being worse

for those of lower classes. Inflation forbids long term planning, so as when there is high

inflation companies cannot plan in long terms and priorities change. The current

administration (Kirchner) has based its propaganda on the idea of transparency. There is

286 no limit in how much currency to print, and the budget is neither debated nor explained.

The government might lie about the inflation rate, but people see how prices rise every

time they go grocery shopping.

It makes no sense to repeat policies that have proven a failure not only in the

country but also wherever they have been used. Such is the case of ISI and populism. It

also makes no sense when a government comes into power and starts undoing the

measures taken before and imposing new policies, the message conferred is one of sheer

distrust. It is hard to measure the cost of lacking credibility, insulting and mocking fellow

country leaders and ignoring legal rules and contracts. Argentina should acknowledge

that it has a serious corruption problem, also a common trait to other countries. Another

issue to acknowledge is the lack of competitiveness: the region has not improved but

declined. But for a country willing to compete it must desire to form part of has to be

willing to be part of the global market. Other issues that should be considered are

accepted the high index of crime, low scores in education and uncontrollable drug

trafficking. A free press paves down the way to a transparent government, and the debate

of ideas.

• Generate trust. There are many ways to generate trust in the government. It is important

to start respecting the rules, laws and constitution. It is impossible to build over a lie, so

after acknowledging the problems, real solutions are needed. For a presidential system

not to be tyranny the three branches should work separately and complement each other.

The idea of the pendulum, where policies go back and forth from the left to the right

avoid building a government strategy. The rule of law should be reinstated, and

procedures, laws, regulations and the constitution should be respected.

287

• Allow for freedom: No citizen or business will trust in a government that does not allow

for freedom of the press, freedom of speech, freedom to save. Limitations to interact in

the globalized world, to trade, to save to communicate severely restrict opportunities to

grow.

It is not easy to break the vicious circle of delegative democracies, but it is definitely possible. Even though a delegative democracy is better further towards a better living condition for a country Argentina needs to continue walking towards a full liberal democracy. Caudillos with suits should not be ruling a country in the XXI century. Delegative leaders have adopted policies form the right and the left, but in all cases their governments ended in a crisis.

Delegative democracies stand in tension with freedoms and growth. Delegative leaders have know tendencies: when the leader puts their agenda before the interest of the country to perpetuate themselves in power and portray themselves as the savior of a country, citizens should know by know that they will be the ones to suffer the consequences of a modern tyrant. The desperation to remain in power, the dislike for constitutional constrains and the constant attack to the press and political rivals are know red flags for citizens of Latin America, yet the continue choosing those that will fix the economy in the short term for over the hope of a long term solution. Brazil, Chile, Costa Rica, Mexico, Uruguay and Colombia have stable democracies, trusted intuitions and party systems. Argentina, Venezuela, Bolivia, Ecuador, Honduras and Peru have no respect for the institutions, for the press, for the opposition, for its own people. The international community is ignoring this issue and so are intergovernmental organizations. They only ones that can stand up and make their rights heard are citizens. In order to avoid the next

288 crisis, all it needed is a strong democracy, a regime that can weather a storm, not the illusion of strong man to save us.

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294 Chapter 1 Appendixes

Figure 1.1 Cycles of Political Change in Latin America , 1990-2000

Figure 1. Cycles of Political Change in Latin America, 1900-2000

19 18 17 16 15 14 13 12 11 Semi-Democracy 10 Oligarchy 9

Number Democracy 8 7 6 5 4 3 2 1 0 1900 1905 1910 1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 Year

Figure 1.2

Polity

10

5 x e d

n I 0 y t i l

o P

-5

-10 1825 1843 1862 1881 1900 1919 1938 1957 1976 1995 Year

Source: Polity IV

295 Figure 1.3

Source: Heritage Foundation Figure 1.4

Economic Freedom Variables

100 Variable Business Freedom 90 Trade Freedom Fiscal Freedom 80 Government Spending Monetary Freedom Investment Freedom m 70 Financial Freedom o

