Excellent reporting from Buenos Aires. From the FT:
In a bid to stem capital flight, Cristina Fernández, newly re-elected as Argentina’s president by a landslide, has ordered energy and mining companies to repatriate all their export revenue.
“This reeks of desperation at trying to curb capital outflows and in the long run is unlikely to be successful,” said Jason Press, Latin American strategist at Citigroup. “This is her first move since re-election. It puts a bad taste in your mouth for the next four years.”
Argentines have been scrambling to buy dollars, which are more attractive because the peso has been depreciating at about a third of the real rate of inflation, now believed, in the absence of credible official figures, to be about 25 per cent. Capital flight is running at about $3bn a month and totalled $9.8bn in the first half of 2011, compared with $11.4bn in the whole of last year.
As a result, the central bank has been blowing through reserves – it has spent $3bn in the past two months – to stop the peso from depreciating too quickly. The central bank has promised no brusque shifts but, unless inflation is curbed, faster depreciation looks inevitable.
Christina is at it again. Her justification is fairness.
It said the move was necessary “for reasons of fairness, since the circumstances which gave rise to these exceptions have changed and in a bid to grant equal treatment to other productive activities, such as the agricultural export sector”.
The troubling economics aside, fairness is not a justification. At least not by itself. It is, however, perhaps the most abused word in our politics. First, it is meaningless. Ask ten reasonable people what fair means and they will give you ten different answers, but none will say they are opposed to it. A fair fight in boxing is one where the rules are followed: weigh-ins are passed, the referee is impartial and enforces the rules, the players use regulation gloves and are drug free, etc. “He won a fair fight.” I weigh about as much as Wladimir Klitschko. That fight would NOT be fair.
Second, it can always be used as a justification. No evidence need be offered to prove unfairness, and there is not metric to measure fairness. It is as elastic a term as we have. When someone says that something is unfair, they really mean, I wish it were no so. Too bad.
What is my definition of fairness? That simple rules are applied across the board, without fraud and evasion, and that third parties, including the government, are limited in their abilities to place costs on others. Part of fairness is freedom from coercion.
But back to Argentina. What should Christina do? She should simply offer free classes on the Kirchner Method of Wealth Growth and Accumulation, and then go back to Patagonia and supervise glaciers.