

Lessons from Argentina's Crazy Economy - mchafkin
http://www.inc.com/magazine/201106/doing-business-in-argentina.html

======
sespindola
As an Argentinian, here are my two cents on this matter:

1) From reading this article, one could asume commercial and financial
regulations change by the hour, while in fact is the opposite.

    
    
       We have a gargantuan commercial code of byzantine
       complexity that has not really been modified in the
       last 50 years.
    
       We also have a terribly regressive and unfair tax
       system that includes 21% VAT even for food products
       and wealth tax even for salaried employees with 
       more than 1400 dollars of monthly income.
    

2) It is my sincere wish, from the bottom of my heart, that "entrepreneurs" (I
doubt they deserve the honor if being called that) who operate "en negro" rot
in jail. They are bringing all of us down with their disregard for the rule of
law and they are increasing the costs of doing bussiness for those of us who
pay taxes.

    
    
       Regardless of the recurrent crises, starting up a 
       successful tech company here is possible, as proven
       by Globant, OfficeNet, MercadoLibre, et al.

------
briggsbio
My in-laws left Argentina 30 years ago and still have much of their family
there. I showed this article to them and their reply was simply, "the US is
heading this way. We've seen this movie, and we don't like the way it ends."

~~~
paganel
> "the US is heading this way. We've seen this movie, and we don't like the
> way it ends."

I grew up in post-communist Romania, and I've also seen this movie before.
Immediately after 1990 (the fall of communism) money started losing their
value. At the beginning money were losing their value by "only" 40-50% per
year, to a maximum of ~150% inflation rate in the late '90s. It was only in
the mid 2000s' that the inflation rate first dropped to single digits.

I can still remember reading Malthus in high-school, and about how he was
saying that the middle-class people are always the worst affected by the
economic crisis. What can I say? My parents went from a secure, middle-class
position (apartment, car, country-house) to relying on subsistence-agriculture
in the space of maximum 10 years. And they weren't the only ones.

~~~
berntb
You scare me. :-)

I moved to Cluj (Transylvania) this spring.

I am thinking about looking for another job, but would like to stay here. I am
scared that telecommuting will make me unhappy.

Good food, wonderful nature, good weather (ok, most anywhere has better
weather than Scandinavia), nice people, a hot girlfriend, etc.

~~~
paganel
> You scare me. :-)

Relax, things are a lot better now (even for me, I'm on HN, ain't I? :)). What
I'm talking about happened 10-15 years ago.

And congratulations for choosing Cluj. I'm usually trapped in Bucharest but
I'm happy that tomorrow I'll go to Sibiu for a 4-day vacation. It's only a 2-h
drive from Cluj I think, I highly recommend it for when you have time to
discover the rest of the country :).

~~~
berntb
Thanks.

I've been to Sigishoara, which was really nice. I really look forward to
seeing more.

The first week here, I had this conversation...

My work friends said: "That is worth checking out, there is a nice lake over
there." I yawned and told them that I've seen lakes before, but "the mountains
around the city looks really cool". They looked confused and said "Uh, do you
mean the hills?"

But frankly, I'm not that curious about Bucharest. :-)

I do wish there were more gypsy music bands around Cluj.

It is a bit embarrassing to like "muzika popular", which seems to be the most
uncool thing around? (-: Otoh, it might help make me popular with the
girlfriend's 70 year old mother... :-)

------
warseph
My 2 cents :) The article gets right both the inflation and the corruption
problems in Argentina. However, it seems to be a bit biased, as it shows only
one real case of success and several failures, and the fact that one of the
interviewees is the son of a former Minister of Economy of Argentina (Domingo
Cavallo), whose economical model was the main cause of the 2001 crisis, which
the author seems to have forgotten to mention in the article. I've worked in
both argentinean and US founded companies here in Argentina, and the reality,
at least from my experience, is that the economic environment isn't as hostile
as the article describes. I've been in companies that made millions (dollars,
btw) and I've also seen some that lost everything (specially in the 2001
crisis), but the truth is Argentina is a cheap country for investment and with
a lot of highly qualified man power. I have to agree, investing in Argentina
is kind of a bet, and making your company work well involves a lot of work,
but, specially if your objective is to export the product/service, it might
provide an awesome ROI.

------
kragen
I thought this part was pretty funny:

> "...I wasn't going to put all of my risk in Latin America again in my life."
> At the end of 2002, he left the company and moved his family to Miami.

