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Ask anyone from Buenos Aires and they will tell you that the business, history and politics of the city are the business, history and politics of Argentina. As the capital of the country and home to one-third of the national population, Buenos Aires is the epicenter of every major Argentine drama – from triumph to defeat and back.

The Spanish arrive

Although the banks of the Río de la Plata (River Plate) had been populated for tens of thousands of years by nomadic hunter-gatherers, the first attempt at establishing a permanent settlement was made by Spanish aristocrat Pedro de Mendoza in 1536. His verbose name for the outpost, Puerto Nuestra Señora Santa María del Buen Aire (Port Our Lady Saint Mary of the Good Wind) was matched only by his extravagant expedition of 16 ships and nearly 1600 men – almost three times the size of Hernán Cortés’ forces that conquered the Aztecs. In spite of the resources, Mendoza did some fantastically poor planning and arrived too late in the season to plant crops. The Spanish soon found themselves short on food and in typical colonialist fashion tried to bully the local Querandí indigenous groups into feeding them. A bitter fight and four years of struggle ensued, which led to such an acute shortage of supplies that some of the Spanish resorted to cannibalism. Mendoza fled back to Spain, while a detachment of troops who were left behind retreated upriver to Asunción (now the capital of Paraguay).

With Francisco Pizarro’s conquest of the Inca empire in present-day Peru as the focus of the Spanish Crown, Buenos Aires was largely ignored for the next four decades. In 1580 Juan de Garay returned with an expedition from Asunción and attempted to rebuild Buenos Aires. The Spanish had not only improved their colonizing skills since Mendoza’s ill-fated endeavor but also had some backup from the cities of Asunción and Santa Fe.

Still, Buenos Aires remained a backwater in comparison to Andean settlements such as Tucumán, Córdoba, Salta, La Rioja and Jujuy. With the development of mines in the Andes and the incessant warfare in the Spanish empire swelling the demand for both cattle and horses, ranching became the core of the city’s early economy. Spain maintained harsh restrictions on trade out of Buenos Aires and the increasingly frustrated locals turned to smuggling contraband.

The city continued to flourish and the crown was eventually forced to relax its restrictions and co-opt the growing international trade in the region. In 1776 Madrid made Buenos Aires the capital of the new Viceroyalty of the Río de la Plata, which included the world’s largest silver mine in Potosí (in present-day Bolivia). For many of its residents, the new status was recognition that the adolescent city was outgrowing Spain’s parental authority.

Although the new viceroyalty had internal squabbles over trade and control issues, when the British raided the city twice, in 1806 and 1807, the response was unified. Locals rallied against the invaders without Spanish help and chased them out of town. These two battles gave the city’s inhabitants confidence and an understanding of their self-reliance. It was just a matter of time until they broke with Spain.

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When Napoleon conquered Spain and put his brother on the throne in 1808, Buenos Aires became further estranged from Madrid and finally declared its independence on May 25, 1810.

Six years later, on July 9, 1816, outlying areas of the viceroyalty also broke with Spain and founded the United Provinces of the River Plate. Almost immediately a power struggle arose between Buenos Aires and the provincial strongmen: the Federalist landowners of the interior provinces were concerned with preserving their autonomy while the Unitarist businessmen of Buenos Aires tried to consolidate power in the city with an outward orientation toward overseas commerce and European ideas. Some of the interior provinces decided to go their own way, forming Paraguay in 1814, Bolivia in 1825 and Uruguay in 1828.

After more than a decade of violence and uncertainty, Juan Manuel de Rosas become governor of Buenos Aires in 1829. Although he swore that he was a Federalist, Rosas was more of an opportunist – a Federalist when it suited him and a Unitarist once he controlled the city. He required that all international trade be funneled through Buenos Aires, rather than proceeding directly to the provinces, and set ominous political precedents, creating the mazorca (his ruthless political police) and institutionalizing torture.

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The fleeting Golden Years

Rosas’ overthrow came in 1852 at the hands of Justo José de Urquiza, a rival governor who tried to transfer power to his home province of Entre Rios. In protest, Buenos Aires briefly seceded from the union, but was reestablished as the capital when Bartolomé Mitre crushed Urquiza’s forces in 1861. From there, Buenos Aires never looked back and became the undisputed power center of the country.

The economy boomed and Buenos Aires became a port town of 90, 000 people in the late 1860s. Immigrants poured in from Spain, Italy and Germany, followed by waves of newcomers from Croatia, Ireland, Poland and Ukraine. Its population grew nearly seven-fold from 1869 to 1895, to over 670, 000. The new residents worked in the port, lived tightly in crammed tenement buildings, developed tango and jump-started the leftist labor movement. The onslaught of Europeans not only expanded Buenos Aires into a major international capital but gave the city its rich multicultural heritage, famous idiosyncrasies and sharp political differences.

