Most Argentines Want Gov't To Cut Farm Taxes

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An overwhelming majority of Argentines say the government should back down and lower export taxes on farm products, according to a new survey by consulting firm Felipe Noguera y Consultores.

The poll, which surveyed 1,080 people and was published Saturday in newspaper La Nacion, shows that 78% of Argentines believe "the government should reverse course on export taxes so farmers lift the agriculture strike." Just 14% disagree.

These numbers bode poorly for government officials who have been hoping farmers would lose popular support and soften their opposition to the taxes.

In March the government created a sliding scale for exports of corn, wheat, soybeans and other goods. At one point the duty on soybeans rose to 45%, infuriating farmers who had not anticipated such high taxes when they planted the crop. The export taxes rise or decline in accord with commodity prices. Higher prices mean higher taxes.

Prior to March, the tax on soybeans, which are Argentina's top export, was fixed at 35%. Before that, it was 27.5%. Farmers have been complaining about export taxes since they were first introduced in 2002, shortly after Argentina devalued its currency.

The taxes provide the government with billions of dollars in revenue each year. But economists say the government loses between $35-$55 million in revenue for each day that the farm strike continues. Farmers began their second strike last week and say it will last until at least May 15. If the government does not budge on taxes, farmers may extend the protest.

Link: The original government resolution raising export taxes (in Spanish)

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U.S. Embassy Issues Volcano Warning for Argentina, Chile

The U.S. Embassy in Buenos Aires issued the following warning Friday:

This message is being issued to inform American citizens residing in or traveling to Argentina of conditions in Argentina related to a volcanic eruption in Chile.

On May 2 the Chaitén Volcano in southern Chile erupted sending a plume of ash and steam 35,000 to 55,000 feet into the atmosphere. The eruption's thick column of ash and smoke is moving east across the Patagonia Region of Argentina to the Atlantic Ocean. Media reports indicate that the ash cloud is fast moving and could reach Buenos Aires.

So far, Chubut Province, which includes the popular tourist attraction Peninsula Valdez, has been most affected by the ash. Provincial civil defense authorities post regular updates on conditions in Spanish at the following web site: http://www.chubut.gov.ar/dgdc/. Information in English may be obtained from the American Embassy’s web site at http://argentina.usembassy.gov.

Because of the ash fall and flight patterns through the affected areas, some airlines have cancelled flights, including some flights in and out of Buenos Aires on May 8. People with flight reservations are advised to check with their respective airlines to see if they can expect cancellations or delays.

Ash in the atmosphere can present health risks. If you have a respiratory ailment, special care should be taken to avoid contact with ash. Monitor local media for public health advisory notices.

The State Department offers the following tips for travelers in areas affected by volcanic eruptions:

* Wear long-sleeved shirts and long pants to avoid skin irritation.
* Use goggles to protect your eyes.
* Use a dust mask or hold a damp cloth over your face to help breathing.
* Avoid driving as ash can clog engines and cause cars to stall.
* Clear roofs of ash as it is very heavy and can cause buildings to collapse.

Americans living or traveling in Argentina are encouraged to register with the U.S. Embassy in Buenos Aires through the Embassy web site http://argentina.usembassy.gov.

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Business Confidence Hits New Low

Argentine business leaders are less confident in the country's economy than at any time since December, 2006, when the Argentine Business Leaders Association began measuring confidence levels.

A new survey, conducted between March and April, shows that 32% of managers and CEOs are confident about the business climate. A year ago, almost 48% of businessmen were confident about the economy.

Meanwhile, confidence in the legal system declined to 15.7% from 28.8% a year earlier. Businessmen often complain about how long it takes to resolve lawsuits. In most cases, judgements are not made for several years, forcing companies to spend exorbitant amounts of money on legal fees.

According to the survey, about 39% of the leaders said they plan to hire new workers in the next six months. That is down from 60% a year earlier.

In one positive sign, almost 38% of managers said they plan to make new investments over the next six months. But that figure is down from 59% a year ago.

Businessmen across all sectors of the economy say key reasons for the lack of confidence are constantly changing business regulations and government officials who treat much of the private sector with contempt.