I think Miami is a lot more Latin American than Buenos Aires.

~~~
diego
In terms of culture and lifestyle, yeah. Many people call Miami "the Capital
of Latin America." Buenos Aires is not particularly representative of Latin
America, it's more like a hybrid between LatAm and Europe (you probably
agree).

In terms of economic stability, Miami is still part of the US so it's less
risky for running a business. Not the greatest place for a startup, but a good
compromise for someone who wants to travel to South America frequently.

~~~
tsuipen
Again, stereotypical and prejudice.

Last I checked, Spain was in Europe.

~~~
hugh3
Has the parent been edited, or is this remarkably non-sequiturial? I read the
parent several times looking for a mention of Spain, couldn't find it.

~~~
tsuipen
Could it be you're (gasp!) not informed instead of it being "non-sequiturial"?

Saying Miami is more Latin American than Buenos Aires is stereotypical and
prejudice because this statement suggests there is something intrinsically
Latin American about Latin America. Latin America is a huge space (a
population of 580,086,590 which the parent seeks to generalize), there are
various cultures and subcultures, various languages and dialects. Whatever J.
Lo has brainwashed people into thinking is "Latin American" is not all-
encompassing and should not be representative of it.

Thus, Buenos Aires is just as very Latin American as La Paz or San Juan or Rio
de Janeiro or Havana.

The fact that more Italians immigrated to Argentina does not make them more
"European", since Spain, the country that colonized most of Latin America is
European. Since its colonization, Latin America adopted a lot of traditions
from Spain and the rest of Europe, thanks to many Latin American governments
asking for more European immigrants to "fill the void" and work the land.
However, not all countries adopted the same traditions to the same degree and
some preferred other European traditions (that could also be shared with
Spain, Portugal and the rest of Western Europe).

Thus, the statement "Buenos Aires is not particularly representative of Latin
America, it's more like a hybrid between LatAm and Europe" is wrong because
most of Latin America includes Europe in its transculturation, acculturation,
syncretism, miscegenation and hybridity.

~~~
kragen
Most of Latin America has not just Latin influence but also a lot of American
influence. The people are brown not just because they're Moorish or African by
ancestry but also because they're American. Most of them speak Spanish,
French, or Portuguese, but a substantial number speak American languages like
Guaraní, Mapuzungun, Quichua, Aymará, Nahuatl, or Haitian Creole. Most of them
practice Catholicism, but in a heavily syncretized form with Catholic saints
corresponding to American gods, and a substantial number of them still
practice American religions.

But all of those things are true only to a tiny extent in Buenos Aires, and a
more noticeable but still small extent in the rest of Argentina. This is what
genocide looks like.

So I wasn't saying that Argentina is more European than Bolivia, Puerto Rico,
Brazil, Cuba, or Miami because it's less Spanish. I was saying that Argentina
is more European than Bolivia, Puerto Rico, Brazil, or Cuba because _it's less
American_ , because none of the things I said in the previous paragraph are
true here, and they're still true in those places. The most distinctively
American thing about Buenos Aires is that everybody drinks yerba mate.

By the way, Diego grew up here in Buenos Aires, where I also live. So however
much you may disagree with our conceptions of what "Latin America" means, you
can't blame poor J. Lo for them.

~~~
tsuipen
I'm sorry, but you are only partly right.

Let me first say this confusion exists also amongst some Latin Americans
because there is a lack of Latin American history (as South American and
Central American continents) taught in Latin America. Each country focuses
largely on their own because each country has such a rich and diverse history.

But let's take your argument apart.

BROWN:

The whole subject of "brown" and their diverse shades has been discussed
before and is currently joked about in Peruvian politics, where Alan García
said he was more Peruvian because of his "copper" skin color. Naturally, this
is ridiculed by most because it is a joke to talk about skin color since
mestizos can be all shades of brown (indigenous blood notwithstanding). And
then there is tanning (even mentioning this sounds ridiculous); as in, there
are people with lighter skin who just happen to be tanned, because they live
in an area where it is mostly sunny (sometimes all year round). You'll find a
higher percentage of "white"-looking people in capital cities in Latin
America. And many mestizos can pass off as Spanish (from Spain, just in case
it isn't clear). And there are also indigenous peoples who are white (see
indigenous groups that live closer to the Andean Cordillera or similar places
of higher altitudes, such as Huaraz where there is a mix of all skin colors
and valleys such as Pasco where there is an Austro-German community that
immigrated there from the late 1800s. Uruguay probably has a larger "white"
population than Argentina, and Paraguay has a very high one, too. You'll find
lots of white people in Southern Brazil. One last thing about "brown", Latin
Americans generally accept, rightfully so, that being "brown" has very little
to do with Moorish or African ancestry, and if you have any noticeable Moorish
or African features, you are mostly considered to have "black" attributes,
since blacks do not originate from Latin America.

