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Post Number: 486
Registered: 12-2004
Posted on Monday, May 29, 2006 - 8:14 am:   Edit PostPrint Post

The following is meant as a discussion and in no way pretends to be the ultimate understanding of our continuous economic malaise. Please apologize any typos as well as any inaccuracies.

Throughout our economic history and financial upheavals it was common to see extensive amounts of money coming from abroad to take advantage of specific temporary financial conditions. Although not new, and certainly not specific to any particular country, the practice of 'speculative money' crossing borders for a short period of time with the objective of rapid and high gains became such a common *theme* that was categorized as 'capitales golondrina', in reference to the population of birds that migrate very long distances for specific purposes and at specific times of the year.

In Argentina, this practice took root during the military period to such extent that it was believed that the powers that be were supported by and lived in connivence with 'la patria financiera'. Although noone can determine who exactly was the 'patria financiera', the term referred to those whose financial power and savvy was such that they could take advantage of the economic conditions at the time with the secret cooperation of local authorities. To understand better what we meant by 'patria financiera' it is worth analyzing the time when Jose Martinez de Hoz was in charge of our economic destiny.

More importantly perhaps, is to focus on the fact that our country has had many such collapses and the one in 2001/2002 just added to the list. In all, there have been approximately 32 devaluations and 5 defaults. Throughout these repetitive nightmares we changed our currency names from pesos, to pesos argentinos, to australes, to whathaveyou and came up with a gazillion terms for locally issued bonds. More recently, we can all recall the terms corralito, or patacon. During the times of Martinez de Hoz, a common one was 'la tablita' (if I remember correctly).

A good read on this subject is Daniel Muchnik's book 'La Patria Financera' but there are probably many more, including investigative reports from journalists. In spite of the current government taking measures to lessen the deleterious effects of 'capitales golondrina' (read Clarins note about it here), I wouldn't be surprised to learn that -as we write in this forum- there is yet another group of investors speculating this way, whether individuals or hedge funds, who are always in-the-know.

What 'capitales golondrina' and 'la patria financiera' represent, in essence, is that during the last decades in Argentina it has been vastly more profitable to make a large financial difference by speculating and 'playing the game' as opposed to investing in traditional industries. The debilitating consequences of not devoting and distributing investments correctly has always lead to economic catastrophes, something we know a lot about. It is really important for anyone who 'invests' their savings in Argentina -whether for the purpose of initiating a small enterprise, buying a second home or retiring- to understand our economic history of the last 30 years. Just to be grounded, at a minimum... or read local newspapers with a critical mind.

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