Banking on a miracle

It must be the longest economic shipwreck in history. For the past nine months, since Argentina erupted into blazing street riots, changed president five times in two weeks, declared the world's biggest debt default and devalued its currency by more than 70 per cent, this South American Titanic has been going down.

With credit lines from the rest of the world cut off and ravaged banks still rationing cash supplies, the country that a decade ago was a booming, free-market success story has hurtled into a world-class economic disaster with no obvious rescue in sight.

Its interim president, Eduardo Duhalde, admits his job consists of 'plugging the holes' in the sinking ship where 'absolutely nothing works'.

After four years of unrelenting recession, unemployment has spiralled to over 21 per cent and soaring prices caused by devaluation have plunged over half the country's 36m inhabitants under the poverty line of $3 a day. Thousands of middle-class savers are still struggling to accept that their dollar savings have shrunk into pesos.

A gaping divide is opening up between the wealthy few and the struggling masses in a country which until now saw itself as a bubble of European sophistication and middle-class comfort in an otherwise poor and violent continent.

'Argentina has never had such painful times. It has never been so anguished,' says Marcos Aguinis, former culture secretary and author of The Atrocious Enchantment of Being Argentines.

Much of Argentina's despair comes from the fact that the country ought to be fine. It is as big as India, has a moderate climate, endless fertile land, oil and minerals, and only 36m inhabitants to feed. It has no ethnic or border conflicts and no major natural hazards. Increasingly few believe Duhalde's mantra: 'Argentina is condemned to success.'

As March presidential elections loom, candidates are offering 'revolution' and 'change', but their vicious bickering is only furthering public disenchantment. As both rich and poor feel the crunch of the country's worst economic crisis, politicians, seen as corrupt and inept, have been 'devalued' as much as the peso. The clamour goes on 'for them all to go' and no candidate can muster more than 15 per cent in pre-election polls.

Hopes of a bail-out from the International Monetary Fund (IMF) are fading even as Brazil receives a $30bn emergency loan. Thousands are bailing out, fleeing to Europe clutching passports inherited from their immigrant forefathers. Others have sunk into poverty, and armies of poor in Buenos Aires have resorted to rummaging through rubbish to eek out a living. Thieves are stripping tombstones of their metal plaques, light bulbs from street lamps and copper from telephone cables.

While the vast majority flounder through the constantly changing economic situation, various fortunate or crafty Argentines have emerged safe and dry. There are those, like the farmers and those in the tourist trade, who have thrived because of devaluation. And those, such as illegal currency traders, pawnbrokers and security firms who spot lucrative business opportunities amid the social and economic upheaval. And those swimming today are swimming as hard as they can in case tomorrow they sink.

Winners
Illegal currency traders Evito Morales, 28, and Silvio, 46

One thing that has proliferated in Argentina since crisis set in is the common queue. Couples have met, books have been read and anxious pensioners have fainted as they queue outside banks, exchange houses, social security offices and foreign consulates.

For some, like 28-year-old Evito Morales, queuing has become a way to earn a living in the crisis. Along with hundreds of shantytown dwellers, Evito queues most days outside the battered and barricaded banks in the financial centre of Buenos Aires, buying up the maximum daily ration of $1,000 per person on behalf of illegal moneychangers, who move tens of thousands of dollars each day under the noses of the banks and the police.

'It's ugly as a job, but I don't have a choice,' says Evito, shiftily watching police among the churning crowds outside the banks. 'You hold the money in your hands for a few hours and then it goes. You need it. You touch it and you can't have it.' Evito treks in each day from a poor suburb, where the streets are strewn with dismantled parts of stolen cars, never sure if there will be work. He earns about 10 pesos a day (£1.80), three of which he spends on his bus fare. As Evito queues, his boss, Silvio (who refuses to give his surname or be photographed), straightens his tie and sips a coffee in his plush new office. He juggles three mobile phones to instruct minions in the streets to buy and sell dollars, bonds, cheques and even frozen bank accounts, skimming a profit from every deal.