By Argentina’s centennial in 1910, Buenos Aires was a veritable metropolis. The following years witnessed the construction of the subway, while British companies built modern gas, electrical and sewer systems. Buenos Aires was at the height of a Golden Age, its bustling streets full of New World businesses, art, architecture and fashion. By the beginning of WWI, Argentina was one of the world’s 10 richest countries, ahead of France and Germany.

Conservative forces dominated the political sphere until 1916 when the Radical Party leader Hipólito Yrigoyen took control of the government in a move that stressed fair and democratic elections. After a prolonged period of elite rule, this was the first time Argentina’s burgeoning middle class obtained a political voice.

It was also the time that Argentina’s fortune started to change. Export prices dropped off, wages stagnated and workers became increasingly frustrated and militant. La Semana Trágica (Tragic Week), when over a hundred protesters were killed during a metalworkers’ strike, was the culmination of these tensions; some say this radical reaction was due to the government being pressured by moneyed interests. The Wall Street crash of 1929 dealt the final blow to the export markets and a few months later the military took over the country. The Golden Age became a distant memory. It was the first of many military coups that blemished the rest of the century and shackled the progress of the nation. Scholars have argued that the events that culminated in the 2001 economic collapse can be traced back to the military coup led by General José Félix Uribiru in 1930.

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The age of the Peróns

During WWII the rural poor migrated into Buenos Aires in search of work. The number of people living in the city nearly tripled and it soon held a third of the national population (similar to the percentage today). The growing strength of these urban working classes swept populist Lieutenant-General Juan Domingo Perón into the presidency in 1946. Perón had been stationed for a time in Italy and developed his own brand of watered-down Mussolini-style fascism. He quickly nationalized large industry, including the railways, and created Argentina’s first welfare state. Borrowing from Fascist Italy and Germany, Perón carefully cultivated his iconic image and held massive popular rallies in the Plaza de 25 de Mayo.

The glamorous Eva Duarte, a onetime radio soap-opera star, became the consummate celebrity first lady upon marrying Perón, and an icon who would eclipse Perón himself. Known as Evita, her powerful social-assistance foundation reached out to lower-class women through giveaways of such things as baby bottles and strollers, and the construction of schools and hospitals. The masses felt a certain empathy with Evita, who was also born into the working class. Her premature death in 1952 came just before things went sour and her husband’s political power plummeted.

After Evita’s death Perón financed payouts to workers by simply printing new money, bungled the economy, censored the press and cracked down on opposition. He was strikingly less popular without Evita, and was deposed of by the military in 1955 after two terms in office. Perón lived in exile in Spain while a series of military coups ailed the nation. When he returned in 1973, there were escalating tensions from left and right parties; even if he’d lived to serve his term of re-election, Perón would have had much on his plate. His successor, his hapless third wife Isabelita, had even less staying power and her overthrow by a military junta in 1976 came as no surprise.

Although the effects of Perón’s personal political achievements are debatable, the Peronist party, based largely on his ideals, has endured – both Menem and Kirchner are Peronists (although their policies have little to do with anything espoused by Perón himself).

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The Dirty War

The new and decidedly more evil military rulers instituted the Process of National Reorganisation, known as El Proceso and headed by the notorious Jorge Rafael Videla. Ostensibly an effort to remake Argentina’s political culture and modernize the economy, El Proceso was little more than a Cold War–era attempt to kill off or intimidate all leftist political opposition.

Based in Buenos Aires, a left-wing guerrilla group known as the Montoneros bombed foreign buildings, kidnapped executives for ransom and robbed banks to finance their armed struggle against the government. The Montoneros were composed mainly of educated, middle-class youths who were hunted down by the military government in a campaign known as La Guerra Sucia (the Dirty War). Somewhere between 10, 000 and 30, 000 civilians died; many of them simply ‘disappeared’ while walking down the street or sleeping in their beds. Most were tortured to death, or sedated and dropped from planes into the Río de la Plata. Anyone who seemed even sympathetic to the Montoneros could be whisked off the streets and detained, tortured or killed. A great number of the ‘disappeared’ are still unaccounted for today.

The military leaders let numerous aspects of the country’s well-being slip into decay along with the entire national economy. When Ronald Reagan took power in the USA in 1981, he reversed Jimmy Carter’s condemnation of the junta’s human-rights abuses and even invited the generals to visit Washington, DC. Backed by this relationship with the USA, the military were able to solicit development loans from international lenders, but endemic corruption quickly drained the coffers into their Swiss bank accounts.