d Property Rights e

e 60 Freedom from Corruption

r F

Labor Freedom x

e 50 d n I 40

30

20

1996 1998 2000 2002 2004 2006 2008 2010 2012 Year

296

Appendix A

297 Figure 2.2 Apprendix B: GPD growth per year.

298

2011, exactamente lo contrario de lo sucedido en Chile en el 2010. En esta alternancia los peruanos buscan una redistribución de los frutos del desarrollo al igual que en Chile. La elección presidencial en ApprendixPerú produce C show la mayor that variaciónsupport for positiva democracy de 22 punhastos increased porcentuales despite en laa decliningaprobación GDP. de gobierno con el nuevo gobernante, y un aumento de 9 puntos en la percepción de progreso y una variación negativa no significativa de 2 puntos porcentuales en el apoyo a la democracia. Tabla Nº7: La Democracia, el Progreso y la Economía- Variación 2010- 2011 Diferencia Variación en Índice de Apoyo Diferencia imagen de Confianza de los 2010 2011 2010-2011 PIB progreso Consumidores 2010-2011 2010-2011 2011 Países donde aumenta el apoyo a la democracia Paraguay 49 54 5 -9,3 -4 55 Argentina 66 70 4 -0,9 12 62 Rep. Dominicana 63 65 2 -2,8 -13 27 Uruguay 75 75 0 -1,7 12 64 Países donde disminuye el Apoyo a la Democracia Guatemala 46 36 -10 1,2 -6 39 Honduras 53 43 -10 0.2 -3 38 Brasil 54 45 -9 -3,5 -16 61 Nos parece que este contrapuntoMéxico es el que49 pone de 40 manifiesto -9 la primavera -1,4 Árabe, el -2contraste entre 44lo que el mundo piensa de Nicaragualos países y lo que58 cada 50paí s piensa -8 de si mismo, -0,5 dos mundos -3 que no se topan. 45 Por ello América LatinaCosta tiene Rica más rezagos72 en su ima 65 gen que -7 en cualquier -1 otra cosa, mientras -13 avanza, 45su imagen está de alguna manera estancada con los mismos componentes del pasado. Venezuela 84 77 -7 5,8 -3 53 Para los ciudadanos latinoamericanosColombia el grado60 de 55 democracia -5 percibida 1 dice relación -1 con la posición 61 original hace escasas tresEl Salvador décadas, mucho59 más 55 que con -4 lo que falta 1,1 por hacer, -3 que los mismos 34 entrevistados detallan extensamente.Bolivia 68 64 -4 1,2 -11 44 Ecuador 64 61 -3 2,8 2 48 Las actitudes hacia los gobiernos militares Perú 61 59 -2 -1,7 9 56 Por una parte hemos vistoChile cómo el apoyo 63a la democr 61 acia fluctúa -2 a la baja 1,1 en varios -26países de la regió 50n de manera significativa mientrasPanamá al mismo 61tiempo 60 s e consolida -1 la legitimidad 1 del congreso -3 y disminuy 57e la legitimidad de los partidosAmérica políticos.Latina La61 democr 58 acia es -3 a la vez criticada -1,3 pero deseada, -4 como nos 49 muestra el creciente apoyo Fuente: a Latinobarómetro la frase de 2011 Churchill , hay demanda por más y mejor democracia. Eso se observa también en las actitudes hacia los gobiernos militares donde en el año 2011 aumenta de 63% 2010 a 66% aquellos Los queelectorados por ninguna de Chile circunstanc y Perú iabuscan apoyarían el cambio a un gobiernopor la vía militar.de la alternancia Guatemala en es el poder, sin que el el país de la región quecrecimiento menos rechaza económico los gobierno sirva des militares argumento con para sólo satis unfacer 40%, las es demandas. decir un 60% Dos depaíses ese donde el problema país no rechaza de planoAppendixno unes régimenel crecimiento D shows militar. the y dondepercentagesEse pa elís éxitoes el of esmás people definido frágil that dede would lamanera región not distinta ensupport este por momento. a los military ciudadanos E governmentn y por el mundo todos los otros países al menos una mayoría de la población rechaza los gobiernos militares, aunque hay tres países, Paraguay under(52%),que observa. any México circumstances. (53%) y Perú (54%) donde la población está más bien dividida en dos mitades respecto del rechazo. En el caso de Honduras que tuvo un golpe de estado en el año 2009 encontramos un 60% enEl contra. crecimiento económico sin duda tiene incidencia en el apoyo a la democracia, puede tener impacto El rechazo a los militarespositivo es abrumador si este se reparteen América de manera Latina esperada en al menos o bien 13impacto de los negativo 18 países, si este lo quese concentra no en manos de quita que todavía haya unosque terminarpocos. Hay de quedesmantelar observar laactitudes manera comoautoritarias el crec queimiento persisten. se distribuye La democracia al interior de las sociedades va ganando terreno, peropara lentamente. conocer el sentido del impacto. Los datos Latinobarómetro indican que es la mala distribución del BAJOcrecimiento NINGUNA lo queCIRCUNSTANCIA causa los impactos APOYARÍA negativos. A UN GOBIERNO MILITAR TOTALES AMÉRICA LATINA 2004 - 2011 - TOTALES POR PAÍS 2011 P. ¿Apoyaría Ud. un gobierno militar en reemplazo d el gobierno democrático, si las cosas se ponen muy difíciles, o no apoyaría Ud. en ninguna circunstancia un gobierno militar? *Aquí ‘En ninguna circunstancia apoyaría a un gobierno militar’. 100 Costa Rica 90 Uruguay 75 90 República Dominicana 75 Chile 73 80 Argentina 73 Bolivia 71 70 65 66 63 62 63 Panamá 71 60 Ecuador 71 Venezuela 70 50 Brasil 67 Nicaragua 67 40 Colombia 64 Honduras 60 30 El Salvador 59 20 Perú 54 México 53 10 Paraguay 2952 Guatemala 40 0 Latinoamérica 66 2004 2005 2009 2010 2011 0102030405060708090100 Fuente: Latinobarómetro 2004 - 2011

46

299 Apendix E shows satisfaction with democracy. According to Latinobarometro, citizens perceive the performance of their states and governments lower than how they perceive the ruling classes.

Those in office are seen as more positive since the mid 1990s; the state, on the other hand, does not receive the same approval levels. The blue line shows satisfaction with democracy, which is at 57% in 2011, and the red line shows dissatisfaction with it, which is at 52%

300 Appendix F

301

No es menor la consideración de estos cuatro indicadores que muestran una baja disposición a cumplir con las obligaciones a la vez que una alta disposición a creer que hay privilegiados que además no cumplen con las leyes. El aumento de la delincuencia en la región también dice relación con la percepción de la validez del estado de derecho. ¿Cuánto logran los estados imponer la ley y quién logra salirse con la suya? La diferencia entre la exigencia de los derechos y el cumplimiento de las leyes alcanza un 16% de los ciudadanos en la región. Es decir hay un 16% de personas dispuestas a exigir derechos pero no dispuesta a cumplir con las obligaciones. Este problema central de la cultura cívica se produce por la percepción de injusticia en la distribución del poder y del ingreso.

Bolivia y Argentina son los países donde un tercio (29%) de sus ciudadanos están dispuestos a exigir sus derechos pero no a cumplir con las obligaciones. Le sigue Costa Rica con 26% y México con 25%. Hay un solo país en la región en que hay más ciudadanos dispuestos a cumplir con sus obligaciones que Appendixexigir sus derechos,G y es Brasil con un 5%.

Tabla Nº 15: Resumen de actitudes hacia la Cultura Cívica 2011 Los Los Los ciudadanos son Diferencia entre Grupos que ciudadanos ciudadanos conscientes de sus exigen derechos cumplen menos

cumplen con exigen sus obligaciones y y las con la ley *Aquí la ley derechos deberes obligaciones "Los ricos" Uruguay 54 68 55 13 54 El Salvador 44 71 51 20 66 Panamá 44 64 42 22 60 Chile 42 49 36 13 61 Ecuador 39 55 41 14 69 República 39 63 49 14 63 Dominicana Brasil 37 36 41 -5 55 Honduras 34 54 41 13 76 Costa Rica 32 69 43 26 72 Venezuela 32 65 46 19 48 Nicaragua 30 37 34 3 73 Argentina 28 70 41 29 62 Paraguay 21 39 35 4 64 Colombia 19 54 34 20 65 Guatemala 19 50 34 16 67 México 19 53 28 25 61 Bolivia 16 44 18 29 64 Perú 12 38 17 21 64 Latinoamérica 31 54 38 16 63 Fuente: Latinobarómetro 2011 AppendixLo anterior H: se inflationcomplementa in Latin con la America percepción de discriminación por raza que es muy alta en la región y persiste como uno de los problemas que no se ha logrado desmantelar.