When Argentina's financial system began to cave in last year, Silvio's line in imported Chinese watches dried up and he turned his hand to the only sure money-spinner he could see - money itself. He built an illegal currency trading empire employing hundreds of queuers and selling hundreds of thousands of dollars each day. His clients, he says, include supermarkets and major businesses, all looking to limit their losses and escape the half-paralysed official financial system. The police turn a blind eye for a regular monthly sum. Business is now so successful that Silvio is opening branches in several provincial capitals.

'This is the land of the middleman,' he explains, somewhat apologetically. 'You always have to be one step ahead of the others. If you do things according to the book, you end up worse off.'

Loser
Rubbish sifter Matias, 16

Matias lives in shantytown number 31, in the shadow of the Sheraton Hotel, in the heart of Buenos Aires. At 16, he is a veteran 'cartonero' (rubbish recycler), having made ends meet for the past three years by rescuing recyclable paper scraps from rubbish in the smart Palermo neighbourhood across a railway line in the centre of town.

Earlier this year, Matias had to drop out of school to trawl the streets full-time after his first son, also called Matias, was born and the young couple ran out of money. 'I like my job. It's the only thing I know how to do,' says Matias, gazing at a stray dog in the dirt street outside his house.

'The thing is that it has got harder now, because of all the people. You have to be really fast. Everywhere I go, there are already three or four people going through the rubbish before I even get there.'

Since the crisis began, portenos (the inhabitants of the port city of Buenos Aires), proud of their country's once-thriving middle class, have watched in horror as a growing army of 'new poor' have begun scouring the streets day and night, stripping the city's rubbish of anything that is edible or recyclable. Recycling firms have estimated that 300,000 families are now living off the rubbish across the country.

Barter clubs, which previously helped those running out of pesos to make ends meet by swapping clothes for food or books for washing powder, have degenerated as high-quality, recyclable goods have become increasingly scarce and forgers have flooded the system with fake 'credits' - the alternative currency used in the barter clubs to establish the value of each item.

As the army of rubbish scavengers grows, Matias sets out earlier each day and returns home later each evening, piling up a cart full of paper which he sells to a recycling firm, making at best a meagre seven pesos a day (£1.25). A bag of nappies costs eight pesos, which means Matias can hardly keep up with his young child's needs.

'Sometimes I'm lucky and I find a pair of shoes or trousers in the rubbish. But even the rich have stopped throwing those things out now,' he says.

Loser
Pensioner Alicia Kuligowska, 79

Alicia gazes out of the cafe window nostalgically. 'What have they done to this country?' she asks. At 79 and struggling with bone and breast cancer, Alicia is counting her days and her shrinking savings. Having run a dry-cleaners all her life, her pension is 364 pesos (£65). Since the peso was devalued, the price of everything imported, including drugs, has soared and Alicia's monthly cancer treatment costs nearly twice her pension.

After several months unable to touch her savings when bank deposits were frozen in December, Alicia's $40,000 was converted into 56,000 pesos, which today would only be worth $15,500. In the shake-up after a decade in which pesos could be swapped for dollars, Alicia lost $24,000. The alternative was to wait until 2005 until the original sum would be released. So Alicia has settled for her 'pesified' savings and withdrawing the maximum ration of 1,200 pesos (£216) from two bank accounts each month to cover her drugs and living costs.

'When the money runs out that's it. I die before my time. But maybe I've already lived enough,' she says. 'They are killing pensioners. It's a kind of genocide. I don't know if it's the banks' fault or the government's.'

Lloyds Bank has assured Alicia it would like to return her savings in full, but is bound by national legislation which froze savings in December after $1.4bn were withdrawn from the collapsing financial system in a single day of panic. The country's Supreme Court has since declared the bank restrictions unconstitutional, triggering an avalanche of lawsuits by savers.

A well-known Argentine sports commentator, 65-year-old Horacio Garcia Blanco, died in May of kidney failure after failing to win a suit to release money for a kidney transplant in Spain. After more than nine months, frustrated and tireless savers still chant outside banks and bash their battered doors with saucepans to demand their savings be returned intact.

