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As Argentina's economy falters, millions turn to a booming bartering system to make do. Customers can trade for goods or buy them with paper that looks like Monopoly money, called creditos, above.
By DAVID ADAMS, Times Latin America Correspondent
© St. Petersburg Times, published March 18, 2002
BUENOS AIRES -- Alcira Wallace used to consider herself solidly middle class.
Her husband's meat business brought in enough to put three daughters through private school. The couple planned to retire to the countryside, living off the income from their two apartments in the city.
Not anymore.
Months after the government froze bank accounts and devalued the peso, Wallace and millions of other cash-starved Argentines have turned to an almost medieval system of bartering to make do in hard times.
Barter clubs, known as trueques (pronounced tru-eh-kays), have sprung up all over the country to facilitate the exchange of goods and services without cash.
An estimated 2.5-million -- some say as many as 5-million -- Argentines flock daily to about 4,500 clubs, housed in abandoned factories, soccer clubs, schools and community halls. Customers can trade for goods or buy them with creditos -- bits of paper like Monopoly money that serve as barter currency.
Economists say the rise of the barter clubs is a sign of just how deep the crisis has hit, especially among the country's large and formerly prosperous middle classes.
"It has become a very powerful instrument for survival," said Dr. Jose Luis Coraggio, an economist and rector of the National University of General Sarmiento in the capital. "These are informal markets but offer greater efficiency than the formal system."
Buenos Aires, a city of majestic boulevards and elegant shops, has long been the envy of Latin America. Until recently its middle class boasted a standard of living comparable to those of the United States and Western Europe.
But just as the city's former magnificence has faded, so too has the dream of upward mobility given way to the reality of the barter clubs. In a nation famous for its melancholy tango verses, the barter phenomenon even has a prophetic song of its own -- Cambalache (pronounced kam-ba-latchay and meaning "a disordered jumble of things").
Penned in the 1930s, its words warn that "the world is and always will be a hopeless place, I know."
Leading economists confirm that as far as Argentina is concerned, Cambalache has got it right.
"The truth is that Argentina is bankrupt," according to Rudi Dornbusch, an international economic analyst at the Massachusetts Institute of Technology. "Bankrupt politically, economically and socially. Its institutions are dysfunctional, its government disreputable, its social cohesion collapsed."
While the poor barter for basic food and clothing, former members of the middle class are increasingly using the trueques in their struggle to maintain the lives they were accustomed to -- trading for cars, apartments, beauty treatments and even hotel stays on the beach.
A handful of towns have begun accepting creditos for payment of local taxes. A judge ruled recently that a man could make his monthly child support payments in barter currency as well.
To participate in the trueques, you need something to trade. Wallace, 54, cooks Argentine breaded steaks, known as milanesas, which she barters at her local club.
"Psychologically it's not easy," she said over lunch at the family's simple rented apartment. "We were on the way up, we acquired many things. But we lost it all."
Wallace is proud of her Scottish heritage and claims to be a direct descendant of William Wallace, the 13th century rebel who fought British rule and was immortalized in the film Braveheart.
"Now we have to adapt to the trueque. But it's a far better option than trying to work elsewhere."
The numbers bear her out. About 24 percent of the work force is out of a job, more than 50,000 business have closed since January, and an estimated 45 percent of Argentines (15.6-million out of 36-million) live below the poverty line.
A recent study found that in the last four months more than 1-million people have slipped into poverty -- or 8,800 new poor every day. If the trend continues, another 2-million may soon find themselves in the same boat.
In a street lined with jacaranda trees in the middle class Palermo district, shoppers start arriving six hours early. A queue of several hundred stretches for blocks, waiting for the neighborhood's barter club to open in a cavernous, half-built social center.
"Look at us. This is the reality of Argentina," said Mirta Palacios, 49, gesturing to a group of women with bags laden with homemade cakes and traditional meat pastries to barter. "This is what they have dragged us down to."
Dressed in a suit and tie, Orlando Esquivel, a 48-year-old dentist, said he had come looking for non-cash clients. "My usual customers have their money in the corralito," he said. Corralito, or playpen, is the popular term for the frozen bank accounts.
Another man, Raul Katz, 66, said a friend in the wine-rich province of Mendoza sends him 60 bottles of wine each week to trade on the barter market. Katz, who has relatives in Orlando, closed his small clothing business in December.
Inside, the dimly lit hall has the appearance of a giant flea market.
Seven rows of wooden tables run the length of the hall. Several are dedicated to food, their tables stacked with neatly wrapped half-cooked pizzas, ravioli, homemade bread, pickled peppers and spices.
Other tables offer clothing or a jumble of household items, from kitchen appliances to used CDs, electrical plugs and fittings.
At one end of the hall, on a notice board, handwritten and printed scraps of paper advertise a wide range of services, from private classes in English, yoga and piano, to household fumigation and private taxis.
Other notes offer goods for barter, including a Louis XV bed, as well as items being sought: a bicycle, a car battery for an Argentine-manufactured Ford and a fax machine offered in partial exchange for a stove.
In a long, low basement, hairdressers and manicurists are hard at work, while some 40 new club members receive an orientation talk. Everything is running smoothly. Volunteers control the flow of shoppers as a loudspeaker issues denunciations of price-gouging. Each one is met with a ripple of applause.
Pablo Jimenez, 58, said the barter club had given him a vital new outlet for his shoemaking business. In a few minutes last week he quickly sold 30 pairs of slippers at 10 credits each.