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The return to democracy

The military dictatorship that ruled the country with an iron fist lasted from 1976 to 1983. General Leopoldo Galtieri took the reins of the draconian military junta in 1981 but its power was unraveling: the economy was in recession, interest rates skyrocketed and protesters took to the streets of Buenos Aires. A year later, Galtieri tried to divert national attention by goading the UK into a war over control of the Falkland Islands (known in Argentina as Las Islas Malvinas). The British had more resolve than the junta had imagined and Argentina was easily defeated. The greatest blow came when the British nuclear submarine Conqueror torpedoed the Argentine heavy cruiser General Belgrano, killing 323 men. Argentina still holds that the ship was returning to harbor.

Embarrassed and proven ineffectual, the military regime fell apart and a new civilian government under Raúl Alfonsín took control in 1983. Alfonsín enjoyed a small amount of success and was able to negotiate a few international loans, but he could not limit inflation or constrain public spending. By 1989 inflation was out of control and Alfonsín left office five months early, when Carlos Menem took power.

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Menem & the boom years

Under the guidance of his shrewd economy minister, Domingo Cavallo, the skillfully slick Carlos Menem introduced free-market reforms to stall Argentina’s economic slide. Many of the state-run industries were privatized and, most importantly, the peso was fixed by law at an equal rate to the American dollar. Foreign investment poured into the country. Buenos Aires began to thrive again: buildings were restored and new businesses boomed. The capital’s Puerto Madero docks were redeveloped into an upscale leisure district, tourism increased and optimism was in the air. People in Buenos Aires bought new cars, talked on cell phones and took international vacations.

Although the economy seemed robust to the casual observer, by Menem’s second term (1995–99) things were already amiss. The inflexibility imposed by the economic reforms made it difficult for the country to respond to foreign competition, and Mexico’s 1995 currency collapse jolted a number of banks in Buenos Aires. Not only did Menem fail to reform public spending, but corruption was so widespread that it dominated daily newspaper headlines.

The Economic Crisis

As an economic slowdown deepened into a recession, voters turned to the mayor of Buenos Aires, Fernando de la Rúa, and elected him president in 1999. He was faced with the need to cut public spending and hike taxes during the recession.

The economy stagnated further, investors panicked, the bond market teetered on the brink of oblivion and the country seemed unable to service its increasingly heavy international debt. Cavallo was brought back in as the economy minister and in January 2001, rather than declaring a debt default, he sought over US$20 million more in loans from the IMF.

Argentina had been living on credit and it could no longer sustain its lifestyle. The facade of a successful economy had been ripped away, and the indebted, weak inner workings were exposed. As the storm clouds gathered, there was a run on the banks. Between July and November, Argentines withdrew around US$20 billion from the banks, hiding it under their mattresses or sending it abroad. In a last-ditch effort to keep money in the country, the government imposed a limit of US$1000 a month on bank withdrawals. Called the corralito (little corral), the strategy crushed many informal sectors of the economy that function on cash (taxis, food markets), and rioters and looters took to the streets. As the government tried to hoard the remaining hard currency, all bank savings were converted to pesos and any remaining trust in the government was broken. Middle-class protesters joined the fray in a series of pot-and-pan banging protests, and both Cavallo and, then, de la Rua resigned.

Two new presidents came and went in the same week and the world’s greatest default on public debt was declared. The third presidential successor, former Buenos Aires province governor Eduardo Duhalde, was able to hold onto power. In order to have more flexibility, he dismantled the currency-board system that had pegged the peso to the American dollar for a decade. The peso devalued rapidly and people’s savings were reduced to a fraction of their earlier value. In January 2002 the banks were only open for a total of six days and confidence in the government was nonexistent. The economy ceased to function: cash became scarce, imports stopped and demand for nonessential items flat-lined. More than half of the fiercely proud Argentine people found themselves below the national poverty line: the once comfortable middle class woke up in the lower classes and the former lower classes were plunged into destitution. Businesspeople ate at soup kitchens and homelessness became rampant.

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Enter Néstor Kirchner

Duhalde, to his credit, was able to use his deep political party roots to keep the country together through to elections in April 2003. Numerous candidates entered the contest; the top two finishers were Menem (making a foray out of retirement for the campaign) and Néstor Kirchner, a little-known governor of the thinly populated Patagonian province of Santa Cruz. Menem bowed out of the runoff election and Kirchner became president.

Kirchner was the antidote to the slick and dishonest Buenos Aires establishment politicians. He was an outsider, with his entire career in the provinces and a personal air of sincerity and austerity. The people were looking for a fresh start and someone to believe in – and they found that in Kirchner.

During his term Kirchner defined himself as a hard-nosed fighter. In 2003 he managed to negotiate a debt-refinancing deal with the IMF under which Argentina would only pay interest on its loans. In 2006 Argentina repaid its $9.5 billion debt, not a small feat, which drove his approval rates up to 80%. The annual economic growth was averaging an impressive 8%, the poverty rate dropped to about 25% and unemployment nose-dived. A side effect of the 2001 collapse was a boom in international tourism, as foreigners enjoyed cosmopolitan Buenos Aires at bargain prices, injecting tourist money into the economy.

