Emily Thornberry MP
Argentina
Mr. Eric Joyce (Falkirk, West): Last August, I was fortunate enough to take part in a study programme designed to provide me and three colleagues of various parties with an overview of cultural development in several different parts of the world. One of the places that we visited was Buenos Aires. The programme, the Norfolk trust fellowship, is run annually by the Norfolk trust charity and is designed to help to educate people in politics, though not just party politicians, in worldwide development issues in the widest sense. I put on record here my gratitude, and that of my fellow travellers, to use the phrase in the literal sense, to the trustees.
Argentina today contains a number of striking paradoxes. It is an astonishingly fertile, vast and beautiful country. Yet its food exports, to Europe at least, are modest and it attracts relatively few tourists, certainly from this hemisphere. The country has been fully democratic since the end of the last military junta some years ago—a famous event—yet politicians still appear to be subject to public ire, even hatred at times, that is easily observable and goes beyond what many people, even in this country, can imagine.
Argentina's economy has to all intents and purposes collapsed, yet Buenos Aires and Rosario to the north, which I also visited with the group, remain complex and functioning cities operating some thoughtful social policies and projects. The Argentine culture is notably European in feel and by instinct, with strong links to Italy and, in particular, to Spain. That contributes to the air of sophistication in the metropolitan areas, in spite of the economic difficulties.
The long historical links between the United Kingdom and the Argentine, particularly in respect of railways, farming and trading through Buenos Aires port, put more recent difficulties, or difficulties in the middle-distant past, into full perspective. It is encouraging to visit Argentina today, because it immediately becomes clear that our relations with it are historically and contemporaneously strong and improve with each passing year.
Immediately following the Falklands conflict—I shall say something about the Falklands dimension later—our relationships with Argentina were, naturally, at a low ebb. Reconstructing the relationship between the two countries in the ensuing period has been helped in no small measure by UK institutions based in Argentina. Our ambassadorial and consular services are of the highest order. The assistance that my party and I were privileged to receive from the ambassador, Sir Robin Christopher, and his staff was exemplary.
In addition to formal Government-to-Government links, it is vital to remember the long reach provided by such organisations as the British Council and the UK-Argentine chamber of commerce. The latter is assisted by a Department of Trade and Industry grant in the form of a salaried DTI official, which I suppose puts it outside the Minister's immediate ambit. However, that organisation, which enabled my colleagues and I to spend valuable time with the Argentine Finance Minister, Mr. Lavagne, seems to me to be an exemplar of the type of trade-based organisation that the United Kingdom should, and does, encourage across the world.
Organisations such as the chamber of commerce are only as good as the people who run them, and I am pleased to report that our woman in the UK-Argentine chamber of commerce, Helen Diaz, is one of the best.
The economic crisis that the country faces continues to threaten the future well-being of the people of the Argentine. At present, there is no question but that Argentina is a developing country rather than a developed one—certainly in economic terms. Yet as recently as five years ago, many saw Buenos Aires as the engine of Latin American economic development. In the past five years, following a privatisation programme which perhaps did not yield all the long-term benefits that the then Government hoped for, the economy has been pretty much in freefall. Just a few months ago, it levelled out at what I earnestly hope is a trough.
Following the pesofication of the Argentine currency, which linked the value of the peso to that of the US dollar, the currency devalued to slightly more than a quarter of its previous worth against the dollar. That means that indigenous products consumed locally can still be bought and sold, but imports and hard currency exchanges of any sort remain off limits to all but the few who had significant offshore assets.
I am pleased to say that, although some international companies more or less fled in panic when the economic crisis struck, some United Kingdom companies, such as British Gas—British Gas owns Metrogas, which serves the greater Buenos Aires area—have committed themselves to Argentina for the long term and are at the heart of the fight to keep the country's infrastructure intact.
It is less pleasing to note that some other companies, including banks based in the UK and elsewhere, derived what in retrospect seems undue benefit from the collapse in the value of the peso. Since the savings of Argentine citizens with western banks would have been instantly converted into dollars or pounds for use on the international market, it should have been possible for the banks to guarantee their Argentine customers' accounts. They chose not to do so, and in doing that, I am afraid that they may well have made a great deal of money for their shareholders off the back of the bad fortune of Argentine savers.
