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The futile obsession of total control
June 18, 2009
It is paradoxical that Argentina, being a country with an economic history in which these events have been repeated ad nauseam and with awful results, still insists in this model. It would be very useful for the government to look at some of its neighbors, where progressive and center-left leaders have demonstrated to have learned from history and today navigate with relative comprehensiveness the stormy waters of the global economic crisis.
By Raúl Ferro

And here we go again. Within a short statement to the Comisión Nacional de Valores (Stock Exchange Commission) of Argentina, the electricity distribution company Edesur informed in early June about their plan to suspend the distribution of US$ 17.7 million in dividends it had promised to its shareholders the previous month. The reason? An announcement the company had received at the beginning of June by the "Ente Nacional Regulador de Electricidad de Argentina", within which it is barred from distributing dividends due to the fact that the electricity company has not fulfilled its investment commitments to maintain the service quality for its clients.

Primarily, the company says to have fulfilled its investment commitments. However, the basic subject is the environment in which the energy industry is developing in Argentina. After the economic debacle in 2001, the government has substituted the logic of market mainly by a political logic. This could be explained as an emergency measure of temporary nature. That is what also the government of the United States is doing with its banks and car manufacturers that have collapsed. However, President Barack Obama already has indicated that he wants the government to get out of this as soon as possible.

In Argentina, on the contrary, eight years after the "pesification", the hyper regulation is maintained within many sectors. In the case of the energy-sector, the normalization of its activity has not advanced much and the price for this is being paid by the Argentine economy as a whole. The main barriers for the modernization of the Argentine energy-infrastructure are not to be found in the lack of willingness to invest on the part of the companies, but rather within the suffocating governmental interventionism.

Worst of all, the administration of President Cristina Fernández insists in a model that has already been applied in many Latin American countries in the past, and that has proved to be a flat failure. The attempt to rule the economy by decrees could show some results in the short term; however, on the long run, the only thing that is going to be achieved is an accumulation of tensions which will end up in violent adjustments with enormous social costs.

It is paradoxical that Argentina, being a country with an economic history in which these events have been repeated ad nauseam and with awful results, still insists in this model. It would be very useful for the government to look at some of its neighbors, where progressive and center-left leaders have demonstrated to have learned from history and today navigate with relative comprehensiveness the stormy waters of the global economic crisis.

The Edesur affair confirms the fears that, given the deterioration of the economic situation, the straight line of the government represents more interventionism, even with some authoritarian features including intimidations, like the mentioned announcement. A very serious step in this direction was taken when AFJPs were nationalized; a measure that in addition to the control over thousands of millions of Dollars has guaranteed the government a seat within the board of directors of many companies.

Many Latin Americans ask themselves why Argentina is not today like is Australia or Canada, given the certain geographical and historical analogies. The answer lies within this sad insistence of trying to distort reality by the use of political force. The result is obvious: economic tensions and a sustained deterioration (again) in the market atmosphere. It does not attract attention, then, that the country is falling behind in rankings like "Doing Business", by the World Bank Group about the market environment in 181 countries, and within which Argentina is on the edge of joining the one third of the countries with the worst indicators. It does not seem to be the best formula to bring wealth and social progress to a country that has all the conditions to create wealth, development and social welfare.

The author is Contents Development Director of BNAmericas.com and member of the Advisory Council of CADAL