Alicia is Polish and was held for four years in a concentration camp in Poland until the end of the Second World War in 1945. In 1948, she emigrated to Argentina.

'I came to the end of the earth to get away from wars. But now I find myself in the middle of a different kind of war, a more modern one,' she says.

Winners
The US salaryman Andres Allendes, 38, engineer, and Maria Allende, 33, psychologist

Curtains twitch in the leafy streets of San Isidro, north of the centre of Buenos Aires, as the Allende family unload their baggage and shopping in the winter sun after a weekend in the countryside.

Andres is one of the few Argentines who have had a pay rise in recent months. He works for Cargill, a giant US-run company that exports around a quarter of Argentina's grain. As the company's profits rose this year, Andres's salary went up 20 per cent just as his mortgage had shrunk from $20,000 to just $6,000 when it was converted straight from dollars into pesos.

'We've done well out of this. It's great for us,' he grins, as the family tuck into an Argentine favourite, apple crumble, with their tea. 'We joke that we are living on an island and some people think if you work for a multinational, you work for a pirate who is just looking for ways to extract money from the country. But the fact is, any business would make money if it could. There is nothing wrong with doing well just because others are doing badly. When you support a football team, you have to wear their shirt with pride.'

But in recent months, gripped by fear after a wave of kidnappings and armed crime, many of the more comfortably off have taken to hiding their wealth, 'dressing down', sending their children to their private schools in scruffy clothes instead of uniforms and using a clapped out old car rather than the conspicuous BMW.

In barrios such as San Isidro, plush villas are prickling with fences, alarms and armed guards, as the explosion of poverty has forced barefoot children and youths from the shantytown nearby to try door-to-door begging, and, in some cases, armed robbery and kidnapping.

Earlier this year, Maria's sister, who lives nearby, was bundled into her car by two teenagers with guns as she unloaded shopping outside her home. A few hours later, after her captors tried to force her to withdraw cash from a cashpoint, she was dumped in a shantytown, stripped of everything including her shoes. 'I don't dare walk down the road any more. It's as if we are becoming more people and they are more animals,' she adds. 'But you can't just build fences. You have to start doing something to help.'

Winner
Bulletproof car dealer Fabian Macome, 48

For Fabian Macome, a 48-year-old bullet-proof car dealer, business has never been better. After mastering his trade in Bogota, Fabian was ready when crime-fever hit Buenos Aires, one of the safest cities in the world a decade ago. Reported crime and murder rates have soared and business has taken off for Fabian as bankers, businessmen and diplomats seek protection from kidnapping gangs and armed thieves.

'The rich are already living in fortresslike houses behind fences wired up with alarms,' says Fabian, in his bunkerlike high-security salesroom on a busy Buenos Aires street. 'They have guards to protect them at work. The journey is their most vulnerable moment.'

In Fabian's showroom, potential clients can examine a display of car windows pumped with bullets of different calibres. On the wall, photos show baseball bat-brandishing youths surrounding a gleaming BMW. Brista Security's prices remain in dollars because of the cost of importing materials made to international standards. The company's turnover has gone from around $200,000 a month last year to more than $1m. And because of January's devaluation, each dollar is worth three times as much in Argentina as last year.

'There is a moment of sowing and a moment of reaping,' says Fabian. 'This is my moment. Now I am going to fill my pockets. I am surfing the wave.'

Many of Fabian's clients are Argentines with dollar savings safely stowed in European or American banks. Others work in export businesses, which are quietly making profits as they sell their products at dollar prices, but spend a fraction of their previous outgoings now that local salaries and running costs have dropped.

'Globalisation brings maximum poverty and maximum wealth,' he says. 'That great divide generates violence. I knew Argentina was going to join the ranks of Latin America's violent countries. I have been preparing for this moment. And it is going to last a long time.