It is worth bearing in mind that an affluent and large middle class is crucial to the success of any economy, and economic success is exactly what Argentina was achieving, even though in retrospect it appears that a fair measure of the apparent economic buoyancy of the mid to late '90s was illusory. Although I by no means blame western banks for the downfall of the Argentine economy, it remains the case that a large number of middle-class people, who saved for a rainy day and for their own future, were dealt a terrible hand when the currency crumbled.
At best, that has caused widespread insecurity. At worst, it has led to impoverishment and the creation of a new poor. People who were in the process of buying a house and whose money was temporarily lodged with the banks found that it dropped in value by three quarters, which virtually ruined many of them. Some have been unable to find work in the current climate. Some just about scrape a living by scavenging—highly effectively through the waste of Buenos Aires.
An impoverished Argentina is not in the interests of the global economy and therefore not in the interests of this country. It is true that China has an economy with an apparently prodigious rate of growth and enormous potential for UK interests, but Latin America, too, has enormous potential for our markets from the perspective of selling to it, and in due course, when it has a more developed economy, we could also buy products and services from it. The case of British Gas and its involvement in Buenos Aires shows that there is scope for success even in the current economic climate. Companies just need a bit of imagination.
For the moment, responsibility for the economy of Latin America—the leadership, as it were—seems to have transferred from Argentina to Brazil, which itself has a long way to go before its economy can truly be considered stable, let alone healthy. Yet Brazil is a huge country with a population eight times that of Argentina, so with the right encouragement and assistance, it should be possible for the smaller boat to turn more quickly and once again help to lead the Latin American charge.
Although my comments are about relations between the UK and Argentina, for many people in this country, the issue of the Falkland Islands remains a potent factor when considering a wider relationship with Argentina. I find that to be less true in Argentina, but that may reflect the current bread-and-butter problems there. Of course, for the people who fought to free the Falkland Islands 21 years ago, not least the Falkland islanders themselves, sovereignty and other related issues remain as important as ever in our relationship with Argentina. It is important to be unambiguous about the fact that the UK Government continue to endorse the right of the Falkland Islanders to self-determination—a right set out in the Falkland Islands constitution of which the UK is a guarantor.
None the less, relations between the Falkland Islands and Argentina have been much improved in recent years. For example, a new range of measures was established following a 1999 agreement between the UK and Argentina: they include enhanced co-operation between the Falkland Islands and Argentina on the sustainable management and conservation of fish stocks, with a particular emphasis on the reduction of poaching. In addition, all restrictions on Argentines visiting the Falkland Islands have been lifted and agreement in principle has been reached on the construction of a memorial to the Argentines who fell in 1982.
Relations between the UK and Argentina are becoming increasingly stronger, even in that crucial and emotional area, the Falkland Islands. With that in mind, I shall address one policy area that many people in both Argentina and the UK raise when I ask them, "What is the single thing that the UK and European Governments could do to assist the economic development of Argentina?" In reply, almost everyone refers to the common agricultural policy. I appreciate that the CAP is complex and that through the years it has delivered many benefits to the farming communities of Europe, but in its present form the CAP serves as a barrier to development in developing countries, which need as few barriers as possible if they are to prosper in the global economy.
I prepared for this debate by having dinner on Saturday evening at La Brasa, an Argentine restaurant in south Croydon, which I am willing to bet produces some of the finest steak dinners in London. Indeed, as I speak I can almost taste the delicious sauce mingling with the blood from the steak. It would be a jolly good thing if there were more Argentine restaurants with proper Argentine beef in the UK and throughout Europe. Of course, the export of Argentine beef to Europe is strictly controlled by the Hilton agreement made at the Uruguay round, under which, as I understand it, the total export weight of beef to Europe was agreed at 18,000 tonnes per year.
