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MAY 9, 2005
Argentina: Reversal Of Fortune A surge of service jobs has begun to restore the nation's middle class Karina Reniu can hardly believe her good fortune. The 28-year-old Argentine resides in the leafy Buenos Aires neighborhood of Palermo, in a beautiful apartment outfitted with a DVD player, a state-of-the-art stereo system, and a kitchen full of gadgets. Her career as a telemarketing manager is on a roll, and she's planning a trip to New York in September. "I love my work, I go to a great gym, I've got everything I need in my apartment," says Reniu. Not bad for someone who just four years ago was preparing to join the thousands of young people departing for Italy and Spain in search of a better life -- a reversal of the great European migration to Argentina in the early 20th century. Fresh out of university and stuck in a dead-end job, Reniu was all set to move to Rome when a breakup with her boyfriend short-circuited her carefully laid plans. "I was devastated," she says, looking back at the traumatic months of late 2001. At the time the country was, too, having slid into a dire debt default and devaluation. "The Argentine crisis was at its height. I was stuck in an empty apartment, watching the [street] protests on TV, thinking, 'What am I going to do now?"' Looking back, Reniu now believes that staying in Argentina saved her career. Since returning to her old job at Clienting Group, a call-center operation, she has landed a string of promotions, working with a blue-chip list of clients, including Repsol YPF (REP ), Oracle (ORCL ), and Hewlett-Packard (HPQ ). "I started as a telephone receptionist, and now I have 35 people working for me," she marvels. SPENDING SPREE Reniu belongs to a species once thought to be on the verge of extinction: the Argentine middle class. Judging from Buenos Aires' packed steakhouses and sold-out rock concerts, this hardy breed is making yet another comeback. Argentina's agricultural sector and its major industrialists were the first to taste the fruits of the country's export-led economic recovery, which is expected to power growth of 6.5% this year on the heels of last year's 9% expansion. A key driver is a competitive exchange rate -- the peso is now 70% cheaper against the dollar than it was through most of the 1990s. Now, at last, the new prosperity has begun to trickle down. The most tangible evidence of this middle-class resurgence is a frenzy of consumer spending. Thanks to a combination of falling unemployment and interest-free credit options, Argentines are splurging on everything from new homes to cars to refrigerators. Auto sales doubled last year, to nearly 312,000, and are set to increase almost 40% this year, according to estimates by the national auto industry chamber. Sales of home appliances and other household goods rocketed by 71.5% in 2004 and were up 56% in the first quarter of this year. Meanwhile, Matías Terrizano, commercial manager at Nordelta, a $250 million gated community some 17 miles outside Buenos Aires, is doing brisk business catering to the many middle-class Argentines fleeing inner-city crime. "We're pushing ahead with substantial new developments this year," Terrizano says. Land prices at gated communities such as Nordelta are now 5% to 10% higher than their pre-debt-crisis levels. Some of the new spending reveals a "live for today" mentality forged by historic bouts of hyperinflation and successive economic crises. "Argentines have always lived in a perpetual present," said Claudio Lozano, an economist at the General Confederation of Argentine Workers, the country's largest union body. "If they have money, they spend it, because who knows what the future will bring?" Nonetheless, the current boom is built on firmer foundations than those that preceded it. The bonanza of the mid-1990s was largely a product of an overvalued peso and financial speculation. Another plus is a comparatively well-educated labor force. World Bank figures show that 48% of Argentina's high-school graduates go on to complete university -- the highest proportion of any country in Latin America. "Businesses making intensive use of skilled labor have been able to flower," says Leonardo Gasparini, an economics professor at La Plata National University. The difference is clear in the information technology sector. Five years ago, Argentine software companies provided work for 15,000 people; this year there are twice that many jobs. And revenues are rising by over 20% a year, topping $1.13 billion last year. HP, Oracle, Cisco Systems (CSCO ), IBM (IBM ), America Online (TWX ), and palmOne (PLMO ) have all centralized regional back-office operations in Buenos Aires or have relocated presale, sales, and customer-service operations to the city. Thanks in part to these new jobs, Argentina's unemployment rate, which had soared to 24.1% in late 2002, has been cut in half, to 12.1% in December, 2004, its lowest level in a decade. "Economies in acute crisis have one major advantage: You can start a new company with a smaller investment and find highly skilled and highly motivated people very easily," says Carlos G. Pallotti, managing director for Latin America at Datastream Systems Inc. (DSTME ), an information-technology services company based in Greenville, South Carolina. With local wages now competitive vis-à-vis other nearby locales, such as Mexico and Puerto Rico, Argentina is attracting more Spanish-language call-center business. A technical-support representative earns about $3 an hour. Revenues at Clienting Group, Reniu's employer, grew by 250% in 2004, and the company is forecasting 50% growth for this year. "Historically, Argentina was far too expensive to enter this market," says Clienting Vice-President Juan Plablo Tricarico. "Thanks to the devaluation and to a maturing of the domestic market here, Argentina now has an international advantage it can leverage." DON'T FORGET "THE NEW POOR" Even small Argentine businesses are signing up international customers. The number of small companies earning revenues from outside the country jumped by 42% from 2000 to 2003, according to the Chamber of Argentine Exporters. One such success story is Grupo Managers, a Buenos Aires management consultant that provides technology and human resources advice. Luis Riva started the business in 1994, but after a few successful years he saw his revenues shrink to just $80,000 in 2001, forcing him to shed all but 10 employees. The 53-year-old businessman then invested in software that analyzes the price and availability of genetically modified grain and soybean seeds -- data it sells to Argentine farmers. By 2004, Grupo Managers had tripled its revenues, to $300,000, taken on 50 new employees, and opened subsidiaries in Colombia and Uruguay. "It has been an adventurous time, with a lot of adrenaline," says Riva. Many Argentines are already wondering how long the current bonanza will last. Prices rose 4% in the first quarter of this year alone, and Economy Minister Roberto Lavagna has warned that inflation could top 11%. And while the middle class is recovering, its ranks have been sharply winnowed. In the '70s more than two-thirds of Argentine households identified themselves middle class. Since the crisis, sociologists have designated the category "the new poor" for once-middle-class families that have slipped into poverty. By some estimates this group encompasses 30% of the population. No wonder the newly prosperous, such as Reniu, are counting their blessings.  By Colin Barraclough in Buenos Aires
BW MALL
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