'I'd have liked to live in Paris and be an artist. But I was dealt this country and these circumstances. Here, you can never see the horizon. Every day you wake up and it's all changed. If you manage to be a stable person amid all the upheaval, you've won, the world is yours.'

Loser
Architect-turned-juicer Maria Viegas, 44

Late last year, when architect Maria Viegas finished building a $300,000 home in the leafy Belgrano district of Buenos Aires, she realised nobody was going to buy it. She had invested all her small construction company's assets in the house and one other which still stand empty now that the property market has fallen through the floor. Like so many of the country's once-thriving middle-class, Maria is taking a harsh lesson in scraping by after a decade-long 'fiesta' under former president Carlos Menem. With the peso pegged to the dollar, the country was flooded with cheap imported gadgets and Argentines jet-setted around the world to the annoyance of their poorer Latin American neighbours.

'I built up my business over 17 years,' says Maria. 'In 1995, I built seven houses at once and had three staff. Suddenly I have nothing left. The houses I built are not worth what I paid for the land they stand on. And however low the price, nobody is looking to buy.'

As thousands lose jobs each month and salaries are slashed and prices rise, many cash-strapped middle-class families are selling off their wedding rings and furniture. Psychoanalysts, a common breed in this city of anxious, melancholic, former European immigrants, say patients no longer wish to talk. 'All they want is a quick-fix,' says analyst Enrique Tenembaum. 'It's ironic, they are the victims of globalisation gone wrong. But they are turning to globalised drug companies for an instant cure.'

Jobless and desperate to support her children, Maria set up a table in the local park and started squeezing fresh juice for joggers and passers-by.

'I never thought I'd end up like this. My kids were ashamed at first, but now they've got used to it,' she says, pulling the handle on yet another half orange and propping her sunglasses on top of her head. 'It's non-stop,' she laughs. 'I try to use my left arm in the week and keep my right arm for the weekends when it gets really busy.'

Maria, a single mother, makes 1,000 pesos (£180) a month, just enough to feed her four teenage children. She has had to pull them out of private school and in recent months she has cut off their cable television and mobile phone, unable to pay the bills. 'We are down to basics,' she says. 'I don't remember the last time I bought a book.'

Loser
unemployed protester Julia Laguna, 46

As the recession snowballed and unemployment crept relentlessly up over the past four years, protesting unemployed men, women and children, known as the piqueteros (picketers), have become a regular thorn in several governments' sides, blocking roads and bridges with burning tyres as they clamour for jobs, food and subsidies.

Since December's riots, the piqueteros have been at the front line of clashes with police, and while middle-class outrage at the loss of billions of dollars of savings has gradually lost steam, the piqueteros movement, representing the country's 18m poor, rumbles on as food prices have soared and hunger has spread. Thousands have marched from grimy provincial shantytowns into the palm-lined centre of Buenos Aires facing ranks of edgy riot police in the Plaza de Mayo, while their leaders win meetings and concessions from a cash-strapped government desperate to keep a lid on social unrest.

In Salta, one of the country's most northern provinces, near the border with Bolivia, the piqueteros have special cause to be angry. Most lost their work in the early 1990s when local oil and gas companies fell into the hands of foreign companies. 'This region is rich in oil and gas. We have our wealth under the ground. But we live in poverty,' said Julia, a 46-year-old single mother. In this arid region, remote villages, many of which do not have gas or water, watch gas being pumped through the Andes to neighbouring Chile. 'You end up concluding you've been robbed,' she adds.

In June, she was arrested alongside several other protesters. 'I'm not afraid of the police, but I don't take my children any more, just in case. All I want is a job. At least you can let off steam by protesting.'

Julia lives on 150 peso (£27) a month, over half of which is spent on her electricity and gas bills. 'I can hardly buy anything with what's left. Bread and milk are three times as expensive now,' she says. 'People are getting poorer every day. I run a soup kitchen and some children arrive now without any clothes.'

The government subsidy, distributed to at least 1m of the country's poorest families, buys less and less as inflation makes even basic supplies unaffordable.