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National Pride and Low Social Trust -- Contradictory or Complementary?

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Argentina's high inflation, low social trust, and corruption run side by side with strong national pride

October 2018

The border between Chile and Argentina contains a wide-swath of no-man's land. We get off the bus to have our passports stamped on the Chilean side. We get back on the bus and drive for about thirty more minutes until we arrive at Argentina customs. Where the actual border is I am not sure. I am used to the hard border between the United States and Canada or an international airport where the moment you step in the new country you are examined. However, the international borders in the Southern Cone are quite different. 

Regardless of the country, the scenery is stunning. It is a mountain pass in spring with patches of snow and blooming wildflowers surrounded by massive peaks. We arrive at Argentine customs and it is chilly. The Argentines choose random bags to put through the x-ray machine. My big bag isn't one of them. However, all handbags, like my little backpack, are supposed to go through the x-ray machine. Carrying cheese from a farm in Chile, after getting my passport stamped I just walk past the x-ray machine without putting my bag on. No one does anything. Do they not care or are they not paying attention?

After watching the border guards search a few bags that went through the x-ray, we get back on the bus and on our way to Bariloche. I notice that many of the border guards are darker skinned. This surprises me because I had thought that Argentina, alongside Uruguay, was the whitest of the Latin American nations. This is but the first indication that these nations are not as uniformly white as advertised.

We descend into what becomes a desert and then as we get into the outskirts of Bariloche a lake and the mountains appear again. Truly stunning.

The Argentine mountains in spring



Getting off the bus, luggage handlers retrieve bags from the hold without being asked and then demand tips. Characteristically stubborn, I take my bag and refuse the tip and walk away. From the car windshield washers in Mexico City to “parking assistants” on a public street in Brazil to self-appointed baggage handlers at a bus depot in Patagonia, the unsolicited service workers are everywhere in Latin America.

Interestingly, people accept the unsolicited service and pay them. Throughout our travels in the region, I witness time and again friends paying for these unnecessary services without complaint. “That’s just how it is here” to “well, in other cities it is worse” to “there is a vast unemployed class” are what I hear when I ask why people give money.

My wife Hyejung, dad, and mom are waiting in Bariloche for me with a rental car. I am overjoyed to see them and it feels like a homecoming. We drive to a hostel next to the lake. The hostel is owned by a guy who claims that his credit card machine is broken when my mom tries to pay. Hyejung says this is common in Argentina. She has already been in the country for a couple weeks. Credit cards not only have fees for owners but also create a paper trail where they must pay taxes. Officially, the guy advertises on the internet and his door that he takes credit. Unofficially, his machine is always broken.

Hyejung also found that hostel owners routinely charge guests for taxes for which foreigners are exempt. She argued the point and won at times but the practice is alarming. It means that many foreign hostel guests are ripped off in the country as they supposedly pay a government tax that the hostel owners simply pocket.

While some businesses charge a false tax to boost their profits, many also evade the taxes they owe. If everyone paid all the taxes they were supposed to pay, no businesses would survive, says Valentina. She is the manager of our next hostel in the equally beautiful town of San Martin near Bariloche. Valentina is a leftist in favor of a stronger public sector. However, she justifies the cultural practice of tax evasion which weakens the public sector.

I am reminded of a conversation I had in Ecuador with an Argentine leftist. She told me with a shrug that both the left and right in Argentina are corrupt. Corruption is just a part of the culture so that by itself is not an argument about why a custom should change.

I mention to Valentina that in the United States and much of Europe everyone gets a receipt for services tourist accommodations. In Argentina, however, I point out to the manager that you have to ask for a receipt and it is given grudgingly because many owners do not want a paper trail of their profits. She, along with another Argentine guest named Stella, forcefully retort that this is not the United States or Europe. It is as if Argentina must be different even if it means by being more corrupt. A gringo pointing this out to them is equally annoying.

I also ask whether Argentina might be better off using the U.S. dollar. As I predict, Valentina and Stella forcefully shoot down this idea. Argentina suffers from heavy inflation and has for years. The restaurants write their prices in pencil because they are always going up. Accommodation prices are always quoted in dollars even though they are paid in pesos. As Juan, a hostel owner at a different hostel in El Bolsón near St. Martin says, “You can’t rely on dependable income if you budget in pesos.” Prices essentially fluctuate based on the dollar-peso exchange rate.

Juan lived in Europe for almost a decade and loved using the stable Euro. “Prices over the years went up very little or sometimes not at all,” he says nostalgically. “I really wish Argentina would not be obsessed with its pride and just adopt the dollar.” Some economists agree.

Ecuador, as I’ve written, has benefited from the stability of the dollar. Inflation is far lower than prior to its dollarization and in other non-dollarized Latin American nations. In the late 1990s and early 2000s, Ecuador’s middle class saw its savings wiped out by inflation. An Uber driver in Guayaquil, Ecuador told me inflation drove his father to financial ruin before the country changed to the dollar. Prices -- and thus the value of savings -- are now stable in Ecuador. Many middle-class Argentines have seen their savings wiped out multiple times in the last 20 years.

