A Constant Feeling of Crisis
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).
Emiliano Rodriguez/Alamy
A view of Buenos Aires, Argentina
Erin Patrice O'Brien
"To Do the Right Thing Is Hard"Santiago Bilinkis paid his taxes. He didn't hand out bribes. It put his office-supply company at a serious disadvantage.
Erin Patrice O'Brien
In Crisis, Opportunity Alejandro Frenkel, CEO of Fën Hoteles. With $40,000 in cash, Fën built a small empire.
- Santiago Bilinkis
- Patricio Fuks
- Politics
- Latin American Politics
- Argentinean Politics
- World Politics
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On the day his country exploded, Santiago Bilinkisstayed at home and watched the riots on television with his wife and infant son. It was painful. In Buenos Aires, one of the world's great cities, looters were attacking grocery stores. Bilinkis's bank account—along with every other account in the country—had been frozen by executive decree three weeks earlier. Argentina was out of money.
This was December 20, 2001, a Thursday. That afternoon, several people were killed by police in front of the executive office building, known as the Pink House, and President Fernando de la Rúa resigned and fled the capital in a helicopter. In the days that followed, Argentina would cycle through four more presidents and default on debts totaling $155 billion. Unemployment would soar to 25 percent, and local governments, unable to pay their workers, would simply invent and print their own currencies. It was the beginning of the worst financial crisis in Argentina's history—and by some estimations the worst peacetime financial crisis in the history of the world.
Not that Bilinkis was surprised. His country had been spending far more than it collected in taxes for as long as he had lived, and paying for the shortfall by printing money or borrowing from international investors. Although he was only 31, Bilinkis had already lived through two coups, one bloody political purge, and 15 years of hyperinflation. Whereas the rest of the world treated financial crises as one-off catastrophes, Argentines looked at them like seasonal floods and prepared accordingly. You stocked up on U.S. dollars and canned food, and you waited for the crisis to pass. The general rule of thumb was one financial crisis every 10 years. It had been 11 years since the last one.
Bilinkis's preparations were slightly more elaborate, because he had more to lose than most Argentines. The son of a psychoanalyst and a sociologist, Bilinkis grew up in Buenos Aires, went to a prestigious private college on a scholarship, and graduated at the top of his class. In 1997, after two boring, well-paid years at Procter & Gamble in Argentina, Bilinkis and a college friend co-founded Officenet, an office-supply company that served businesses in Argentina and Brazil.
At the time, this was a highly unusual decision. Since the 1950s, a series of dictators had devastated the Argentine private sector, concentrating wealth into the hands of politically connected oligarchs, corrupt government contractors, and, most recently, foreign investors. In Argentine Spanish, the word for businessman—empresario—had become synonymous with criminal, and it was widely assumed that the most successful people had robbed and cheated to get where they were. The word for what Bilinkis was—emprendedor—was not in regular use. "I'd gone to one of the top business schools, and I'd never heard the word entrepreneur," Bilinkis says. "I just knew I wanted to start my own thing."
Bilinkis also knew that he wanted to start a different kind of company. Officenet paid all of its taxes and eschewed corruption of any kind. At a time when software piracy was rampant in the developing world, he paid thousands of dollars for Microsoft Windows licenses. This put Officenet at a disadvantage relative to its competitors, but Bilinkis rose to the challenge. "We survived by being more productive than our competitors," he says. "If you're focused on evading taxes or paying bribes, you're not focused on warehouse productivity or customer service or business intelligence." By 1999, Officenet was profitable. The company had 200 employees and revenue of $20 million a year. Bilinkis had always dreamed about being acquired by a big American office-supply company; now he sometimes dreamed that he would be the one doing the buying.
But the crisis changed everything. Bilinkis knew a lack of cash in the economy would devastate Officenet's sales. (Over the following months, they would fall nearly 80 percent.) His personal stake in the company—a block of stock that had been worth millions of dollars on paper—was now effectively worthless because of liquidation preferences on preferred shares given to outside investors. Many Argentines in this position, including his co-founder, simply decided to leave the country, but Bilinkis wanted to stay. "I thought there was a fight to be had," he says. Officenet's cash—some $20 million left over from a private equity investment in 2000—was safe in a U.S. bank account. If he could just get expenses in line, the company would survive.
On Friday morning, he took a taxi to the office and retrieved a folder that contained a worst-case-scenario plan. The plan—code-named Pi for plan inflación—had been kept secret from all but two senior managers. The first and most brutal step was an immediate layoff of a third of the company's workers. "It was ugly," Bilinkis says. "So ugly. I knew that most of the people we let go that day would not get another job for a long time. We were pushing them to the crocodiles."
But it had to be done. That afternoon, four days before Christmas, he mailed (as stipulated by Argentine law) termination notices to 80 people. The move was prescient: The following week, the Argentine government suddenly changed the rules for severance payments—instead of one month's salary per year of service, it would be two months' salary. If Bilinkis had waited just one week, his company would have gone under. "There are stupid changes in context that can happen at any time that will completely screw your business," Bilinkis says. "You have to be ready to face whatever life throws at you."
The meltdown of 2008—which nearly destroyed the world's banking system, sent the United States into its worst recession in 80 years, and put half of Western Europeon the brink of economic collapse—barely registered in Argentina. Andy Freire, Bilinkis's co-founder at Officenet, told me that he finds it hard not to laugh when his American friends complain about their problems. "Retail sales fall 5 percent in the U.S., and people say it's a major crisis," Freire says. "Our sales went down 65 percent in a single month. That's a crisis."
NO SE SI EN VERDAD QUIEN HIZO ESTE ARTÍCULO ESTUVO EN ARGENTINA. NO VOY A NEGAR QUE NO SOMOS UN PARAISO, QUE NO HAY CORRUPCIÓN Y QUE EN OCASIONES (MUCHAS) FALTAN CONDICIONES DE LARGO PLAZO PARA HACER NEGOCIOS, PERO NO HAY SITIO EN EL MUNDO EN DONDE SE HAYA HECHO TANTO DINERO EN LOS ÚLTIMOS AÑOS. LA TÍPICA AMBIGUEDAD ARGENTINA, Y HAY QUE ASUMIR DE UNA VEZ POR TODAS, QUE SOMOS ASI, LA ARGENTINIDAD AL PALO!!!!
NO SE SI EN VERDAD QUIEN HIZO ESTE ARTÍCULO ESTUVO EN ARGENTINA. NO VOY A NEGAR QUE NO SOMOS UN PARAISO, QUE NO HAY CORRUPCIÓN Y QUE EN OCASIONES (MUCHAS) FALTAN CONDICIONES DE LARGO PLAZO PARA HACER NEGOCIOS, PERO NO HAY SITIO EN EL MUNDO EN DONDE SE HAYA HECHO TANTO DINERO EN LOS ÚLTIMOS AÑOS. LA TÍPICA AMBIGUEDAD ARGENTINA, Y HAY QUE ASUMIR DE UNA VEZ POR TODAS, QUE SOMOS ASI, LA ARGENTINIDAD AL PALO!!!!
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