Venezuela Según el FMI 31,6%

Según mediciones Argentina 24,0% privadas

Según el Gob. 9,2% argentino

55 Uruguay Según el BID 7,5%

Brasil Según el BID 5,2%

Guatemala Según el BID 4,8%

México Según el BID 4,0%

Perú Según el BID 3,2%

Colombia Según el BID 2,9%

Chile Según el BID 2,0% About Tableau maps: www.tableausoftware.com/mapdata

Según el Gob. argent.. Según mediciones pr.. Según el FMI Según el BID

Fuente: FMI, BID; y en el caso de Argentina, Gobierno argentino y mediciones privadas

302

Appendix I : The most important problem is economic/crime

303

CONFIANZA INTERPERSONAL TOTAL AMÉRICA LATINA 1996 – 2011 - TOTALES POR PAÍS 2011 P. Hablando en general, ¿Diría Ud. que se puede confiar en la mayoría de las personas o que uno nunca es lo suficientemente cuidadoso en el trato con los demás? *Aquí solo ‘Se puede confiar en la mayoría de las personas’. República Dominicana 35 50 Honduras 33 Argentina 45 28 El Salvador 28 40 Venezuela 25 Ecuador 24 35 México 23 Uruguay 22 30 Paraguay 22 23 Panamá 21 25 21 22 21 21 22 20 19 19 20 Guatemala 20 20 16 17 17 16 17 Bolivia 20 Colombia 19 15 Costa Rica 18 Perú 18 10 Chile 17 5 Nicaragua 15 Brasil 9 0 Latinoamérica 22 1996 1997 1998 2000 2001 2002 2003 2004 2005200620072008200920102011 01020304050 Fuente: Latinobarómetro 1996-2011 Confianza en las InstitucionesAppendix J

La confianza en las Showsinstituciones the level es ofun trust tema in trata Latindo Americaextensamente in the enChurch, nuestros Radio, informes, TV, Newspapers, y por cierto Banks, dice relación con el pisoGovernment, de confianza Armed interpersona Forces, lPrivate presentado entities, más State,arriba. Local government, Police, Congress/Parliament, Public Administration, Judicial Power, Unions, and Political Parties on the El año 2011 no presentaleft. mayores diferencias respecto de años anteriores a excepción de la creciente disminución de la confianza en las iglesias, especialmente en algunos países que han tenido escándalos de sacerdotes, como es el caso de Chile. CONFIANZA EN . . . TOTAL AMÉRICA LATINA 2011 P1. Por favor, mire esta tarjeta y dígame, para cada uno de los grupos, instituciones o personas mencionadas en la lista ¿cuánta confianza tiene usted en ellas? Mucha, Algo, Poco o Ninguna. *Aquí solo ‘Mucha’ más ‘Algo’ P2. Por favor, mire esta tarjeta y dígame, para cada uno de los grupos/instituciones o personas mencionadas en la lista. ¿Cuánta confianza tiene usted en ellas: Mucha, Algo, Poco o Ninguna confianza en…? **Aquí solo ‘Mucha’ más ‘Algo’. ***Aquí Porcentajes 1996-2010 Promedio 1996 - 2010 Iglesia 64 Iglesia 71 Radios 49 Radios 55 Televisión 48 Televisión 48 Diarios 45 Diarios 45 Bancos 43 Fuerzas Armadas 43 Gobierno 40 Bancos 39 Fuerzas Armadas 39 Empresa Privada 39 Empresa Privada 38 Gobierno 37 Estado 38 Municipios/Gobierno local 36 Municipios/Gobierno local 37 Policía 35 Policía 33 Administración pública 31 Congreso/Parlamento 32 Poder judicial Administración pública 31 31 Poder judicial 29 Congreso/Parlamento 28 Sindicatos 28 Sindicatos 28 Partidos Políticos 22 Partidos Políticos 20 01020304050607080 01020304050607080 Fuente: Latinobarómetro 2011 La confianza en la Iglesia es la que ha bajado de manera más sistemática a lo largo de los años desde un 76% en el año 1996 a 64% en el año 2011, con una baja de tres puntos porcentuales respecto de año pasado. El año 2008 es el año en que la Iglesia baja de 74% (2007) a 66%, sin haberse recuperado como fue la baja experimentada en el año 2005 cuando alcanzo 62%.

48

304 Apendix K: protests

305 Chapter 2 – Appendix

Appendix 2.1

GNP per Capita

WEALTH AND CLIMATE are inextricably linked.By com- paring world maps show- ing GNP per capita (right) Tropic of Cancer and climate zones (opposite page),one notices that tem- perate-zone countries are generally much more pros- Data for 1995 perous than tropical-zone $465 – $1,999 nations.And in each climate $2,000 – $4,999 Tropic of Capricorn zone, the regions near sea- $5,000 – $9,999 coasts and waterways are $10,000 – $15,999 richer than the hinterlands $16,000 – $44,000 (table below). No data

