Chasing The Crash

At the end of 2001, the Argentinean economy fell completely into the shitter. After years of recession, the peso lost two-thirds of its value and Argentina's government defaulted on more than $100 billion in loans. Millions of working-class people found themselves in an economic crisis that made Enron look like a bad day at the track.

Here's the basic story, coming from a man who flunked Econ 101: In 1991, the Argentinean peso was pegged to the U.S. dollar, one to one. This in itself is not unusual; a number of currencies are pegged to ours, including Ukraine, the Bahamas, even China. But as the South American giant slipped into recession in the mid 90s, the peso lost too much of its value against the dollar.

Efforts were made to shore up the peso. The International Monetary Fund, for instance, loaned the Argentines billions (space limitations prevent me from fully discussing the IMF's role in the peso's crash), but more drastic measures were needed. In June 2001, the Argentines decided to peg their money to both the dollar and the euro. As BBC News reported, the bill, known as Convertibility II, would take effect "just as soon as the euro rises to parity with the dollar." Thereafter the peso would then "be set at the mid value between the two currencies."

The BBC's closing sentence would be quaint if it weren't so depressing: "The euro is now worth about 85 cents of a dollar." Not even four years later, one American dollar buys approximately 76 cents of a euro.

And that's how I found myself backpacking across the reasonably priced Argentina earlier this year. Who can afford Europe?

The Iguazú Falls are tucked in a northeastern tip of Argentina bordering Brazil and Paraguay. They're said to be one of the world's most spectacular natural sights; they're certainly among Argentina's most striking landscapes. It was there that I walked among the remnants of the failed economy.

Along the highway that connects the waterfalls to the town of Port Iguazú are four hotels that were left behind, mid-construction, when the nation's economy collapsed. Today, they are poles of concrete with steel reinforcements sticking out of their tops like the hairs of a wire-wheel drill bit. These ghosts of tourism haunt the highway, skeletons awaiting a flesh they could not afford. Economic abortions-eerie yet beautiful.

At least two of the structures have been taken over by squatters. Think Gibson's vision for the Golden Gate Bridge. At the base of the largest, a magnificent eight-story frame that emerges from the lush greenery like a Mayan ruin, a family has taken over the small contractor's building. Their dogs run freely on the grounds, roosters peck at the dirt of the building's unfinished foundation, a mule grazes up and down the dusty road. When I hopped the fence, an old woman tending to the animals shot me a glance, then waved permission for me to explore the area. Unfortunately, the stairwell was padlocked and grates were welded over all access spots.

Next door, on the roof of what would have been a four-story red-brick hotel, three young boys played. As I approached, they stood at the edge, eyeing me suspiciously. They had dirty faces, torn clothing and rocks in their hands. I wasn't certain they wouldn't use me for target practice.

Hey there, I yelled in my passable Spanish, do you mind if I come up?

The largest of the three shrugged, tossed a baseball-size chunk of concrete in a different direction.

I climbed up the four flights and came out onto a flat roof half the size of a football field. The kids, I found out, lived in a nearby village. Judging from the graffiti carved into the soft concrete and the homemade soccer goals in the back field, this wasn't their exclusive playground.

Just three years ago, Argentina was a full-crash world. In December 2001, six months to the day after Convertibility II was passed, president Fernando de la Rua resigned. Millions of people lost everything as their dollar-based savings accounts were forcibly converted to the increasingly worthless peso. By June 2002, their money was trading at approximately three to one with the dollar; that's where it stands now. One taxi driver told me that the economy is recovering, but slowly.

As in Iguazú, in Buenos Aires there's no avoiding the past. The capital city is awash in graffiti. Stencils and slogans can be found on just about every building; some banks and government offices are covered at the street level. (Those that aren't escape only with the help of armed guards.) Even the monument in the world-famous Plaza de Congreso has been fenced off, its every side covered by anti-government screed.

This Friday, the deadline will pass for creditors to accept a debt-swap offer from the Argentinean government. Put simply, Argentina is offering to pay back $41 billion against the original $104 billion worth of loans. Those left holding the IOUs can take 30 cents on the dollar, or fuck off, cross their fingers and sue. It's the classic debt-recovery dilemma: Take a portion of what's owed you, or risking getting nothing.

For the swap to be successful (i.e., for the IMF to issue yet more billions in aid), 70 percent of creditors must accept it. As of press time, 80 percent of local bondholders were on board, making up 30 percent of the total default. As for foreign creditors, it may come down to the wire.

Reading this news, I wonder if the Argentinean government's credit rating will suffer. What's their FICO score? Will they still be able to get a credit card and a decent mortgage rate? More than anything, I wonder how long before the developers return to Iguazú-to take back their properties and send those three little kids, and that nice old lady and her mule, packing.