Link: Argentine Business Leaders Association

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Most Argentines Do Not Read Books

Most Argentines do not read books, according to a TNS Gallup poll published Tuesday in newspaper La Nacion. The poll, which surveyed 1,006 people aged 18 and over, indicates that 58% of Argentines have not read a single book within the past year. Those who do read prefer history books or novels. Gallup conducted a similar poll in 1999. Since then, the demand for religious books has declined while demand for self-help has increased. Argentine men tend to read history books while women prefer novels by Argentine authors. Those who read said they read an average of 5.9 books a year.

IPSOS Public Affairs conducted a similar study last year in the U.S. That study, which had a sample universe of 1,003 adults and was published by the Associated Press, said 27% of Americans had not read a book within the last year. American readers read about 6.5 books annually, according to the poll.

In the UK, a recent poll of 2,000 adults showed that 34% of Britons had not read any books in the last year. Almost half of the people surveyed had read at least five books while about 20% said they had read more than 20 books over the last year.

Argentina's literacy rate stands at 97.2%, ranking it 55th in the world. That compares with 99% in both the UK and the US, which are both ranked 18th worldwide, according to a 2007-08 UN Develop Program Report.

Link: IPSOS Poll (Unfortunately, it is available for free only to the media)

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Free Dog Show May 10-11 In San Isidro

"It's a dog eat dog world, lads,
and I got bigger teeth than you."
--Lock, Stock and Two Smoking Barrels - 1998

If you want to get out of Buenos Aires and do something different this weekend, here is a nice option. From May 10-11 Purina Dog Chow will be sponsoring a full-fledged dog show and canine competition. Tickets are free. Among other things, dogs will engage in agility contests, jump through loops, jump over and into water and catch Frisbees. The competition and shows will take place at the San Isidro Hippodrome, or race track, from 12pm-4pm. For more information and instructions on how to get there, in Spanish, click here.

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The Storm Clouds Are Gathering Over Argentina

"The best predictor of future behavior is past behavior."
--Anonymous

The storm clouds are gathering over Argentina again. Rumors are swirling. People are nervous, asking, “What is going to happen with the country?” Middle class Argentines are wondering if they should withdraw their cash from banks. “I hear they’re going to freeze deposits again,” they say. “I hear they’re going to split the exchange rate in two – one rate for exporters, another for the rest of us. What do you think is going to happen?”

Unfortunately, after 10 years of writing about Argentine politics, I have no idea. And neither do any of the economists, politicians or businessmen I talk with. Many are struggling to get even the smallest bit of information about what is to come. The uncertainty is both pervasive and profound. Even the keenest observers are grasping at straws, admitting they have no idea what to expect. Welcome to Argentina.

Corporate executives are holding emergency meetings with economists and other paid advisors. CEOs who are normally confident about their ability to manage crises are calling colleagues and competitors to see if anyone knows what is going to happen. People with connections in the government – that is to say, connections to Nestor Kirchner, Julio De Vido or Cristina Fernández – are trying to find out what these three are thinking. Inflation is rising, perhaps by 30% annually, though nobody knows for sure because the government has decapitated the national statistics institute. The higher prices have pushed hundreds of thousands of people below the poverty level, economists say. But official data do not reflect such trouble because the government conveniently stopped measuring poverty last year. Banks are raising interest rates and curtailing loans. Another devastating farm protest looms.

Mid-level managers are clamoring for higher salaries (for themselves and their employees) while postponing decisions about hiring new staff. On the street, people are returning to exchange houses and buying dollars, as they have so many times in years past. But few people know if any of this is necessary or wise. Nobody knows if there will even be another crisis. And that is the problem, you cannot be sure. After all, this is a country where boom and bust cycles tend to radically alter the political and financial landscape every decade or so. Argentines have come to expect this. History has taught them to take it as a given. And when expectations become so ingrained in a nation's collective conscious, they tend to become self-fulfilling prophecies.

In an article published Saturday in the newspaper Perfil, political analyst Graciela Römer said this about the situation:

"Opinion polls show the government is losing popularity. Business and academic travelers who visit the country are surprised to see how the Argentine mood has changed. The key question they ask is, 'What led to the decline in optimism that was so prevalent just a year ago?'

