Think the U.S. economy feels shaky? Try doing business in Argentina, where corruption is the norm, regulations are absurd, inflation is rampant, and financial crises are a dime a dozen (11 cents next month)….
In Argentina, even the most successful entrepreneurs are never entirely sure how safe they are. “I’m more worried than ever,” says Susana Balbo, the founder of Dominio del Plata, a $12 million winery in Mendoza that makes some of Argentina’s finest Malbec and Torrontés. Balbo is 55, with blond hair and the hearty, weatherworn skin of someone who has spent a lifetime picking through vines. She is also the most successful wine entrepreneur in a booming industry, but she tells me that she often dreams of leaving Argentina, maybe for California or New Zealand. “But I already have everything planted here,” she says, with tragic resignation. “So I must continue to the end.”
Balbo has flirted with disaster ever since she started her first winery, in 1991. At the time, inflation in Argentina was rampant—prices were rising 30 percent a month. Balbo coped by spending her money as soon as she had it. (During the worst periods of hyperinflation, this was a common practice, even in households. One Argentine entrepreneur I met recalled having to take a day off from school every time his mother got paid in order to help her spend her paycheck as quickly as possible.)
An innovative start-up company in Mendoza, which helps tenants pay their landlords online or at ATMs, has been awarded $40,000US by Start Up Chile. PagaTuAlquiler is a new company started by Adrian Fisher and his partner Guillermo Horno which makes rental payments quicker, easier and safer allowing tenants to pay their monthly rent online, at ATMs or at rapipago’s across Argentina.
In its early days, the founders of MercadoLibre wanted to ensure that their online company, considered the eBay of Latin America, just survived…. The Latin American online e-commerce site recently announced its first quarterly dividend on the heels of a $6 million profit and $200 million in revenue last year…. MercadoLibre is the dominant e-commerce platform in Latin America, with 31.8 million unique visitors last year and an average of 1.7 billion pages viewed monthly. Launched in Argentina, the company now operates in 12 countries, including Brazil, its largest single market. U.S.-based auction giant eBay took a 20% stake in 2001 and is MercadoLibre’s biggest minority shareholder.
In addition to buoying investors, MercadoLibre is also boosting the fortunes of Latin American entrepreneurs. During the Argentine economic crisis of 2001 and 2002 traffic increased as residents who had lost access to their financial holdings turned to MercadoLibre to sell their assets. Last year, 16 million Latin Americans sold items using the company’s site, and 52,000 people make their living selling goods there.
Argentina’s ranking in The Wall Street Journal/Heritage Foundation’s Index of Economic Freedom—now 135th out of the 179 countries ranked in the Index—has declined steadily in the seven years since President Cristina Fernández de Kirchner and her husband, former President Nestor Kirchner, took power. It is by far the lowest ranked G-20 nation. Recently Charles Krauthammer neatly summarized why: Argentina is “a chronically unstable, endemically corrupt polity with a rich history of dictatorship, economic mismanagement and the occasional political lunacy.”