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Argentina's astounding recovery: Ambassador José Octavio Bordón
The Washington Diplomat / April 2007

By Larry Luxner

José Octavio Bordón remembers hyperinflation at its worst.

More than once, Bordón — former governor of Argentina's mountainous, wine-producing province of Mendoza — ran out of cash to pay government workers because the printing presses simply could not keep up with the demand for banknotes.

But that was nothing compared to the devaluation that came later — and which for Argentina was more like the Great Depression.

"The period between 1998 and 2002 was the worst, deepest recession in our history," said Bordón. "We were $160 billion in default, which was larger than our GDP at the time."

Argentina's overvalued peso, which had been on par with the U.S. dollar, suddenly lost one-third of its value, wiping out thousands of middle-class shopkeepers and their life savings, and turning into a once-prosperous country into an economic basket-case.

Yet as devastating as that recession was, Argentina's recovery has been equally dramatic.

In less than four years, President Nestor Kirchner — inaugurated in May 2003 with only 22% of the popular vote — has managed to restructure Argentina's debt, lead successful negotiations with the International Monetary Fund and pull more than eight million of Argentina's 40 million inhabitants out of poverty. Those accomplishments have given him a sustained approval rating of 75%, making him one of the most popular leaders in Latin America.

Bordón, appointed by Kirchner in July 2003 as Argentina's ambassador to the United States, said the country's economy has been growing at between 8.5% and 9% since then, translating into perhaps one of the region's strongest economies. At the same time, inflation has been slashed from 41% in 2002 to 9.8%, and imports have skyrocketed by 400%.

"We are trying again to be a middle-class country, not just a country with a middle class," he said. "At the same time we're growing, we have also reduced unemployment from 23% to 9%, and we've cut by half the levels of poverty and extreme poverty."

The ambassador added: "We have gone from a country with a fiscal and trade deficit to fiscal and trade surpluses. Over the last four years, Argentina has returned more than $25 billion to the IMF, finally paying off 100% of our debt on Dec. 15, 2005. It's the first time since 1956 that we don't owe the IMF anything."

Bordón, 61, spoke to The Washington Diplomat in a one-hour interview at his residence on Q Street, near Dupont Circle.

The political appointee and former senator, who hails from the city of Mendoza, is best-known in Argentina for his failed presidential bid in 1995.

Bordón — at the time a visiting professor at Georgetown University — is a longtime adversary of former President Carlos Menem of the Peronist party. Despite Argentina's temporary prosperity during the 1990s, Bordón gradually became more and more frustrated with Menem's neoliberal economic policies, which he felt would eventually drag the country down. Bordón formed a new left-wing alliance known as Frepaso to compete against the more established political movements in Argentina.

"It was the first time a third party came in second," said Bordón, noting that Frepaso got over 30% of the vote. After the election, Bordón went on to work as a consultant for the Inter-American Development Bank; he also served as general director of culture and education for the province of Buenos Aires.

But Bordón's appointment as ambassador in Washington was a particularly difficult assignment, especially during the first two years.

"The central issue was helping Argentina recover and get out of the crisis of bankruptcy and default," he said. "In the middle of the crisis, we thought about dollarization. During the '90s, we had convertibility [with the peso], but you don't have the same competitiveness. It was unsustainable."

Bordón pointed out that although big companies are important in terms of Argentina's key commodities, it was small and medium-sized companies that drove the country's economic recovery. "We've seen cumulative growth of 35% in the past five years," he said. "This administration had the responsibility of recovering financial confidence in Argentina, both at the domestic and the international level."

Kirchner, he said, has lowered external debt from 160% of GDP to around 70%. Argentina's GDP is currently around $200 billion.

"Since December 2005, we have been concentrating on three issues: diversifying our exports, increasing direct investment from the United States, and promoting scientific and technical cooperation between the two countries."

Bordón says he divides his time evenly among Congress, the executive branch, NGOs, traveling throughout the United States (he's visited over 30 states) and spending time with the Argentine expatriate community, which numbers around 200,000. Argentine consulates are located in Atlanta, Chicago, Houston, Los Angeles, Miami and New York.

"We have a very intense cooperation agreement. We've just had the first visit of the Argentine Investment Council to New York and Washington," he said. "And we've brought more than 20 presidents of American companies in Argentina to promote missions to the U.S., in order to increase direct U.S. investment back home."

Despite its prosperity, Argentina was not among the countries President Bush visited on his mid-March trip to Latin America. Asked why not, Bordón deflected the question — suggesting we ask the State Department instead — but did acknowledge that many Argentines are unhappy with the Bush administration for various reasons, including the war in Iraq.

"The polls show that in general, attitudes are negatives like in the rest of the region, but we maintain positive relations with the U.S. because the interests of our countries are more important than public opinion," Bordón told the Diplomat.

"In general, I would say U.S.-Argentine relations are characterized by four elements: sincerity and frankness; respect; independence, and a positive attitude, especially in issues like non-proliferation of weapons of mass destruction and the fight against terrorism," he said.

Yet commerce with the United States pales in comparison to Argentina's trade with its neighboring countries in the Mercosur trade bloc. According to Bordón, the Mercosur bloc, including Chile, accounts for 35% of Argentina's external trade. That compares to Europe (19%), Asia (16%) and the United States, Mexico and Canada, which comprise NAFTA (15%).

"We have a good balance of exports and imports. We don't have a concentration in one market," he explained. "For us, Mercosur is important, but we always saw it as an open integration, not aimed at impeding trade with the rest of the world."