Are we entering the negative phase of one of those cycles ... of disappointment that seem to define our national temperament? Is there something more profound than the frustration over the government's inability to contain rising prices, the continuing presence of crime, or the failure to resolve the agriculture conflict? Is it perhaps the "double presidency," or maybe the questioning of former president Kirchner and his role as the 'economy minister behind the scenes?' I believe it is all of these things and much more. Together, these things have produced a critical mass that overwhelmed peoples' ability to tolerate the frustration they have felt when thinking about the future."

If enough people believe a crisis is approaching, and enough withdraw their money from banks and stop spending, the outcome is a foregone conclusion: a genuine crisis. Nobody is predicting the kind of jaw-dropping meltdown that walloped the country in 2002. But a lesser crisis is plausible enough to stir fears and feed the rumor mills. Economists say Argentina's “fundamentals are solid.” The economy is growing rapidly. Unemployment is low, the government has a fiscal surplus, the central bank has $50 billion in reserves, inflation is high but not wildly out of control, and people are still shopping, dining out and dancing at nightclubs. Tourists are arriving in records numbers.

But one key indicator often goes unmentioned: consumer confidence. The farm strike left the government deeply wounded. It slashed confidence in the president's ability to solve problems. The conflict, and her tone-deaf, hard-headed and ineffectual approach to dealing with it, made her look incapable of dealing practically with what was, in some ways, a simple revolt against tax policies. Had she made a few minor concessions, she could have avoided a month-long conflict that cost Argentina hundreds of millions of dollars in lost trade and industrial output. She also could have demonstrated that she is capable of governing prudently.

Evidently, that was too much to ask. Cristina attacked the farmers, calling them enemies of the state, and refused to negotiate the one policy that led them to protest in the first place. Her refusal to sit down and negotiate in good faith, as well as her effort to marginalize farmers socially and politically, guaranteed that they would harden their position. For almost a month since the protests ended, she unnecessarily let the nation wonder if farmers would return to the roads and protest again. Meanwhile, she allowed one of her key officials, Commerce Secretary Guillermo Moreno, to threaten farmers and their children. “I know where you live,” Moreno told one agriculture leader: “I know where your children go to school.” This is not statesmanship. It is behavior one would expect from an Italian Mafioso.

Since Cristina won the election, observers have wondered what kind of leader she would be. She said little about how she would govern. She made no policy announcements, leaving analysts little alternative but to read tea leaves when trying to predict her policy prescriptions. Aids said she would focus on international relations and improve Argentina's image in the world. She would start, they said, by repairing relations with the U.S.

But just days after taking power, she backtracked on those plans and launched an all-out verbal offensive against the U.S. After discovering that a U.S. prosecutor was investigating a Venezuelan who carried $800,000 into Argentina in a suitcase, Cristina said the U.S. was engaging in "trash" intelligence operations against her and her ally, Venezuelan President Hugo Chávez. The outburst served no constructive purpose. But it scarred relations with the U.S. while raising questions about her leadership skills. It also raised questions about the nature of her ties to Chávez.

The "suitcase scandal" eventually blew over, but not before damaging Cristina's image as a leader who, many hoped, would govern pragmatically and less impetuously than her husband. Over the past month more people have begun questioning her leadership. They also have begun questioning her influence on policy. Is it Cristina or her husband who really calls the shots?

"More is said about Néstor Kirchner than about Cristina Kirchner," political columnist Joaquín Morales Solá wrote in Sunday's La Nación. "The president (Cristina) was known in her day for being a strong woman with her own ideas. But that was another world." Santa Fe Province Governor Hermes Binner recently said this about the matter: "We need for there to be just one president."

Cristina's favorability rating has dropped to 41% from 54% in 30 days, according to a poll by Römer. People are becoming impatient with her lack of transparency. As long as things were going well, many people felt little need to question the government. But since the farm strike, and the ongoing failure to deal with inflation, more people are questioning the president's plans. Does Cristina believe inflation is a problem? If so, what should be done about it? What does she believe is the proper role of the state? Does the economy require more state intervention? Does Cristina prefer the policies being pursued in Bolivia and Venezuela or those in Brazil and Chile?

