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U.S. Gets a Second Chance to Be Friends With Argentina

James Gibney writes editorials on international affairs for Bloomberg View. He was features editor at the Atlantic, deputy editor at the New York Times op-ed page and executive editor at Foreign Policy magazine. He was a foreign service officer and a speechwriter for Secretary of State Warren Christopher, National Security Adviser Anthony Lake and President Bill Clinton.
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Sunday's election of Mauricio Macri as president promises a fresh start not only for Argentina, but also for its ties with the U.S., which have been mostly chilly since Argentina's massive default in 2001.

Yet that will only happen if the U.S. revisits and learns from its own role in precipitating this diplomatic deep freeze. When President George W. Bush came into office, he threw away a budding, multi-faceted relationship to make Argentina a misguided object lesson in fiscal probity. If the U.S. truly wants Latin America's "pink tide" of populist socialism to recede, and to rejuvenate its own regional diplomatic mojo, it needs not only to engage more deeply with the continent but also to take a more strategic approach to advancing its interests.

Argentina

For decades, U.S.-Argentine relations have been marked, as one historian put it, by "repeated misunderstandings, extended periods of tension, and missed opportunities for cooperation and friendship." They took a turn for the better with the 1989 election of President Carlos Menem. Partly this was driven by Menem's conclusion that the only way to end Argentina's recurrent economic travails was to break with the statist policies of the past -- a decision that cheered U.S. policy-makers.

But according to Domingo Cavallo, who served both as Menem's foreign and economic minister, Argentina also saw the Cold War's end and President George H.W. Bush's effort to create a New World Order as a chance to lock in economic and political benefits by aligning Argentina more closely with the U.S.

Over the next decade, a series of remarkable policy shifts followed. Argentina set aside its nuclear rivalry with Brazil and ratified the Nuclear Non-Proliferation Treaty. It sent ships to participate in the Gulf War. It cancelled a controversial program, funded by Egypt and Iraq, to develop a medium-range missile. Menem became Latin America's "most vociferous critic" of Cuba's human rights record.

Argentina also dramatically stepped up its participation in United Nations peacekeeping, and in 1997 the administration of President Bill Clinton designated the country a major non-NATO ally. At least figuratively, Argentina had achieved the "carnal relations" that Menem's Foreign Minister Guido di Tella famously declared he sought with the U.S.

Then came the break-up.

Despite achieving brisk economic growth in the 1990s, Argentina's government also continued to borrow heavily, and the decision to peg its currency to the dollar made the country vulnerable to external shocks. When the 1997 Asian crisis hit, falling demand for Argentine exports shrank its foreign reserves, making debts harder to cover. Meanwhile, the dollar's appreciation rendered Argentina's exports less competitive.

The U.S. at first tried to help. After crashes in Asia and Russia, the Clinton administration worried about a knock-on crisis in its good friend and star neoliberal pupil. So in 2000 it backed a $20 billion support package from the International Monetary Fund. Even with that in place, however, Argentina's economic troubles mounted.

Unfortunately for Argentina, the incoming administration of George W. Bush was less sympathetic -- skeptical about the wisdom of "bailouts," and suspicious of the growing influence of multilateral organizations.

Treasury Secretary Paul O'Neill told Congress that the IMF "had been too often associated with failure"; in his earlier years as an academic, Treasury Undersecretary for International Affairs John Taylor had called for its abolition. (I leave it to Sophocles and psychologists to explain the glee with which the younger Bush undermined every multilateral pillar of the New World Order laid out by his father.)

In the summer of 2001, the administration signaled it was reluctant to support more IMF help for Argentina. As O'Neill put it, "Argentines have been off and on in trouble for 70 years or more. They don't have any export industry to speak of at all. And they like it that way. Nobody forced them to be what they are." The U.S. punted, and the IMF decided in November 2001 to pull the plug on further financial support. In December, Argentina defaulted on $132 billion in debt.

In the year that followed, the economy shrank by 11 percent, savings evaporated and more than 50 percent of Argentines were plunged into poverty. A revolving door of caretaker regimes led to elections in 2003 that brought to power Nestor Kirchner, who regularly lambasted the U.S. and IMF for beggaring his country.

Of course, blame for the conditions that led Argentina to collapse rests primarily with the Argentines. But the U.S. decision to let Argentina fall was neither necessary nor consistent. Even as the U.S. railed against the IMF and bailouts, it backed assistance to Turkey, Brazil, and Uruguay. And consider some of the costs. In Argentina, public opinion toward the U.S. turned sharply negative; there, as in the rest of Latin America, the U.S. reinforced its reputation as a fickle ally by abandoning a more-than-willing partner.

Worse, that partner then became a pain in the pampas. Kirchner not only repudiated neoliberalism and the so-called Washington Consensus; he and then his wife Cristina Fernandez unhitched Argentina from U.S. goals.

Kirchner cozied up to Cuba, and he and his wife went on to sign more agreements with Hugo Chavez's Venezuela than with any other country, including inviting it into the Mercosur trade bloc. Kirchner opposed the invasion of Iraq and bucked the U.S. at the UN and the Organization of American States. As the host of the 2005 Summit of the Americas, he helped organize a counter-summit to attack the U.S. and its plans for a Free Trade Area of the Americas.

After taking office, his wife continued the sniping and skirmishing -- trumped-up incidents like withdrawing from U.S. police training programs that Argentina said promoted oppression, or confiscating equipment to be used for joint security exercises. More seriously, her administration reportedly conducted secret negotiations with Iranian officials offering, in return for Iranian oil, to deflect charges that they organized the 1994 bombing of a Jewish community center in Buenos Aires. And Fernandez has opened the door to growing Chinese influence with a string of financial deals, motivated both by the country's post-default needs for cash and her belief in the advantages of a multi-polar world.

The election of Macri promises better diplomatic days ahead: He plans to shift Argentina's foreign relations away from China, Iran, Russia and Venezuela toward the U.S. and Europe.

But given the sharpening global competition for influence (not least with China), the U.S. had better reciprocate. Macri will need American support to finally regain access to the international credit markets. That's a subject of heated dispute, with lobbying groups (bankrolled by hedge funds who bought up Argentina's defaulted bonds) pushing the U.S. to take a hard line. President Barack Obama shouldn't put that narrow interest ahead of rebuilding its partnership with Argentina and its broader influence in the hemisphere.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
James Gibney at jgibney5@bloomberg.net

To contact the editor responsible for this story:
Christopher Flavelle at cflavelle@bloomberg.net