about $2,500, or nearly twice as much. will therefore constitute a large propor- dry seasons—such as the African savan- Second, geography affects the preva- tion of that country’s population. With na—farmers must contend with the rap- lence of disease. Many kinds of infec- so many children, poor families cannot id loss of soil moisture resulting from Source:tious diseases The Geographyare endemic to the of tropi- Poverty,invest Americanmuch in each Scientific,child’s education. Marchhigh temperatures,2001 the great variability cal and subtropical zones. This tends to High fertility also constrains the role of of precipitation, and the ever present be true of diseases in which the patho- women in society, because child rearing risk of drought. Moreover, tropical envi- gen spends part of its life cycle outside takes up so much of their adult lives. ronments are plagued with diverse infes- the human host: for instance, malaria Third, geography affects agricultural tations of pests and parasites that can (carried by mosquitoes) and helminthic productivity. Of the major food grains— devastate both crops and livestock. infections (caused by parasitic worms). wheat, maize and rice—wheat grows Many of the efforts to improve food Although epidemics of malaria have oc- only in temperate climates, and maize output in tropical regions—attempted Figurecurred 2.2 sporadically as far north as and rice crops are generally more pro- first by the colonial powers and then in Boston in the past century, the disease ductive in temperate and subtropical cli- recent decades by donor agencies—have has never gained a lasting foothold in mates than in tropical zones. On aver- ended in failure. Typically the agricultur- the temperate zones, because the cold age, a hectare of land in the tropics al experts blithely tried to transfer tem- winters naturally control the mosquito- yields 2.3 metric tons of maize, whereas perate-zone farming practices to the trop- based transmission of the disease. (Win- a hectare in the temperate zone yields ics, only to watch livestock and crops ter could be considered the world’s most 6.4 tons. Farming in tropical rain-forest succumb to pests, disease and climate effective public health intervention.) It is environments is hampered by the fragili- barriers. What makes the problem even much more difficult to control malaria ty of the soil: high temperatures mineral- more complex is that food productivity in tropical regions, where transmission ize the organic materials, and the intense in tropical regions is also influenced by takes place year-round and affects a rainfall leaches them out of the soil. In geologic and topographic conditions that large part of the population. tropical environments that have wet and vary greatly from place to place. The is- According to the World Health Orga- land of Java, for example, can support nization, 300 million to 500 million new highly productive farms because the vol- cases of malaria occur every year, almost The Wealth of Regions canic soil there suffers less nutrient de-

entirely concentrated in the tropics. The Climate Zone (percent of world total) Near* Far* pletion than the nonvolcanic soil of the (CIA,1997)AND 1996 disease is so common in these areas that Tropical neighboring islands of Indonesia. no one really knows how many people it Land area 19.9% 5.5% 14.4% Moderate advantages or disadvan- kills annually—at least one million and Population 40.3% 21.8% 18.5% tages in geography can lead to big dif- perhaps as many as 2.3 million. Wide- GNP 17.4% 10.5% 6.9% ferences in long-term economic per- THE WORLD FACTBOOK WORLD THE spread illness and early deaths obviously Desert formance. For example, favorable agri- hold back a nation’s economic perform- Land area 29.6% 3.0% 26.6% cultural or health conditions may boost ance by significantly reducing worker Population 18.0% 4.4% 13.6% per capita income in temperate-zone na- productivity. But there are also long- GNP 10.1% 3.2% 6.8% tions and hence increase the size of their term effects that may be amplified over Highland economies. This growth encourages in- Land area 7.3% 0.4% 6.9% time through various social feedbacks. ventors in those nations to create prod- H.STRAHLERALAN BY N.STRAHLERARTHUR AND (JOHN SONS,1992)& WILEY For example, a high incidence of dis- Population 6.8% 0.9% 5.9% ucts and services to sell into the larger ease can alter the age structure of a coun- GNP 5.3% 0.9% 4.4% and richer markets. The resulting inven- try’s population. Societies with high lev- Temperate tions further raise economic output, els of child mortality tend to have high Land area 39.2% 8.4% 30.9% spurring yet more inventive activity. The levels of fertility: mothers bear many chil- Population 34.9% 22.8% 12.1% moderate geographical advantage is GNP 67.2% 52.9% 14.3% SOURCE:ANDREW D.MELLINGER

dren to guarantee that at least some will thus amplified through innovation. GEOGRAPHY, PHYSICAL MODERN * ”Near”means within 100 kilometers of seacoast or AND survive to adulthood. Young children sea-navigable waterway;“far”means otherwise. In contrast, the low food output per SAMUELBY ILLUSTRATIONS VELASCO; SOURCES:THEBANK, WORLD 306

74 Scientific American March 2001 The Geography of Poverty and Wealth Copyright 2001 Scientific American, Inc. Figure 2.3

307

308

309 Chapter 3 – Appendix

Figure 3.1

The following graph will summarize them:

Name of Currency Date Years used Zeros it eliminated

Peso Moneda November 5, 1881 88.2 Nacional

Peso Ley January 1st, 1970 13.4 2

Peso Argentino June 1st, 1983 2 4

Austral June 15th, 1985 6.6 3

Peso (convertible) January 1st, 1992 21 4

Figure 3.2

The following graph shows GDP growth in annual percentage change. It can be seen that

the story of Argentine economics is a constant rollercoaster.

GDP growth (annual %)

20 15 10 5 0 -51960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 -10 -15

GDP growth (annual %)

310 Figure 3.3 The following graph shows the unemployment rate.

Source: INDEC. The lighter line represents the whole country and the darker one Buenos Aires.

Figure 3.4

Source: http://www.lanacion.com.ar/1521479-el-trabajo-de-calidad-es-la-asignatura-pendiente

311

Figure 3.5

The following chart will show the areas that are mostly subsidized by the Kirchner administration:

Area and percentage Explanation

Railway subsidies: 98% Its efficiency was highly questioned after the tragic accident that took place last year in Station 11 (Buenos Aires). During 2012 the budget assignment/ was above 1,600 million pesos. Bus subsidies: 90%. In order to avoid a rise in public transport costs, they were allotted more than 8,600 million pesos.

Programme”Football for All”: 78% One of the most controversial measures. This year the Government destined it almost 700 million pesos and increased this amount to 205 millions by the end of 2012. Broadcasting and Press:73% This amount grew to 267% since CFK got into office in 2007. In 2012 she devoted 606 millions to it.

Health and Infant Care: 38% There are many plans in the Ministry of Health that were never executed, as the “Mother and Child Care” plan. Small amounts were allotted to school care and ambulatory service.

312 Government Housing Program: 37% Tax collection reduction during the first semestre affected public works. Federal Housing Plans,”Techo Digno”,were/ one of the most affected/damaged/.

