subject: Fiscal Crisis Gives Argentines Familiar Sinking Feeling [print this page] Along the cobblestone streets of the Palermo neighborhood, a mecca for this city's hippest restaurants, the outdoor tables are still full most zentai bodysuit nights and the red wine flows freely. Signs of the global financial meltdown are not always obvious in a country conditioned by past economic traumas to live for the moment.
But even here in Palermo, where tourists and well-heeled Argentines come to play, Manoj Menghani, the owner of two Indian restaurants, is quietly preparing for the worst.
With summer in South America a month away, Mr. Menghani is among a growing number of Argentines who are stockpiling dollars amid worries that their government's economic policies have doomed them to yet another financial crisis.
A steep fall in commodity prices and the global credit crunch are affecting much of Latin America. But Argentina is widely considered to be among the countries in South America most vulnerable to recession or other financial shock because of its government's stewardship of the economy.
It saved far less than neighbors Chile and Brazil did during the recent commodity boom, and the Peronist government of President Cristina Fernandez de Kirchner has lost credibility with international markets for its populist politics, lack of financial discipline and questionable government data on the economy.
Argentines are pulling money out of the country's banking system at a pace that has alarmed some economists, stoking potentially self-fulfilling fears of another crippling default on international debt that could bring Argentina's seven-year economic expansion to a screeching halt.
Six months ago, when the country's farmers were waging a protracted battle with the government over export taxes, Mr. Menghani started to convert almost all his money from spider man costume Argentine pesos to dollars. Today, he keeps just enough in the local currency to pay salaries and cover his other expenses.
''We think the real crisis could hit Argentina in two or three months,'' Mr. Menghani, 47, said. ''Argentines are very skeptical of the summer. They always seem to have crises in the summer.''
After a period of relative prosperity and renewed confidence, Argentines are living through another moment of uncertainty. The failed effort to raise taxes on farmers, and now a move by Mrs. Kirchner to nationalize some 86 billion pesos (nearly $26 billion) in private pension funds, has raised fears that the government is short on cash. Mrs. Kirchner said the pension takeover was necessary to safeguard retirees' savings from turbulence in the global economy.
But the move, which requires legislative approval, has alarmed international investors, who see it as an admission that the government will grab whatever cash it needs to avoid losing political support before regional elections next year.
Now Argentines are getting that familiar feeling of being let down by their government again. Millions were caught flat-footed in December 2001, when the government tried to limit withdrawals of bank savings. The measure backfired, causing a panic as Argentines rushed to pull out whatever they could. The country then defaulted on billions of dollars of loans, and the government sharply devalued the currency. An economic malaise pushed more than half the country below the poverty line by late 2002, before a strong recovery began.
These days, there are browsers but few buyers at the Innocenza beachwear shop in the garment district. Its orders for zentai are off by more than 15 percent.