But not all was bread and roses. The fact that Argentina repaid its debts was fantastic news indeed but economic stability didn’t follow by design. In fact, a series of problems ensued during Kirchner’s presidency – high inflation rates caused by a growing energy shortage, the unequal distribution of wealth and the rising breach between the rich and the poor that was slowly obliterating the middle class. Some argue that the official inflation figures were manipulated – and have been, in fact, double – to mask the government’s failure at reining in inflation. The administration bullied supermarket chains and wholesale vendors into introducing price caps on basic goods, from beef to tomatoes, which some saw as a surefire way to harm the country’s potent agriculture industry and discourage investment.

On the foreign policy front, Kirchner’s belligerence aimed at outside forces (and deposed ‘neo-liberals’ Cavallo and Menem) was in contrast to the close ties he established with Venezuela’s left-wing Hugo Chávez, who became Argentina’s biggest creditor. Some believe this relationship was forged to counter the power of the IMF, the World Bank and Washington. In November 2005, when George Bush flew in for the 34-nation Summit of the Americas, his presence sparked massive demonstrations around the country. Although anti-US sentiment unites most Argentines, some fear that Kirchner’s schmoozing with Chavez may have alienated potential investors in the United States and Europe.

Kudos goes to Kirchner for making admirable strides toward addressing the human rights abuses of the military dictatorship. In 2005 the Supreme Court lifted an amnesty law that protected former military officers suspected of Dirty War crimes and this led to a succession of trials. Perhaps the most publicized was the case of Reverend Christian von Wernich, the first Catholic priest persecuted in Argentina in connection to the human rights abuses, who was sentenced to life in prison in October 2007. Ghosts were further stirred with the 2006 disappearance of Jorge Julio Lopez the day before he was slated to testify against former police officer Miguel Etchecolatz. Etchecolatz was sentenced to life even without the testimony but Lopez’ case was the talk of the town, with the press calling him the first desaparecido (literally ‘disappeared one’) of the democratic era.

Toward the end of his presidency, Kirchner’s administration met a series of difficulties that included government corruption scandals (the economy minister Felisa Miceli resigned over a brown paper bag packed with US$64, 000 in cash that was found in her office bathroom in July 2007), the teachers’ protests in April 2007 that resulted in the death of a teacher in the southwestern province of Neuquén and political unrest in Kirchner’s native province of Santa Cruz.

The Rise of the Kirchner Dynasty

When Néstor Kirchner stepped aside in July 2007 in favor of his wife’s candidacy, many started wondering: will ‘Queen Cristina’ (as she’s often called due to her regal comportment) be just a puppet for her husband who intends to rule behind the scenes?

In the October 2007 presidential election, Cristina Fernández de Kirchner went from first lady to president, having captured 44.9% of the vote (23% of the vote went to center-left ex-deputy Elisa Carrió and 17% to former economy minister Roberto Lavagna). The weak opposition and her husband’s enduring clout are some of the reasons cited for Cristina’s clear-cut victory despite the lack of straightforward policies during her campaign. While this is not the first time Argentina has had a female head of state (Isabel Peron held a brief presidency by inheriting her husband’s term), Cristina is the first woman president to become elected by popular vote. As a lawyer and senator she’s often compared to Hillary Clinton; as a fashion-conscious political figure with a penchant for chic dresses and designer bags, she evokes memories of Evita.

Cristina’s victory wasn’t without controversy. Some are guessing that the power couple ushered in a Perón-style political dynasty in which they’d run the country for many years to come. As presidents in Argentina are restricted to two consecutive four-year terms but can run again after a term on the outside, the Kirchners could potentially stay in power for the next 16 years.

Having inherited a bagful of problems from her husband’s years in power, Cristina faces numerous challenges during her term. Many worry that Argentina’s economic development isn’t sustainable and that simply continuing the center-left policies won’t solve the current issues. Cristina will first need to differentiate herself from her husband and not rest on his laurels when it comes to saving the country. She’ll also have to woo foreign investors that Néstor may have alienated due to his alliance with Chávez (although she did condemn the Colombian invasion of Ecuador and visited Venezuela in March 2008 to show her support). Most importantly, she’ll need to tackle Argentina’s top concerns that include high inflation, rising crime, frozen energy prices and unequal distribution of wealth. In February 2008, as a way of addressing the energy crisis, Cristina signed an agreement with Brazil’s Lula da Silva to build a joint uranium enrichment plant. But this was just a start. How the presidenta will head off remains to be seen.

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