Schoolbuilding: 34% The program More Schools for a Better Education that promised 700 schools was never carried out efficiently, as well as Equipment and Structure, announced by the Ministry of Education.

Security Plan: 11% Even though the Ministry of Security establishes affirms that an average 455 plans were carried out as regards salaries of those who form part of it, the actual number is much lower. (Martin 2012.)

Media (Governemnt propaganda): 80% of the oficial publicity was handled by 9 groups. The government spedn over $1900 million pesos (0ver 43% more tan 2011). 95% of those resources were concentrated in TV and graphic press.

Figure 3.6

313 Chapter 4 – Appendix Figure 4.1 This Chart covers President Menem´s first term

Tota Policy Area 1989 1990 1991 1992 1993 1994 l

Taxes 2 7 23 17 21 2 72 Salaries 18 9 3 2 7 39 Public debt 5 14 5 3 1 1 29 Trade 5 3 2 10 Transport 3 8 7 3 21 Nation/Provinces 4 1 1 6 Real estate privatization 3 6 3 7 3 22 Civil and political rights 2 2 1 8 8 Public agencies 1 11 7 5 5 3 32 Proceeding agaunst state 5 5 Electic energy 4 1 2 1 8 Promotion of Industry 3 3 1 1 8 Mega DNU 435/90 7 5 2 14 Mega DNU 1930/90 5 11 6 22 Mega DNU 2284/91 4 3 1 8 Other 2 7 11 10 2 32 Total 30 63 85 69 62 27 336

Source Ferreira Rubio and Goretti 1995

314 Figure 4.2

Date DNU # Type Description

3-Jan-90 36/90 Economic When the bank has to return customers over 1 million Emergency Australes, they would do it in Bonds

16-Apr- 686/90 Economic increase of subsidies to poor families or relatives of 90 Emergency handicaps given the economic emergency of the country

5-Sep-90 1757/90 Economic Creation of a commission of "rationalization of public Emergency spending and administrative reform. Control of public spending. Privatizations, Pensions, subsidies, Taxes, oil. YPF

31-Dec- 27788/90 privatization of the national oil company YPF 90

31-Oct- 2284/91 Economic Deregulation of the economy, revoking any restrictions to the 91 Emergency offer of goods and services or any other measurements that distorts the market prices. Dissolution of regulatory bodies of the economy, (related to the trade of meat grains, and other commodities and food products, . Creation of a technical committee that helps with the deregulation process. Pension system. Changes in custom practices

4-Feb-92 241/92 Intervention of the Province of Corrientes, organizes new election of governor and vice governor

11-Jul-95 005/95 Economic centralization of financial function Emergency

11-Jul-95 005/95 Economic centralizes power while the financial emergency Emergency

13-Oct- 008/95 refinancing of debt of the provinces 95

29-Dec- 13/95 Economic guidelines for voluntary retirement 95 Emergency

29-Dec- 13/95 encouragement of voluntary retirement for public employees 95

13-Sep- 007/96 Economic suspends obstacles for foreclosures/confiscations 96 Emergency

13-Sep- 007/96 Economic suspends lawsuits against the state 96 Emergency

4-Jun-98 009/98 gave 36 million pesos for improvements in the judicial buildings

315 4-Jun-99 1098/98 Budget gave subsidy of 20 and 28 million pesos to two hospital to help with their expenses

Source: DNU published at infojust.gov

Figure 4.3

Date

DNU # Type of DNU Description

28-Dec-99 162/99 Fishing fishing emergency, danger of extinction of hake Emergency

24-Jan-01 185/10 creation of the Ministry of Production

20-Jun-01 815/01 Economic increase in social welfare. Bus cards are given to public emergency servants

26-Jul-01 957/01 Economic reduction of public spending, reduction of state salaries, Emergency reduction of maximum possible for salaries,

13-Aug 14/2001 encouragement of promotion of promotion of participation in improvement of infrastructure

1-Nov-01 1387/01 Economic reduction of the national and provincial debts, intervention of Emergency the supreme court reduction of taxes

1-Dec-01 1570/01 Economic establishes the rules that financial institutions and banks. The Emergency amount that can be withdrawn out of banks is established and it prohibits wiring Pesos and foreign currency out of the country.

1-Dec 1572/01 Economic modifications on the national budget Emergency

5-Dec-01 1606/01 Economic limits all financial transactions to be conducted in cash Emergency

5-Dec-01 1584/01 Economic ratifies previous agreements and begs for fiscal discipline Emergency

5-Dec-01 1582/01 Economic procedures to create formal laboral ties Emergency

7-Dec-01 1631/01 Economic Credits that have not been paid can be paid with LECOP Emergency

316 23-Dec-01 30/01 Economic It established that the vehicles that belong to the state cannot Emergency longer be used by public servants and companies administered by the state.

23-Dec-01 23/01 Economic limits the salary of public servants, which cannot be higher Emergency than the salary of the president

23-Dec-01 25/01 Economic It freezes any job openings in the public administration in Emergency order to decrease costs.

26-Dec-01 35/01 Economic suspension of mobile services to civil servants Emergency

26-Dec-01 32/01 Economic creation of the Liquidity Fund in order to provide liquidity to

Emergency the financial system

Source: DNUs published at infojustgov

Figure 4.4 Decrees signed during the Duhalde Administration

Date DNU # Type Description

3- 565/02 Economic creation of the welfare program "Jefes de Hogar " to be used Apr-02 Emergency while the emergency is in place. The DNU establishes the conditions to be eligible for the benefit.

19- 654/02 It implements a new mandatory registry for those willing to Apr-02 export agricultural goods.

13- 1453/0 modifications on the national budget Aug-02 2

20- 1536/0 It establishes new procedures with the end of facilitating the Aug-02 2 promotion and establishment of the national cinema industry.

4- 1654/0 Established the emergency of the aero-commercial Sep-02 2 transportation industry.

20- 1873/0 It established the mechanism to covert the national debt in Sep-02 2 the national currency for those that have not arranged to to cancel debts or accepted bonds.