LANGUAGE:

No, most people do not speak French as their native language in Latin America
and the Caribbeans. Haiti is the obvious one that has French and Creole as
their official language, but only about 10% speak it fluently, and this is in
a population of 9 million. French Guiana obviously has French as their
official language, but they're a population of 217,000 with many people
speaking other dialects and languages. Suriname has Dutch as their official
language, with Guyana and Belize having English as theirs and a minority speak
other Cariban languages, with tiny Belize having 40% Spanish speakers, I
believe. These countries are minorities, though. That's about it for French.
Portuguese is only spoken in Brazil, a country with a population of 203
million. All this out of a population of 580 million in Latin America. As for
Guaraní, yes, it is an official language of Paraguay, with 4,650,000 speakers;
a majority since the country's population is 6 million, but still a minority
within the total Latin American population. If you want to count a language
that is spoken by 200,000 people (Mapuzugun), go ahead, but then we start
getting into the smaller languages and dialects, too, which are many, all
throughout Latin America. Peru and Bolivia are interesting in that they sought
to preserve indigenous culture. Peru's official languages are Spanish, Quechua
and Aymara, in order of amount of speakers. Aymara is actually spoken by very
few Peruvians, though, and Quechua by 13% of the population--another minority
language. Quechua is spoken by 20% of Bolivia's population, and Aymara 14%,
with Spanish being the majority.

I mention all of this so you can have a perspective for what I am about to say
about language in Argentina. When colonizers arrived in modern day Argentina,
there were about 35 languages spoken there. Now there are only 12. A variant
of Quechua (called Quichua, most likely different from the "Incan" Quechua) is
spoken in Santiago de Estero by 100,000 people, a city founded by Spanish
settlers. Four Guaraní variants are spoken in Argentina: Chiriguano (known in
Argentina as Ñandeva) spoken in Jujuy and Salta by about 15,000 people; the
Guaraní Correntino is the official language of Corrientes; Mbyá is spoken by
3,000 people in Misiones; and lastly, the Paraguayan Guaraní spoken at various
parts of the borders. Chaco has "co-official" languages: Qom, Moqoít, and
Wichí (spoken by 45,000) from the Mataco language family. In Rosario, there
are about 10,000 Wichi speakers/peoples. There are other dialects and
subdialects such as Mivaclé, Chorote, and in Patagonia (Santa Cruz,
specifically), Tehuelche (Aonikenk or Aonek'o 'ajen), with all these also
being minority languages/dialects and the last spoken by just a few; there
used to be more in the south, but the Conquest of the Desert nearly wiped them
all out.

My point is there is a wealth of variety in each country, and many minority
languages and minority peoples. Argentina is not an exception. All of them
mixed with some type of European, whether it was a Western, Central or Eastern
European.

And just to be clear, very few Catholics believe in Catholic saints that
correspond to "American gods". And if by "American religions" you mean
"indigenous religions", then, no. Most of Latin America is Roman Catholic,
with an increasing number of Protestants, namely in Brazil.

~~~
kragen
Thank you for the interesting and informative reply.

The reason brown-skinned mestizos can pass as Spanish is because many Spanish
people have a fair bit of Moorish blood, so they're brown-skinned themselves.
"Moorish" can mean lots of different ethnic groups, some but not all of whom
look "black".

I didn't know about these pink-skinned American indigenous people. Where can I
learn more?

Uruguay definitely has a larger "white" population than Argentina.

It is certainly true that most people don't speak French as their native
language in Latin America. But I didn't say they did. I said that most people
in Latin America do speak one of French, Spanish, or Portuguese. I included
French to avoid the debate about whether Haiti and French Guiana are part of
Latin America. Adding more Romance languages to the list (Romansch! Ladino!)
wouldn't make the statement less true. That's simple logic.

Suriname, Belize, and Guyana aren't part of Latin America, so they're
irrelevant.

The numbers you quote for Bolivia are for _primary_ language: 20% of Bolivians
_primarily_ speak Quechua. A much larger number speak primarily Spanish but
also Quechua. I suspect the same thing is true of the other statistics you
cite.

Your statistics for Argentina are a good demonstration of how Argentina is
much less American (and more European) than the rest of the continent. In
Peru, 20% of the people primarily speak Quechua; the Quechua-speaking
community you mention in Santiago del Estero, by contrast, is 0.25% of the
Argentine population, proportionally 80 times smaller.

There is indeed a wealth of variety in each country, even in Argentina, but
Argentina's American heritage, in terms of language, genes, and religion, is
extremely marginal here in the capital, and marginal even in the rest of the
country.

> And just to be clear, very few Catholics believe in Catholic saints that
> correspond to "American gods". And if by "American religions" you mean
> "indigenous religions", then, no.

There are lots of examples of syncretic saint/American-god combinations. Here
is one you might find interesting:

<http://www.uv.mx/popularte/esp/scriptphp.php?sid=387>

Of course the Catholic people who worship, excuse me, venerate these saints do
not believe that they are worshipping Aztec or Maya or Mapuche gods or
celebrating Aztec religious festivals; that would be heretical. Nevertheless,
there are identifiable collections of attributes that have been transferred
from pagan deities to Catholic saints, and from pagan festivals to Catholic
holidays.

Not around here, though. We just have Gauchito Gil.

