ARGENTINA  - Bursting The Barter Bubble 

http://www.lapress.org/Article.asp?IssCode=&IanCode=1&artCode=3245

Andrés Gaudín.  Feb 17, 2003

A solidarity network that developed to help the poor is the target of harsh criticism.

After more than seven years, a barter network that was a key to survival for thousands of unemployed Argentines has nearly collapsed.

The Global Barter Network, which is built on the solidarity of its members, is based on the swapping of products and services for which members receive vouchers. The network sprang up in Argentina in the mid-1990s and burgeoned between late 2001 and mid-2002 (LP, May 3, 1999, and May 21, 2001). In October 2001, about 400,000 people were participating in more than 2,000 barter clubs or "nodes."

When Argentina’s economic crisis came to a head early last year with the devaluing of the peso and skyrocketing unemployment (LP, May 20, 2002), people flocked to the clubs.

According to the Global Barter Network, by mid-2002 there were 5,800 nodes with more than 1 million members called "prosumers" — a combination of "producer" and "consumer" — trying to make ends meet in the informal economy.

"After that, we stopped keeping statistics, but some people estimate that as many as 2 million people could have been surviving by bartering," said museum expert Rubén Ravera, one of the network’s founders.

Now, however, the number of participants has dropped to one-third the level of late 2001. On the last Saturday in December, traditionally one of the clubs’ busiest days, the country’s largest node, La Bernalesa in Buenos Aires, set up 37 tables for members to display their wares — compared to 180 the preceding month.

"Even taking into account that at a critical moment, bartering served as a substitute, it obviously had limits of supply that did not allow it to meet the basic needs of the families in the clubs," said Jorge Marchini, who has studied the phenomenon.

At the end of last year, the network came under other types of attack — merchandise was stolen and files destroyed, outside groups tried to force the use of regular currency instead of vouchers, and organizers say media have launched a smear campaign against them and the clubs.

One media group disseminated unfounded reports on its radio and TV stations and in its newspaper claiming that the merchandise swapped by the clubs had been stolen by a criminal gang headed by Ravera and Carlos Desanzo, another pioneer of the barter system. "They tried to turn us into criminals," Desanzo and Ravera said of the reports, which also claimed that the two were wanted by authorities in Italy because of links to the Red Brigades.

The worst blow, however, was the large-scale counterfeiting of vouchers. At one point, Desanzo said, 90 percent of the chits in circulation were fake. The injection of worthless vouchers pushed prices up by a factor of more than 40. The barter "price" of cooking oil rose from seven to 300 vouchers and flour skyrocketed from three to 140.

"We struck a nerve with powerful economic interests and they attacked us, inundating the market with fake vouchers that caused runaway inflation," Desanzo said. "They infiltrated the groups with people who undermined the system, turning the vouchers, which are a social currency for trading, into speculative currency," Ravera said. Along with this came other problems, such as lending at usurious interest rates and the selling of vouchers.

"No one can deny that during the first months of the crisis, bartering was the only means of survival for many people. But nodes were springing up like candy stands. In my neighborhood, three nodes opened within a seven-block area. The controls failed," said Adelma Avila, a "prosumer" who has withdrawn from the system.

"The counterfeiting undermined the system’s credibility, but the lack of basic products, along with inflation — which was almost nine times the level of that in the formal economy — and the inability to obtain vouchers were the main reasons for the system’s collapse," Marchini said.

Because of the breakdown, network leaders decided not to participate in last October’s legislative elections, an idea that had been raised as the barter system expanded (LP, Nov. 18, 2002). "Although we had never expressed interest in forming a political party, we started to appear in the polls by popular demand. Now we see that that was part of the trap that was set for us," Desanzo said.

Ironically, the barter model — which was once the salvation of poor Argentines, but which collapsed under outside pressure — is being imitated by large companies. Auto manufacturers, agrochemical companies, oil companies and insurance companies are using the barter principle to lure agricultural producers to do business with them.

Transnational companies including Monsanto, Petrobras, Bayer and Nissan have organized agriculture fairs aimed at 11,000 farmers who have combined annual sales of US$6.3 billion and purchase inputs worth $3.5 billion. The companies offer to accept the farmers’ harvest in exchange for tempting packages of products ranging from seeds and fertilizers to vehicles and fuel. Prices are pegged to international futures markets.

The schemes have various names — "Technology for Grain," "Harvest Plan," "Grain Plan" or "Wool Plan." In the case of automakers, once a vehicle’s value is set in terms of corn, soybeans, sunflower seeds or wheat, a contract is signed. At harvest time, the farmer delivers the product to the grain or wool exporter, where it is credited to the auto manufacturer’s account. When the manufacturer receives the cash payment, it credits the farmer’s account and delivers the vehicle within 30 days.

The deal is not necessarily a bargain for the farmers. The vehicle often arrives 60 days later and ends up costing about 13 percent more than it would have if the farmer had paid cash.

Although they have been astonished by the ease with which agrochemical companies and automakers like Ford, Mercedes Benz, Chevrolet, Jeep, Dodge, Renault and Nissan have turned the barter concept to their own ends, the network’s founders have not given up hope of returning to the system’s roots. "This isn’t a mortal blow," Desanzo said. "At a moment of great change, we had serious growing pains."