25- 25/02 It establishes that for international flights, the tariffs should be Sep-02 stipulated in USDollars at the official rate

19- 2641/0 It increases welfare programs giving people help of $130 until

317 Dec-02 2 FebRúary 2003 and $150 until June 2003.

31- 2718/0 modifications on the national budget Dec-02 2

31- 2724/0 extension of economic financial salaries and administrative Dec-02 2 provincial emergency

31- 2718/0 Modification of the national budget in order to accommodate Dec-02 2 the national debt, credits, debts to intergovernmental organizations.

7- 39/03 Extension of the emergency until the end of 2003 Jan-03

29- 1022/0 creation of the National Institute of the Theatre, for the Apr-03 3 promotion of dramatic arts.

24- 1283/0 two ministries got unified the Ministry of Economics and May-03 3 Production. The Ministry of Federal Planning, Public spending and Services

318 Figure 4.5

Source: http://www.lanacion.com.ar/1568090-diez-anos-de-kirchnerismo-crecimiento-con- inflacion

Figure 4.6 These are the topics of the DNUs signed by Néstor Kirchner

Topic 1st year 2nd year 3rd year 4th year

Salaries 15 25 34 36 Budget 11 7 10 4 Public Work 9 7 10 4 Emergencies 8 4 Financ/e/ial System 8 6 7 Ministeries 6 6 4 2

319 Fiscal Benefits 4 9 3 1 Direct Contacts 4 6 1 Miscelaneous 2 3 Total 67 73 61 48

Source: Modifications for Delia Ferreiro Rubio UTDT 7-6-07

Figure 4.7

DNUs during the Kirchner administration

34 Decrees (salaries, pensions, welfare, subsidies, 1.60% indemizations 3.30% 4.90%

10 Decrees( Budget, modiications of laws) 6.60%

7 Decrees (inancial system, 11.50% public debt, mortagages, currency exchange, payment to intergovermental 55.70% organizations 4 Decrees (issues about 16.40% Ministries and other delegations)

3 Decrees (iscal beneits, industrial promotions, issue of bonds)

Source: infojust. gov

320

Figure 4.8 DNUs signed by Nestor Kirchner

While President Néstor Kirchner was in power he signed 249 DNUs while there were only 176 laws were passed.

80 73 70 67 60 61 56 50 48 43 40 40 DNU 35 Laws passed 30

20

10

0 2003 2004 2005 2006

Source: La Nacion Data

DNUs signed by Nestor Kirchner

D Date DNU Type Description

2425/03 modifications on the Law 24452 that gives specifications on the writing on 5-Jul- checks 03

2622/03 modification of the national budget for the expenses of the elections for 1- deputies and senators Aug-

321 03

3812/03 modification of the national budget 0- Sep- 03

11069/03 extension of the nutritional emergency 3- Nov- 03

21124/0 modification of the national budget 4- Nov- 03

11221/03 Extension of a health national emergency 0- Dec- 03

21351/03 Extension of the prohibition to fire personnel 9- Dec- 03

21357/03 established the salary of the President of the Nation 9- Dec- 03

21353/03 Economic Extension of the declaration of emergency program, extension of the 9- Emergency occupational emergency and programs “Jefe de Hogar” Dec- 03

21349/03 established the minimum wage 9- Dec- 03

21355/03 9- Dec- 03

1557/04 Economic extension to finish the national economic census -Jun- Emergency 04

11189/94 National given a terrorist attack there will be increase in the screening for people 8-Jul- Security coming in and out of the country 04

322 3978/04 Industrial Established 180 days for the establishment of each state of the industrial 0-Jul- promotion plant of Dilexis S.A. 04

1539/04 Pensions Employer contributions 2- Aug- 04

22009/04 Industrial 9- promotion Dec- 04

4772/05 modifications on the national budget -Jul- 05

5774/05 Automobile increase competitiveness in the automobile industry, -Jul- industry 05

5774/05 incentives for competitiveness by creating auto parts nationally -Jul- 05

1004/05 creation of subsidies for pensions in Rio Negro 1-Oct- 05

11599/05 the reserves of the central bank that exceed the 100% of the coverage of 5- the monetary base can be used to pay intergovernmental organizations. Dec- 05

3352/06 modification on the national budget for public works 0- Mar- 06

2530/06 established how much medical residents should be remunerated -May- 06

2524/06 states the remuneration for military personnel -May- 06

21098/06 states the remuneration for communication personnel (Comision nacional 4- de Comunicaciones de la Secretaria del Ministerio de Planificacion Federal) Aug- 06

91386/06 states the remuneration for the civil personnel of the Intelligence -Oct-

323 06 Secretary

22063/06 modification of the national budget 8- Dec- 06

Figure 4.9 BCRA Reserves

Source: BCRA

324 Figure 4.10

D Date DNU Type Description

2 010/07 Creation of the Social Program "garrafa social" that creates the subsidies 8-Dec- of propane tanks of 10 kgr in Rio Negro 07

2 857/08 food stamps 5-Mar- 08

1 1472/08 modification of the budget 5-Sep- 08

2 2025/08 creation of the Ministry of Production 5-Nov- 08

3 2792/09 Health Health emergency due to influenza N1H1 -Jul-09 Emergency

8 1458/10 change in the name of the Tourism Ministry (Ministerio de Turismo) to -Oct-09 Mininistry of Tourisim and Industry (Ministerio de Turismo e Industria)

9 1461/10 change in the members of the Industrial Board for Agro- industrial -Oct-09 Technology

2 1602/10 increase in the welfare amount per child 9-Oct- 09

2 1801/09 modifications of the budget 0-Nov- 09

1 2010/09 creation of the Fund to end the debt 4-Dec- 09

7 18/10 removes from his post the Director of the Central Bank of the Argentine -Jan-10 Republic, Mr Martin Redrado

1 298/10 creation of a Bicentennial Fund with the purpose of ending the debt -Mar- 10

1 296/10 revoke the Bicentenial Fund that was created with DNU 2010/09. -Mar

325 3 615/10 creation of a national holiday for one time (24 May 2010) -May- 10

2 919/10 The Ministry of Tourism is created 8-Jun- 10

3 278/11 establishes details about the inscription and documents for adopted -Mar- children until the age of 12 11