~~~
tsuipen
kragen, chromosomes passed on from Spanish people from their own ancestries
are not something that people distinguish/highlight--at least not in South
America. You are right, however, in stating that,
colloquially/conversationally, "Moorish" can mean lots of different ethnic
groups, but in my field of study, this interpretation is usually seen as
pejorative. So, I was specifically talking about the immigrants in the Iberian
Peninsula from the time of Al Andalus.

Regarding "pink-skinned" American indigenous peoples, the thing you have to
understand is that there are many patches of Latin American territory that are
not visited or studied (you can say they remain "undiscovered"), so there is
no nomenclature or taxonomy for a specific tribe. So, there are dozens of
indigenous tribes with no names and many that haven't been discovered yet. I
mentioned the areas where they are from so you can get an idea and Google the
places (Huaraz, Pozuzo, etc.), but, as you know, there was an incredible
amount of mixing from Europeans (from all over Western and Central Europe) and
the indigenous peoples, in this case from Peru.

The study of non-Spanish European immigrants in other South American countries
that are not Argentina, Uruguay, Paraguay, Chile, and I assume Southern
Brazil, is still in its infancy, and, as an example (because I wrote on this
and know more about it), German immigrants in many parts of the continent were
never documented, and families of German descent (myself included) are only
now formalizing everything and documenting where their ancestors came from and
giving a rough estimate of a year of arrival based on memory and oral
traditions. It's very difficult, though, because of the way Latin America
functions, both politically, bureaucratically and socially. The take away
point is that Latin America is a lot more diverse than books or numbers state,
but the issue is that we can only guide ourselves by the numbers and facts
(creating a dichotomy). This is why in Latin America we talk a lot about the
"other history", the history that is not written or formalized, the history of
oral tradition and information handed down through other means. Even in
Argentina, there is a movie called "La historia oficial". It is one of Latin
America's major themes in history.

Despite all this, here I go citing numbers again (because, unfortunately, that
is what we have to work with): there are only 48 million indigenous peoples
(discovered) in all of the Americas. Usually, only people who consider
themselves "indigenous" (there is a social aspect to it, too, not just
biological) speak an indigenous language. This means indigenous peoples are a
minority and, in fact, are in danger of becoming extinct.

The reason why I brought up Peru and Bolivia is because they have the highest
population of aborigines, and because they understand that they need to be
protected. Peru and Cuba have a long history of sociopolitical discourse
protecting minorities and different ethnicities.

Despite this "other history" and "undiscovered tribes", I do believe it is
better to err on the side of caution. There is still much to be done and
studied in Latin America. Because each group of people lives a different
"reality" and each region is so isolated from one another, I'd rather think
there is more to be found out and looked at, because not everything is as
homogenized and connected as the United States (but even there, Americans
aren't aware of customs and differences between other regions, and how many
parts of the country look like a "developing nation").

Anyway, I need to cut this short, but on the subject of syncretism, the major
indigenous gods were transferred over to Catholicism because Europeans needed
a way to explain to indigenous peoples about Christianity, and as masters of
proselytism, they understood that they had to get on their good side and gain
their trust ("tame" them, in colonial speak) in order to facilitate a
conquest. So, there is some overlap, but not much, because the God of Rain or
God of Thunder had no real equivalent in Christianity, and Europeans taught
indigenous peoples that these gods were inferior and these characteristics
were held by an all-mightier god. So, most indigenous creation gods became the
equivalent of the Christian God. As such Tonantzin, the female counter part of
an All Mighty God, became Virgen de Guadalupe in Nueva España, just as the
First Council of Constantinople made the Virgin Mary "official". Both of these
female counterparts were created for similar reasons and both were derived
from pagan gods/concepts.