Cristina has said nothing about any of this, at least not publicly. She has continued to pretend that inflation does not exist and defended the government's thoroughly discredited inflation data. Meanwhile, inflation recently has surpassed crime to become the top concern among Argentines. And just as Argentines have become more concerned about inflation, they have become more concerned about the government's failure to address it.

Concern about the future is affecting the way people think about their personal finances and the way companies think about their budgets. The following internal memo, written by a local consultant, was sent as a notice to clients on Wednesday:

Yesterday afternoon there were major rumors circulating around the city. These included rumors asserting that there was or would be:

• A small run on banks (the withdrawal of deposits and the decision to not renew fixed-term deposits)
• A possible (forced) banking holiday to stanch the flow of money out of banks
• The resignation of Cabinet Chief Alberto Fernandez
• The naming of a new presidential cabinet on May 25. The launching, on the same day, of a new economic plan, which includes anti-inflation measures
• The return of the parallel or dual exchange rate, where exporters receive one rate and everyone else receives another.

What is troublesome is that all of these rumors are plausible. Increasingly, people fear that the country is teetering on the edge of a political precipice. This fear alone, if it became pervasive enough, could push the country into genuine trouble. For now, much of the concern is hidden from view. But attitudes seem to be changing quickly. Before the farm strike, complaints about the government were limited to the Kirchners’ insular nature, their combative style, their attacks on opposition parties and the media, their relationship with Venezuelan President Hugo Chávez and, of course, inflation.

Journalists voiced concern about the government’s disdain for the press. Neither Cristina nor her husband has held a single press conference since taking power in 2003. Moreover, both have verbally attacked journalists and media companies, saying they are anti-democratic. But while this frustrated journalists and worried some analysts, it was never an important issue for most voters. It never had a major impact on economic growth.

That is beginning to change. The government’s hermetic approach to communication is beginning to take a toll on the economy. A purchasing manager at a multinational company told The Argentine Post last week that he postponed buying a new building because of concern about the farm conflict and the lack of information about the government's economic plans. The CEO of one of Argentina's largest companies said, "This situation is unsustainable. The exchange rate is going to be 10-to-1 within a year or two. They will have to devalue the currency again."

The mere fact that businessmen are worried indicates that things are not as rosy as they were even two months ago. The gloom and doom rumors are back. Rumors die only when they are refuted or shown to be implausible. Rumors thrive when they are plausible and left unaddressed. A person close to Cristina told The Argentine Post that she and her husband read the newspapers on a daily basis. One cannot but wonder if this is actually true. After all, you would think that if the president were aware of all the negative publicity she is getting, she it would take action to address it.

Perhaps she will. It is not too late and Argentina is not doomed to repeat the mistakes of its past. Cristina may yet prove to be a wise and skillful states-person. But for now, there is reason to be skeptical. Nobody can predict the future (futurología, as they say). But that does not leave us entirely in the dark. As psychologists like to say: The best predictor of future behavior past behavior. For those unhappy about the past, however, this may not be much consolation.

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The Today Show Comes To Buenos Aires

NBC's The Today Show and über-host Matt Lauer have been hanging out in Buenos Aires. The famous American morning TV show shot around a dozen videos about Argentina. You can see the online story here, and check out the videos here.

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Argentina Goes To The Movies (Less)

All the good movies have been made. -- Targets 1968

Argentina's film industry is known all over Latin America and many of its films have gained global recognition. Local films have been nominated five times for an Academy Award in the Best Foreign Language Film category. Only 16 countries have produced more Oscar-nominated films, according to The Film Experience. Argentina won an Oscar in 1985 for The Official Story.

But none of that is helping to reel in audiences at local theaters, where ticket sales have been falling constantly in recent years.

The average Argentine goes to the theater less than once a year, an industry source told The Argentine Post. In contrast, the average American goes 6 times a year, according to a study by the Motion Picture Association of America. Europeans went to see an average of 1.8 movies last year, according to a Council of Europe study. The French are Europe's top movie-goers, with the average Frenchman going to see 2.8 films last year.

In 2001, when Argentina was on the brink of an economic meltdown, theaters sold 30.9 million tickets. Despite a staggering recession in 2002, nationwide sales rose to 31.5 million. The upward trend continued through 2004, when Argentines bought a record 44.4 million tickets.