1 446/11 modifies a law that assigs welfare benfits to pregnant ladies. 8-Apr- 11

3 521/11 change the date of the celebration of a holiday -May- 11

3 1764/11 modification od the budget 1-Oct- 11

2 192/11 Dissolves the national office of Agricultural Commerce 4-Feb- 12

6 874/11 changes the name of the Ministry of Internal Affairs (Ministerio del -Jun-12 Interior) to Ministry of Internal Affairs and Transportation (Ministerio del Interior y Transporte)

2 1006/12 allows the registration of birth of children under the name of two parents -Jul-12 of the same sex

9 1382/12 Creates and agency to administer state assets -Aug- 12

1 1667/12 establishes requisites for the access to welfare 2-Sep- 12

1 2609/12 modification of the budget 7-Dec- 12

Source: infojust.gov

326 Figure 4.11

Source: Latinobarometro 2011

327 Figure 4.12 Economic Restrictions

# Date Organization Description of the restriction imposing the restriction

1 10/31/11 AFIP42 All currency exchange operations will require the permission of the AFIP

2 11/12/11 Central Bank The Central bank approved a policy that allowed some flexibility of the minimum amount of foreign currency (especially dollars) that Banks need to have deposited, in order to make easier the offer of foreign currency before the increasing demand from customers

3 11/18/11 Central Bank The Central Bank allows people with mortgages to buy US dollars. The Central Bank announces that it will implement a new way of control for banks.

4 12/13/12 Central Bank The Central Bank announces banks that starting in 2 days (December 15th), they should inform the Central bank with full details about all the operations banks do related to the purchase and sale of US dollars. This was thought in order to prevent another bank run as it happened before the President assumed her second term.

5 2/9/12 Central Bank Companies need the approval of the AFIP to buy foreign currency

6 4/3/12 Central Bank In order to withdraw money from another country, people and companies need to open a special account in foreign currency Source:http://www.lanacion.com.ar/1461720-rige- la-nueva-normativa-para-utilizar-cajeros- automaticos-en-el-exterior

42 AFIP, Administracion Federal de Ingesos Publicos (Spanish). It is an organism that depends on the Ministry of Economics in Argentina. It is the one in charge of the tax income. It regulates the obligations and rights of taxpayers.

328 7 5/9/12 AFIP AFIP reduced the limit to buy foreign currency to 25% of the requestant’s salary.

8 5/29/12 AFIP People need to require a permission from AFIP in order to buy foreign currency

9 6/13/12 AFIP Agro: la afip repealed electronic transactions in dollars Source: http://www.lanacion.com.ar/1481594-no- dejan-facturar-en-dolares-y-afecta-los-insumos-del- agro

6/15/12 AFIP The AFIP web site deleted the possibility of buying dollars for savings

1 6/15/12 AFIP Prohibition to the banks to buy bonds in US dollars Source:http://www.lanacion.com.ar/1482314- prohiben-a-los-bancos-comprar-bonos-en-dolares-y- pagarlos-en-el-exterior

6/25/12 Economics The government changes the (amount of) time that Ministry companies have in order to buy foreign currency in 1 order to bring into the country money collected through exports. Some companies closer to the government get better deals. Source: http://www.lanacion.com.ar/1485032-el-gobierno- beneficia-a-las-mineras-y-otras-grandes-empresas- que-exportan

1 7/5/12 Central bank Prohibition to buy US dollars for savings http://www.lanacion.com.ar/1488031-el-banco- central-oficializo-la-prohibicion-de-comprar-dolares- para-ahorrar

7/6/12 Central Bank Properties cannot be bought and sold in US dollars (or any other currency). http://blog.dolarblue.net/2012/07/la-jefa-del-banco- central-confirma-que.html

1 7/14/12 Banks People receiving pensions from abroad (including foreign citizens) can no longer receive them in foreign currency but only in Argentine pesos.

7/25/12 Central Bank People cannot send money to family members

329 outside (of) the country.

7/25/12 Central Bank The Central Bank forbids Argentines do give donations to parties outside the country in order to prevent “fraudulent” ways of getting money from abroad. http://blog.dolarblue.net/2012/07/argentina- restringe-donaciones-en.html

1 8/8/12 Comision Nacional Companies should give value to their assets de Valores according to the official value of the dollar. http://www.lanacion.com.ar/1497664-limitan-a-los- fondos-comunes

Central Bank The Central Bank limits the sell of bonds http://blog.dolarblue.net/2012/06/el-banco-central- ahora-limita-la-venta.html

1 8/10/12 Central Banks US Dollars would be sold to those travelling to no neighboring countries nor EU countries. The Central Bank tightens the restrictions. The only foreign currency sold to people is the one of the country where they are traveling to.

1 8/21/12 Banks Banks stopped accepting advanced payments in US dollars. The clamp on the dollar gets tougher on credit card purchases abroad.

1 8/30/12 AFIP Tourist could only ask for a permission to buy foreign currency just seven days before their trip.

1 8/31/12 AFIP People using their credit card overseas would be charged 15% of their purchases to deter people to spending money abroad.

2 9/1/12 AFIP People using their debit cards abroad will also be charged 15% for their purchases.

2 9/6/12 Central Bank Private banks could not operate in ports and airports. Only public entities are allowed to sell foreign currency. The maximum that people can buy is u$s 500.

330 2 9/12/12 Jefatura de Diplomats have to face limits to the money they can Gabinete access to before trips.

2 10/31/12 Central Bank There is a prohibition to buy foreign currency to pay for mortgages and other loans.

2 12/21/12 Central Bank Controls to wire funds abroad is centralized, so companies needing to pay for imports and exports AFIP would be controlled. Companies will have to present detailed information about the funds they need to transfer (Resolution 3417/2012). Companies need to inform the AFIP if they need to pay or receive anything from their headquarters, cancel financial debts, pay interests, pay expense generated by air travel, or any other financial transaction involving foreign currency.