"I used to have five factories producing 1,400 pairs a day," he said. One by one his businesses closed after the government opened the economy, allowing the domestic market to be flooded with cheap Chinese and Brazilian goods.
"One day we were fine. The next day we lost everything," he said.
Jimenez and others agree that the barter clubs are somewhere they can share their frustrations. A strong sense of solidarity lifts the spirits of the shoppers.
"I was very depressed the first time I came," said Ricardo Jordan, 62, wearing a T-shirt saying, "These are barter times."
An amateur plant breeder, he brought along some bonsai that first time. Since then, he said, his life has turned around.
"I lost everything: my work, my self-respect and my dignity. I was dead when I came here and now I have found life again," he said, beaming.
"I'm unemployed, yet today I had a pedicure, got my beard trimmed, and a bicycle tune up -- all with credits. What more can I ask?"
The sudden growth of the clubs, coupled with a lack of government regulation, has some experts worried.
"It's grown so much, it's getting out of control," said Dr. Coraggio, who is leading an economic study of the impact of bartering. "The rules of the game have not been regulated."
He cited at least three different barter networks in Argentina, each with its own philosophy and paper credits. In all, more than a dozen different credits are in use, and not all are recognized by the various networks. Fakes have begun to appear. Some legitimate credits are professionally printed, with serial codes and watermarks.
"People accept these credits because of local community confidence," Dr. Coraggio said. "That's easy in small markets. The problem is that it's converting into a big business controlled by a small group of people. So you are beginning to see the creation of a mafia."
The evolution of the barter system can be directly linked to the fortunes of the Argentine economy. The first barter club began in 1995, with just 20 members in Quilmes, a sprawling city on the outskirts of Buenos Aires.
"We met in a garage, just like how Apple began," said one of the founders, Ruben Ravera, referring to the U.S. computer maker.
At first they attracted only a small following. Members tended to be victims of a government policy in the 1990s to modernize the country's economy by opening it up to foreign investment.
Precisely how the Argentine economy went wrong is the subject of intense debate by scholars and politicians alike, with possible lessons for the rest of the world.
Although Argentina became an international model of economic reform, reaching record growth figures during the 1990s, all was not well. Argentina's high cost of living and a dollar-pegged peso made local industry uncompetitive.
As the cracks in Argentina's economy grew, the barter system picked up.
"We provided an alternative for people who had fallen into the crevices of the formal economy," Ravera said.
By privatizing banks and other state-run businesses, the government got by for a few years. But mounting debt, coupled with weak tax collection and an extravagant bureaucracy, eventually brought the system crashing down.
When Argentina finally defaulted on its staggering $155-billion public debt in December, it was the largest national default in history. Since then the economy has ground to a virtual halt, and two presidents have fallen.
The breakdown of the formal economy opened the door to an explosion of interest in the barter system, Ravera said. The Global Network barter club he heads in Quilmes now has 400 salaried employees -- paid partly in credits -- and 500,000 members.
But even before December's crash, divisions began to appear in the barter system.
In April of last year, a rival Solidarity Network broke away from Ravera's founding Global Network. Claiming to represent the true ideals of the barter system, the dissidents accused Ravera and his partners of turning their club into a for-profit business, charging all manner of fees in standard hard currency.
"Unlike some, we believe in the absolute non-use of cash," said Ismael Silva, 65, addressing new recruits to the Solidarity Network at the Eva Peron community action center, a rundown meeting hall in the Villa Crespo neighborhood of Buenos Aires.
"We have a social goal. We are here to help people reconstitute their lives, not profit from their situation," he said, dragging on the dark tobacco of an Argentine cigarette.
Silva spent three hours explaining the workings and philosophy of the network to the group, constantly interrupted by telephone calls from people inquiring about bartering. "People come here in a very bad state. We encourage them to express their anguish. They cry. They let it all out. No longer do they feel alone, ignored and unimportant. The smile returns to their faces."
His audience of parents from a nearby public school seemed impressed. They were hoping to set up a barter club to subsidize the underfunded school.
"All you need are products and publicity," said Silva, suggesting they print some fliers and distribute them at other clubs in the area. "People will come in droves, you'll see. It's amazing."
A question came up: What would happen when the state health inspector visited the school? "Nothing," chuckled Silva. "The government doesn't dare do anything. They know it would be the gravest error."
Indeed, the government has almost completely ignored the clubs. An official at the Ministry of Economy acknowledged that the country faces so many enormous financial problems that it has yet to give the issue any thought.
The sudden growth of the barter clubs is a double-edged sword, analysts say. On the one hand it provides the government with an unforeseen safety net. It also occupies the minds of people who might otherwise be protesting on the streets.
But, by its nature, bartering is tax free. With government revenues already plummeting because of closed businesses, the barter trade isn't helping.
That could become a problem for the government in its ongoing bail-out talks with the International Monetary Fund. Before it makes any funds available, the IMF is expected to demand Argentina fix its infamously leaky tax collection system.
Some analysts predict the barter clubs will fade as economic stability returns. But with no sign of the current crisis easing, they warn that a significant part of the population may continue to depend on the barter clubs for some time to come.
Alcira Wallace is already busy bartering for her future.
She recently got some major dental work done. Instead of paying the equivalent of $100 in cash, she found a dentist who accepted credits.
She and her husband still plan to move to their small home in the countryside. She is currently saving to pay for a well and running water to be installed. Again she bartered a solution with a local workman, reducing the cost from $750 to a small amount of cash and some credits.
She knows she has a lot of steaks to sell, but is confident it can be done.
"It's the only way we are going to have that house," she said.