On the other hand, Argentina — along with Brazil — appears to be resisting efforts by the Bush administration to create a Free Trade Area of the Americas (FTAA) that would stretch from Alaska to Tierra del Fuego. One reason, says Bordón, is that the United States doesn't want to include the issue of agricultural subsidies, but prefers that the FTAA cover only things like service industries and intellectual property rights.

"Agriculture is 50% of our trade, and if that 50% is not part of the FTAA, then it's impossible for us to have a free-trade agreement only for the service industry," he said. "For this reason, we cancelled in the short term the possibility of discussing an FTAA until we finish the discussion in Doha. If the United States would be willing to include agricultural subsidies in the negotiations, we wouldn't have problems."

At the moment, Argentina has a deficit with the United States but enjoys a trade surplus with the rest of the world.

"Today we have a fiscal surplus, [partially] because we increased tax collections at all levels of government. For me, this is an important step to have more transparency in society. Secondly, we have a more independent and better Supreme Court, and we are working to have a better judiciary system in Argentina.

"Finally, it's important not only to have a good macroeconomic policy, but also to fight against corruption and impunity. But we learned that you need to fight corruption within the institutional process, because if not, you replace old corruption with new corruption. Without democracy and transparency, it's impossible to have good government."

Bordón adds that "for us, it's impossible to defend human rights if you are not fighting terrorism, but at the same time it's a mistake to fight terrorism without human rights at the domestic and international level."

To that end, the ambassador stressed the need to continue surveillance of the Triple Frontier where Argentina, Brazil and Paraguay meet. Those three countries, along with the United States, have for several years now been keeping a close watch on the area, which is home to thousands of Arabs and may be linked to financing of Hezbollah activities worldwide.

In March, Argentina observed the 15th anniversary of the bombing of the Israeli Embassy in Buenos Aires — a terrorist attack that took 29 lives and injured dozens. The blast was followed two years later by a truck bomb that destroyed the AMIA Jewish center in Buenos Aires, killing 85 people and injuring over 300.

"I remember when AMIA was attacked, and also the Israeli Embassy. Thousands of people protested in the streets, and 90% of them were not Jews," recalled Bordón. "There were headlines in the newspapers saying 'Hoy todos somos judios en Argentina' — today, all of us are Jews in Argentina."

The two incidents — considered the worst terrorist attacks in Latin American history — have never been solved, though the evidence strongly points to Iranian involvement. In the aftermath of the 1994 AMIA bombing, the Menem government actually tried to impede the investigation, sparking cries of protest from Argentina's 200,000-strong Jewish community.

Kirchner, on the other hand, has vowed to pursue the case to the end, even creating a special investigative unit and giving that unit the resources it needs to get the facts.

"Certainly, in the process of investigation, errors were uncovered, and the current Argentine government has tried to improve the quality of the investigation through the new unit," said Bordón. "It was not a political decision to circumvent the judicial system, but an effort to improve the capability of the investigating unit to do its work. We have a strong commitment to this because we have previous experience with state terrorism committed during the dictatorship between 1976 and 1982."

Even so, Bordón concedes that proving it was the Iranians isn't easy.

"It's very difficult in these cases to find who's responsible. Unlike other attacks, nobody took credit for these. Iran and Hezbollah denied that they had anything to do with it, and Hezbollah insists that it acts only inside Lebanon."

Alberto Nisman, the special prosecutor heading the AMIA investigation, concluded in a recent report that the Iranian government planned and executed the 1994 bombing with the full knowledge of then-President Hashemi Rafsanjani.

In fact, Rafsanjani was among eight Iranians and one Lebanese that Argentina had sought in connection with the attack. But Interpol, in a decision announced Mar. 15, said it would issue arrest warrants for only six men; among them is former Iranian intelligence chief Ali Fallahian and a Lebanese militant, Imad Moughnieh.

Bordón said he doubts Argentina would break diplomatic relations with Iran because those relations are already "at a very low level," he said.

"In the past, we had millions of dollars of trade, but today, we have practially no trade at all," he said. "The relations are very weak, not even at an ambassadorial level."

In his final report, Nisman suggested that Argentina was singled out for the terrorist attacks partly to humiliate Menem, who had reneged on an agreement to provide Iran with nuclear technology.

Asked about this, Bordón politely declined to offer an opinion.

"It's not correct that I comment on this, because it would affect the integrity of the investigation. But I can tell you that we only export nuclear technology to countries that fulfill all the requirements of the IAEA."

He added that "Argentina wants to guarantee the integrity of the judicial process. Our commitment was to put all the logistical and information resources possible into the hands of the prosecutor. But the conclusion is in the hands of justice. It's not a political issue."

Another foreign-policy issue has also been making headlines lately: the Falkland Islands, known in Argentina as the Malvinas. It was exactly 25 years ago that Argentina and Great Britain fought a war over the remote South Atlantic colony, which is claimed by both countries. The conflict resulted in 258 British and 649 Argentine deaths, and ended with Argentina's surrender on Jun. 14, 1982, less than three months after it started.

"People in Argentina generally believe now that the war was a mistake, especially since we returned to democracy in 1983," said Bordón.

"But the feelings of Argentines concerning our sovereignty over the islands hasn't changed, because the Malvinas were taken by force in 1833 by England. We maintain our permanent diplomatic demands. It's necessary that both countries have peaceful conversations in order to overcome this sovereignty dispute. Unfortunately, the United Kingdom refused, and we hope they'll change their attitude."

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