Source: La Nacion, AFIP, BCRA, Ministry of Economics Figure 4.13 Protection of Private Property

Source : Latinobarometro 2011

331 Figure 4.14 Inflation a)

Source: La Nacion b)

332 Source: La Nacion Data

c) The magazine with the highest circulation in Brazil pictures Cristina Kirchner as Pinocchio, portraying her and her government as liars in terms of economic data

Source: http://www.lanacion.com.ar/1573000-la-revista-de-mayor-circulacion-de-brasil- compara-a-cristina-con-pinocho

333

Figure 4.15

Source: Reuters

334 Figure 4.16 Different values of the US Dollar

Different prices for the US Dollar in Argentina at the end of 2012.

6,91 4,93 5 5,66 7,5 7,70 4,97

Official Value BCRA reference Airpor t Gold Blue

Green Grey

Source: dolarhoy.com on December 31st 2012

335 4.17 Indice Lider

Source: http://www.utdt.edu/ver_contenido.php?id_contenido=3146&id_item_menu=6227

4.18 ICC

Source: http://www.utdt.edu/ver_contenido.php?id_contenido=2575&id_item_menu=4982

336

4.19 Capital Flight

337 4.20 IGEE

Source: http://www.uca.edu.ar/uca/common/grupo83/files/64_-2012-12.pdf

4.21 Subsidies for Aerolineas Argentinas

338 Source: http://www.lanacion.com.ar/1564366-aerolineas-ya-le-costo-al-estado-mas-de-lo-que- valen-tres-american-airlines

4.22 Comparison among leading Latin American economies

Country GDP Inflation Industry Investmen Constructio Trade FDI (in variation production t (% GDP) n Activity (estimate millions (Variation s 2012) of US ) Dollars) Argentina 1% 25.60% -1.20% 24.20% -3.20% -3.70% 5388.00 Brazil 1.10% 5.80% -2.10% 20.20% 3% 1% 43175.00 Chile 5.50% 1.50% 2.60% 25.70% 8% 3.50% 9622.00 Colombia 4.10% 2.40% 0.80% 23.10% 1% 10.30% 7798.00 Peru 6.20% 2.60% 2.90% 25.20% 16% 7.80% 5440.00 Uruguay 3.80% 7.50% 2.80% 19.60% 12% 6.90% n/a Source: Abeceb, IPC Congreso, Latin Focus, FMI, Cepal, La Nacion

339 4.23 Foreign Direct Investment

4.24

How different sectors of the economy have been affected (in percentages)

-27 Real Estate** Agriculture* -12.7

-8.2 Metallurgical Industry**

-8 Freight**

-7.8 Automobile Industry***

-2.7 9 Construction** Retail*** -2.4

-1.3 Machinery and equipment**

1.1 Minerals (not metals)** 1.6 Food Industry**

Textil Industry** 3.9

Transport (Passengers)** 5.2

Telefone Industry** 12

Finantial Intermediation* 1 19.8

-30 -20 -10 0 10 20 30 * up to the third trimester-**up to november-***for the whole year Source: http://www.lanacion.com.ar/1544382-de-tapa-la-mayoria-de-los-sectores-economicos- mostraron-pobres-resultados-en-2012\

340

4.25 Open Budget Survey

341

342 Budget Transparency Level of information on a maximum of 100 points

93 New Zeland Extensive information 88 Unided Kigdom

79 USE 73 Brazil Significant 66 Chile

61 Mexico

58 Colombia 57 Perú Moderate 50 Argentina

37

31 Ecuador Low

Little or no 12 Bolivia

0 Qatar

343 4.26 Country Risk

344 4.27 ICG

4.28 Balance of Trade

345 4.29 Comparison between Argentina and other Latin American countries.

Comparison of Argentina and other Latin American coutnries País GDP*(Var. i.a.) Inflation (fin de período) Industrial Production Investment as a % of GDP Construction activity Trade Paraguay 4% 8% 3% 20% 12% 7% Perú 6% 3% 3% 25% 16% 8% Colombia 4% 2% 1% 23% 1% 10% Chile 6% 2% 3% 26% 8% 4% Brasil 1% 6% -2% 20% 3% 0% Argentina 1% 26% -1% 24% -3% -4%

4.31 Trade with the West and Non West

346

4.32 Freedom House

60

51 50 49 49 49 50 46 46 47 44 41 41 40 39 37 36 35 31 31 30 29 29 29

20

10

0

347 Freedom of the Press

Press Freedom Legal Political Economic Year Press Status Score Environment Environment Environment

2012 Partly Free 50 12 22 16

2011 Partly Free 51 12 23 16

2010 Partly Free 49 13 21 15

2009 Partly Free 49 13 21 15

2008 Partly Free 47 11 21 15

2007 Partly Free 49 13 20 16

2006 Partly Free 46 12 17 16

2005 Partly Free 41 10 16 15

2004 Partly Free 35 8 14 13

2003 Partly Free 39 11 16 12

2002 Partly Free 37 10 21 6

2001 Partly Free 44

2000 Partly Free 46

1999 Partly Free 41

1998 Partly Free 36

1997 Partly Free 31

1996 Partly Free 31

1995 Free 29

1994 Free 29

1993 Free 29

1992 Free

1991 Free

1990 Free

348 1989 Free

1988 Free

1987 Free

1986 Free

349

Figure 4.33 Confidence in Judiciary

The following graph shows the data gathered by Latinobarometro:

Source: Latinobarometro 2011

350 Figure 4.34

Evolución del Índice de Confianza en la Justicia (ICJ) y sus dimensiones 100

90

80

69,8 71,1 68,8 67,7 69,7 68,1 70 67,3 67,2 64,2 70,9 69,4 68,6 67,1 68,6 68,3 66,4 64,4 60 64,3

50,5 48,5 47,7 49,3 49,0 48,3 50 46,7 47,7 47,4 50,1 49,5 48,5 48,0 47,8 46,3 46,4 46,5 46,5 40

29,3 29,2 28,5 29,5 29,9 30 26,5 27,3 28,2 27,5 30,7 28,6 28,4 28,0 27,4 28,2 26,5 25,9 27,4 20

10

0

ICJ Conductual Perceptual

351