But in 2005 sales began to drop and they have not recovered. Theaters sold more than 10 million fewer tickets last year than they did in 2004.

As sales have fallen, ticket prices have risen. A full price ticket at the Village Recoleta, which sells more tickets than any other theater in the nation, cost 8 pesos in 2001. The same ticket now costs 17 pesos, or 113% more than before the economic collapse.

As measured in dollars, Village ticket prices plummeted in 2002 but have been rising each year since. Prices went from US $8 before Argentina’s 2001 currency devaluation to $2 in 2002. They have since rebounded to US $5.40 today. The average ticket in the U.S. costs $6.88, up almost 22% from 2001. (Of course, ticket prices in the U.S. vary within cities and states, just as they do in Argentina. The Argentine Post was unable to find a national average price for Argentina.)

"It's hard to be sure that people are seeing fewer movies because of higher prices. Historically, ticket sales are determined by the quality of movies and the number of blockbusters released each year," said the industry source. "These factors are much more decisive than ticket prices."

Indeed, after a record year in 2004, worldwide ticket sales fell by almost 8% in 2005, indicating that Argentina was not alone in seeing sales drop. But since then sales have largely recovered in most countries while they have continued to decline in Argentina. One possible explanation for this is the availability of inexpensive, high-quality pirated movies.

"We can say for sure that pirated films are affecting sales," said the industry source. "Meanwhile, an enormous number of people are buying Home Theaters and staying at home to watch movies."

In March the Argentine Video Editors Union (UAV), together with city officials, carried out "pirated DVD" raids throughout Buenos Aires. They targeted "trucho" DVD stores and kiosks that sell pirated DVDs. In total, they confiscated 6,545 pirated movies recorded on CDs and DVDs.

Seven out of every 10 DVDs sold in Argentina are pirated, according to the UAV.

The UAV estimates the sale of pirated DVDs at 350 million pesos annually. That is equivalent to about half of all the DVDs sold legally in Argentina each year. Pirated DVDs are sold in every neighborhood in Buenos Aires. Meanwhile, scores of online catalogs offer thousands of high-quality DVDs, including the latest unreleased Hollywood blockbusters, for as little as 3.5 pesos. Many of these businesses offer home delivery, making it easier than ever to buy pirated DVDs without even leaving your home. In fact, at many online stores, the more you buy, the less you pay per DVD. What's more, customer service at pirated DVD stores is often better than it is at legal businesses such as Blockbuster.

The growth in pirated DVD sales has made it almost impossible for the world's leading video rental chain, Blockbuster Video, to operate successfully in Argentina. To survive, Blockbuster has abandoned its business model, closed stores, and begun advertising itself as a kind of "maxi kiosk" that sells candy, soda, ice cream and other goodies. Many pirated DVD stores now offer a larger selection of movies than does Blockbuster. Such stores are profiting from the demand for cheap DVDs, but their gains appear to be hurting profits at local movie theaters.

“Profits from this business are not rising because, even though ticket prices are going up, our costs are going up too,” the industry official said.

As measured in dollars, Argentine theaters earned US $ 180,117,000 from ticket sales last year, compared with US $247,000,000 in 2000. So while ticket prices have increased 113%, dollar-based ticket income has actually declined 27%. This is important because key operating costs - such as the acquisition of movie reels - are in dollars.

Most of the movies shown in Argentine theaters were made in the U.S., though many were made Asia, Europe and other regions. Argentine films, while highly praised by local media critics, almost always do poorly at the box office. Nonetheless, INCCA, the national film and audio-visual arts institute, forces theaters to show local films each year. This, industry experts say, has made it harder for theaters to make money.

"The INCCA obligates cinemas to show a certain number of films...even if there is not a single decent film available to show," the source said. "If it's necessary, we have to show films that have been made by students."

Argentina has a "screen quota law" forces theaters to show local films. "This law is not in anyway positive," said the source. "Just think about it. Why would we not be interested in showing an Argentine film? If the film is acceptably good, we will want to show it. To give you an idea of how bad this law is, consider this: In the theaters where we are forced to show Argentine films, the occupation rate is exactly five times lower than it is in any other theater."