Anyway, yes, of course, Suriname, Belize and Guyana aren't Latin American
countries, but they are territorially in Latin America, and I mentioned them
since you mentioned Haiti, which isn't really considered a Latin American
country (there is a whole debate on what we should call "Latin America" or
Spanish-speaking countries and what countries should be included, along with
Brazil and Spain). So, I mentioned these other countries just in case.

Anyway, good chat!

------
rabble
Thank god Uruguay's not Argentina. This article is why i've refused to open up
an office on the other side of the river. Argentina's an amazing country where
just about every institution in society is in some sort chaotic collapse.

------
iwwr
"A crisis is an opportunity, what's _my_ opportunity?"

------
missing_cipher
A big problem is the lack of regulation, IMO. That owner who is doing things
"en negro" hurts the rest of the country and should be fined accordingly.
Since no one takes a big step forward to stop it, people see their colleges do
it and the trend continues.

Inflation is also pretty bad, but I don't think it falls completely on the
shoulder of the Government. Some items are simply overpriced. I'm not talking
between a big store and a simple corner store, I mean between two big chains
you can see price differences of 50% or more sometimes. Again, taking
advantage of the lack of regulation.

And we don't all see the U.S. as THE economic model, far from it.

~~~
wslh
"That owner who is doing things "en negro" hurts the rest of the country and
should be fined accordingly". This is a chicken/egg issue. People try to avoid
taxes also because past governments confiscated their savings.

Speaking from the entrepreneurship perspective, there is a big issue having
employees, if you fire them you need to pay a salary for each worked year. So
a employee with 10 years of work receives 10 salaries if he's fired.

~~~
missing_cipher
This is a very good point, entrepreneurs have a lot to loose and history has
taught them to be wary of the Argentinian government. Can't say I blame them.
I suppose it's up to the government to "show" them that they can be "trusted"
again.

------
johnwatson11218
Does anyone think that something like bitcoin could help these people out? It
seems like the government there is not doing its job and providing
infrastructure to conduct business. Why not use a distributed payment system?

~~~
kragen
The problem is not that it's too hard and expensive to transfer _money_ here.
It _is_ hard and expensive if you do it legitimately (like we do), but a huge
fraction of the economy is underground. Like a third.

The problem, if I had to sum it up in a soundbite, is that _you can't trust
anybody_. And so nobody trusts you. Unless you're family. You can imagine the
effect that has on the competence of officials and executives.

The crazy laws are a big problem, but not as big as the endemic non-government
corruption. Bank _financing_? We had to get a personal recommendation from our
accountant to open a _corporate bank account_.

Bitcoin isn't going to help with that. If anything, it will make it worse.

The funny thing is, living here is pretty good, if you can afford the bare
minimum needed to survive.

------
meow
It's surprising that business owners are complaining about inflation. I always
thought its the fixed salaried employees who usually complain (because their
salaries don't scale as fast as the inflation).

~~~
Duff
High inflation means you can't get loans and have to spend money immediately.

Also, those salaried workers have rights. If you can't pay them, the
government shuts you down.

~~~
meow
aah.. sort of like the credit crunch then.. it kind of feels counter intuitive
because the usual cycle would be: a) credit crunch with loss of demand leading
to deflation b) governments pump money c) money loses value pushing inflation
higher.. d) Governments try hiking rates and pull back money..

But some how in this case it seems the order is all jumbled up..

~~~
Duff
Yup. Problems materialize faster.

Deflation is different -- basically everyone gets scared and stops spending
money. As a result, the "velocity" of money slows down and prices drop in a
race to the bottom. (The best example of this was the car market in 2009. If
you had cash, you could get unbelievable deals on cars.)

With inflation, there is plenty of money out there, but evaluating risk gets
difficult. High inflation tends to have a snowball effect, so you don't want
people owing you money -- think of it as compounding interest in reverse. So
you end up with informal contracts... "Give me a car today, and you get 15
goats or hunks of aluminum in July."

A creditor wants informal contracts, because like in the US, paper money is
"Legal Tender for All Debts, Public and Private." But to have informal
contracts, you need a personal/trust connection... and that encourages
corruption and nepotism.

------
loboman
Surprisingly accurate

------
itswindy
Buy a couple of acres of land somewhere, at least you might not starve.

But EU is going to go down first.