In view of the parlous state of the Argentine economy, it was agreed that an extra 10,000 tonnes could be exported for one year only—last year. Yet it seems that although we may hope that the Argentine economy has bottomed out, and might even be beginning to rise off the bottom, the economic conditions that led to the one-off, one-year deal remain in place. Perhaps the Minister will say whether there is any scope for the UK to encourage a continuation of that agreement for another year at least. That would do so much to help the Argentine economy and, of course, the taste buds of consumers in the UK and Europe. Will he also tell us what the UK Government intend to do in the longer term to augment the work that they are already doing in and for Argentina?
It is a privilege to have had this opportunity to raise the issue of relations between the UK and Argentina, especially at a time when other parts of the world understandably take centre stage. However, every dog has its day, and it is essential, especially in uncertain times such as these, that we continue to work in the background to ensure that in the medium and long term, potentially affluent countries can become affluent countries that are able to benefit themselves and us, not least through their full and free engagement in world trade.
The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Bill Rammell) : I congratulate my hon. Friend the Member for Falkirk, West (Mr. Joyce) on securing the debate. I know that he takes a keen interest in this subject, because he and a number of other hon. Members came to see me after the visit he has described. I welcome that interest. We should do far more to promote healthy debate on our relationship with Argentina.
My hon. Friend will be aware from his visit last summer that the past 14 months have been exceptionally turbulent for Argentina—he referred to that fact in his excellent contribution. What happens in Argentina matters to us, to the international community, and, of course, to Argentina. It also matters to the rest of Latin America because Argentina is the largest country in south America after Brazil, and it has the third largest population, with some 37 million people. That is why I am especially pleased that we have the opportunity of today's debate. This is a good moment to take stock of developments in Argentina and review the state of our bilateral relations.
First, I shall touch on the economic situation, which my hon. Friend described graphically. We have watched the economic crisis unfold with great concern. In the mid-1990s, the picture was very different: Argentina had the highest income per head in Latin America, and the Argentine economy was in the world's top 20. From that position of strength, it went into severe recession due to falling confidence and an inflexible exchange rate. Between 1999 and 2002, income per head shrank by more than a fifth, and 55 per cent. of Argentines now live below the official poverty line. In the Buenos Aires suburbs, three-quarters of people are poor, half those live below subsistence levels, and there have been reports of malnutrition among children in some parts of Argentina.
The economic crisis has been the most serious in Argentina's history, and one of the worst anywhere in the world. That is worth underlining. These have been very difficult times. Furthermore, because of the country's relationship with the rest of Latin America, the crisis has had a negative impact across the region, especially on neighbouring Uruguay, which has suffered its own significant economic disaster.
There has been much discussion and debate and a lot has been written about the reasons for Argentina's economic collapse. Some blame the deficits of previous Governments, some the International Monetary Fund, the international banks, the downturn in the world economy, or the fixed exchange rate. We could spend some time debating it, but whatever the reason for the catastrophe a year ago, the country is still trying to find a way out of the crisis.
The British Government have certainly encouraged and supported the efforts of President Duhalde and his Government to tackle the serious problems that Argentina faces. Throughout the crisis, we have stressed to Argentina that the cornerstone of its economic policy should be to work as closely as possible with the IMF and the rest of the international financial community.
It is worth responding to my hon. Friend's suggestion that British banks might have taken unfair advantage of their customers when the peso was devalued. I think that all banks, whether British or not, did what the law obliged them to do at that time and in those circumstances—that is, convert deposits into pesos. Although that was unpopular in many instances, it was a valid business response under Argentine law as it stood at the time. The international community is working hard to restore stability to Argentina, and that is absolutely right.
I should like to echo some of my hon. Friend's positive comments. Although the situation remains serious and precarious, there are grounds for thinking that Argentina may have come through the worst of the crisis. The hyperinflation that many predicted has not materialised, restrictions on bank deposits have started to be lifted, and the fall in output seems to have bottomed out. I sense from my hon. Friend's remarks that he shares some of that optimistic perception.
It is clear that Argentina must now press on to lay the groundwork for a stable and productive future. Its aim must be to agree an economic programme that will lead to sustained growth and recovery. Price controls on privatised utilities should be lifted—there is significant concern about that—insolvent banks need to be restructured and progress must be made to lock in a sustainable fiscal position.
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(11th Feb 2003, c237WH-241WH)
