Christopher Walker: Argentina shivers but Chile is hot

The night flight to Buenos Aires was packed. I peeped into first class, and found that even at £7,000 a seat there were few spaces. "We will shortly be landing at the airport, where the ground temperature is 28 degrees. The government has just declared martial law, so do take care." The businessman next to me yawned. It was the only noticeable reaction. The sang- froid of the Argentinian is not to be underestimated.

It has certainly been put to the test. In the past month, Argentina has had five presidents, several complete changes of the cabinet, a massive devaluation of the currency, the seizure of pension fund assets, the freezing of personal savings, and each and every citizen being forced to live on about £1,000 a month.

The effect of this debacle abroad has been limited. One estimate puts the value of foreign investment in Argentina at only $6bn (£4.2bn). Sadly, most of this is by the Spanish banks (I'm off to Madrid tomorrow to find out just how bad it is), otherwise the damage is small change. Fears that the crisis would cause a repeat in markets of the "tequila wave" that followed Mexico's devaluation have proved false. Some commentators have suggested this is because markets have grown up a bit. I'm not so sure.

Which brings me to chick- peas. I went from Buenos Aires to Chile, now regarded by most emerging market managers as a safe haven. The contrast between the two countries is striking. I spent a day riding around the vast ranch of Chile's Chickpea King. We discussed price charts and economies, but he looked blank when I talked about the past year's slowdown. From his perspective, the world has been in recession for four years (since the Asian crisis). Argentina was the end of the wave, not the start, and in some markets, like chickpeas, we are in an up trend.

The Argentinian meltdown has been seized on by Euro- sceptics as evidence of the danger of currency systems that do not reflect economic realities; artificial pegs are bound to fail. This misses the point. The Argentinian pegging of the peso to the US dollar failed because of the lack of cohesion between the two economies (European econo- mies are much closer linked). In addition, political decisions made things worse. The joy of the euro is that it reduces the ability of politicians to interfere. If anything, events in Argentina should spur Latin Americans to work towards their own currency union.

Life on the streets is certainly harsh. Starving slum dwellers have made mass raids on supermarkets. Gunmen have raided Buenos Aires' equivalent of the Ivy six times, and one friend was mugged (at gunpoint) in the six feet between his taxi and the airport door. But for the rich these are side effects, and they party on.

Estimates of the offshore wealth of Argentinians run as high as $120bn. High levels of taxation, limited detection of evasion and political incompetence have led to the country's money simply moving elsewhere. This in turn allows the well-heeled to greet political events with a yawn, and reduces the establishment's willpower to put things right.

Chile, by contrast, has rectified its historic problems and given people a sense of being "stakeholders". By maintaining political stability, and indeed political involvement, they have survived four years of recession intact.

I spent New Year in Chile. As the chimes rang in 2002, the band struck up a waltz and Agnesita, an Argentinian stockbroker, grabbed the best- looking man and began to dance. The stern-faced Chil- eans looked on disapprovingly as they stood and sang their national anthem.

It's time for Argentinians to get serious.