When I raise these points to Valentina and Stella, they both say it is about more than economics. It is about being independent. Without your currency it is hard to call yourself a nation. Interestingly, neither brings up an economic argument about why adopting the dollar might be negative (such as the inability to devalue export prices). It is all about pride. (I do recognize that I live in the world’s superpower and we do not have to decide whether to adopt another country’s currency; my place in the discussion is one of a privileged outsider.)

The national pride, however, does not translate into national trust or collective solidarity. In addition to the rampant tax evasion (and perhaps as a result of it), public services are constantly defunded. Jose, a small business owner from the capital on vacation in San Martin near Bariloche, says the goal of the conservative government in power in 2018 is to make public hospitals and schools so bad that people must go to the private sector for health and education. People give up on public sector services which makes it easier to then further defund. A vicious cycle. People in Chile mentioned a similar vicious cycle. (Unsustainable debts to entities like the IMF also play a role in the defunding of the public sector.)

I read an editorial in a Buenos Aires paper which argues that because the Argentine middle class is pulling their kids out of public schools en masse, public education is no longer an important political issue. The editorial says the poor have no choice but to attend the schools, regardless of quality. Moreover, the poor are more preoccupied by survival than political activism. Assuming the wealthy already go to private schools, the middle class are the people with the most political influence over education since they are more politically engaged. Without participation in the system, public education is no longer an important issue to the middle class.

Poor public services are an issue for the middle class, though, because they are choosing to send their children to costly private schools while still paying taxes to fund the public ones. The neglect of public education and subsequent expansion of private K-12 education is widespread throughout Latin America. A friend in Brazil, who struggles at times to pay his monthly bills, still sends his daughter to a private school to avoid what he describes as “a terrible public school system.” My friend could badly use the extra few hundred dollars a month he pays in tuition.

Jose’s analysis of Argentina's public sector is striking because he is not a social justice-focused leftist. He is essentially a loan shark whose business gives loans at 30 percent monthly interest to people who lack access to banks. Business in late 2018 is booming because when economic times are tough, more people come to him. He benefits from a society where many live on the margins unsupported by the state. As such, his analysis of the public sector’s decline seems objective and not driven by ideological thinking.

Jose also discusses how people do not buy insurance in Argentina because they fear they will not obtain a settlement in the case of a disaster. Juan, the hostel owner in El Bolsón, confirms what Jose says.

Juan and his wife also decided not to even try and access the official banking system to pay for startup costs for their hostel. Although they likely could have received a loan because they own land and have an income stream, “the process requires far too much paperwork and the rates are not good.” Instead, they asked relatives for a loan in U.S. dollars and at a lower interest rate than the banks offer.

Without a functioning insurance marketplace, poor public services and an inaccessible or poor quality banking system, Argentina appears to be a society in which it is not easy to get ahead. Add to this the nationalistic insistence on keeping their own currency despite the hyper-inflation it helps cause and things are further complicated.

The economic crisis that Argentina is experiencing, however, is far from visible in the beautiful tourist centers of Bariloche, St. Martin and El Bolsón. These areas are filled with wealthy Argentines and foreigners.

Walk a few steps to the edge of one side of San Martin, however, and a slum presents a major contrast from the first-world feeling of the center. Roads are unpaved. Dogs bark and snarl. The metal bars over windows that are ubiquitous in other Latin American nations reappear. The streets are full of garbage. St. Martin’s contrasts are proof of Argentina’s extreme inequality.

The slum’s inhabitants are noticeably darker and more indigenous-looking than everyone in the town center. On the other edge of town, too, there are dilapidated indigenous farming communities which, while better looking than the slums, still lack paved or even gravel roads.

I ask Valentina, the leftist hostel manager, about the indigenous poverty. Her response is that the indigenous always “want more even though they already have a lot. The farmland outside of town is reserved for the indigenous.” It is as the indigenous should feel lucky to have what they have.

Some Latin American nations embrace their mestizo and indigenous roots but Argentina is often discussed as the most European Latin American nation. The capital, Buenos Aires, is modeled on Paris and represents the image many Argentines historically have sought to portray to the world. The indigenous do not fit into Argentina’s strong national pride. Look around, though, and the supposedly exterminated indigenous are never far away.

The European-looking streets of Buenos Aires

The slums and indigenous farmland may be on the edge of town but Stela, the hostel guest referenced above, is a proud mestizo (mixed native and European). Juan’s wife Julie is also mestizo and embraces it. My walking tour guide in Buenos Aires is also openly mestizo.

As I was at the border of Argentina, I am again surprised. Everything I previously read about Argentina downplayed the current role of the indigenous in Argentina’s history because they were supposedly wiped out shortly after the Spanish arrival. A nation’s image and reality are often inconsistent.

Equally inconsistent, Argentina is a proud country with low social trust. Tax evasion, corruption and broken insurance networks are accepted as the price of being Argentinian. A country with such national pride, however, unfortunately cannot create a more functioning state where the citizens care for the state and the state cares for the citizens. Does such pride simply compensate for the weight of a self-neglected nation?

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