Link: INCCA
Link: Cine Nacional
Link: MPAA
Link: UAV
Link: The $35 Luxury Movie Ticket

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Fernandez Picks Fernandez To Join Fernandez & Fernandez

Cristina Fernandez de Kirchner late Thursday fired 17-year-old Economy Minister Martín Lousteau and moved to replace him with world-renowned economist Carlos Fernandez, according to C5N, or Cristina Cinco Nestor, the almost-official television network. Cristina decided there were not enough government officials named Fernandez, so she moved decisively to raise the number of high-ranking officials named Fernandez, including herself, to four.

President: Cristina Fernandez
Cabinet Chief: Alberto Fernandez
Justice Minister: Anibal Fernandez
Economy Minister: Carlos Fernandez

Analysts expect the move to immediately boost the president's approval ratings, avert another farm strike, tame inflation, spur economic growth, reduce unemployment, eliminate traffic accidents, improve relations with the U.S. and lead to the freeing of FARC hostage Ingrid Betancourt.

At least one analyst said the move may even lead Argentines to stop using the word caramelo, or "candy," to describe Halls cough drops.

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The Street Artist

Pablisky Moreira has exactly 24 seconds to perform his act. If he takes any longer, he wastes time, energy, and risks bodily harm. His act is timed to coincide with the changing of the traffic light at the corner of Libertador and Alvear, in the Buenos Aires suburb Martínez, where he often performs. This particular light stays red for 34 seconds before flashing yellow and then green. Moreira juggles four balls for 24 seconds. He then stops and takes 10 seconds to collect donations from people whose cars are stopped in two lines at the light. Moreira weaves in and out of the cars as they begin to move. Some people honk. Others yell, telling him to get out of the way. Some smile. Some say thank you. Some wave. Many just ignore him.

Today Moreira's timing is off. Perhaps it's because I am watching, observing his every move. I seem to be making him nervous. Moreira is dropping balls right and left. Balls are rolling in between cars and sliding into the gutter before he can reach them. He is wiping his brow a lot, trying to prevent beads of sweat from rolling down into his eyes. It's hot outside, especially for a street artist. Moreira is an entertainer. He tries to make people smile. He loves making people laugh. He smiles himself and his smile is genuine. He loves people. He loves what he does. "I am a street artist," he says. "I like what I do. I like to make people smile. My goal is to make people smile, to make them laugh. If I can do that, I've done my job. I like to bring happiness into people's lives."

Moreira works six hours a day, five or six days a week. He makes around 30 pesos a day, sometimes more, sometimes less. "It varies every day," he says. "It's enough."

You can watch Moreira yourself by checking out the latest Scooping Argentina video here. If he makes you smile or brings even a little happiness into your life, he will have done his job.

Link: Scooping Argentina

*TIP: If your bandwidth is slow, click the "pause" button and wait for the video to fill-up before watching it.

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Solving Arentina's Smoke Problem

Click on photo to expand it.

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Aire Y Luz: The New Buenos Aires City Blog

Macri talking about why he makes surprise visits around the city.
From Aire Y Luz, the city's new blog.

The Buenos Aires city government has started up a new blog. It's called Aire y Luz and it is remarkable because of what it represents. The blog, which is run by my friend Alejandro Rozitchner, as well as Marcos Peña, Laura Ojeda, Federico Suárez and others, allows the city to communicate "directly and informally" with residents. If you want to know what the city is doing and why it is doing it, check it out.

You may have read in Clarín or La Nación about Mayor Mauricio Macri doing this or that. But if you want to know why he's doing what he's doing, he'll tell you in the blog. The blog consists largely of video interviews with city officials, including Macri. It is informal. The site is simple and unvarnished. The interviews (in Spanish) are straight forward and conducted with Flip Ultra video cameras, which are uploaded straight to YouTube. In a decade as a journalist writing about politics in Argentina, I have never seen anything like it.

Beyond that, there is something refreshing about the way city officials make themselves available in the blog. Their approach to communication contrasts starkly with that of the national government, which often displays distaste for people who want to learn more about why it does the things it does.

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