"The failure of Argentina, so rich, so under populated...is one of the mysteries of our time." V.S. Naipaul wrote those words 20 years ago, and the mystery remains.

Some blame corruption and the bungling military rule of the seventies; others say the biggest mistake was to peg the local currency, the peso, to the US dollar - which cured inflation while at the same time making Argentine goods and services hopelessly uncompetitive.

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British influence

But economists and historians have suggested to me that the origin of the problem lies much deeper in Argentine history: that it goes back to the early days of nationhood, to the 1820s when the Argentine Government borrowed heavily from the British at rates that greatly favoured the London banks and that the culture of dependency and indebtedness continues to the present day, with catastrophic consequences.

Cattle market in Buenos Aires

The British contribution to the Argentine heritage is certainly a mixed bag that includes the railway system, a number of expensive private schools, modelled on our "public" schools, a passion for football played with both spherical and ovoid balls, various breeds of beef cattle expertly reared, and, not least, the Buenos Aires Herald, the respected English language newspaper founded in 1876.

Economic crisis

At a time when newspapers the world over are obsessed with war and rumours of war, a recent copy of the Herald carries a lead story suggesting that Argentina has different priorities: "Revenue plummets 10%, VAT 31%". The article goes on to tell how tax revenues are plunging as Argentina enters its fourth year of recession.

When I left my job I hadn't been paid for five months Paula Arias

So deep is the economic crisis that only the handful of super-rich are unaffected by it. The middle class has been devastated by company closures, bankruptcies and layoffs.

Dog walkers are one of the sights of Buenos Aires. They walk the dogs of the city's wealthy residents. The ratio of dogs to dogwalkers is usually taken as an indicator of the state of the local economy. Maria Patricia now has only 12 dogs, she used to walk 21 -- a sign of the times!

Private sector incomes have fallen by 30% while public sector salaries and state pensions were recently slashed by 13%, provoking street demonstrations and protests.

Politicians plan

Lurking behind every policy move is the inescapable fact that Argentina is suffocating beneath a huge burden of debt, internal and external, amounting to $130 bn. With the possibility of default never too far from anyone's mind, there is not much room for manoeuvre, although a plan to restructure the debt has just been unveiled.

President de la Rua announces new economic measures to the nation

Following recent elections where the opposition made widespread gains, President de la Rua says that the economy must be stimulated. But how he intends to do that is not clear - at least not to the Argentine electorate - many of whom failed to vote or spoiled their ballot papers.

In the wake of the government's draconian austerity measures of last August, I found the country in a mood of deep despondency. In the industrial suburbs of the capital, unemployment is over 30% and there is so little money in circulation that a barter economy is rapidly taking over.

Swap markets

I went to a "swap market" with Claudio Fabrega, one of many middle class Argentines whose living standards are plummeting. Claudio trained as a radiologist technician and had a good job at a private hospital. When the hospital changed hands, he was dismissed and hasn't found a market for his professional skills in three years.

Although he's done occasional menial jobs, he's relied more and more on the "trueque" as the swap markets are called, to provide for his wife Patricia and his two young children. He told me that 70% of the goods and services they need to live, they obtain by barter.

At the trueque daily goods such as food and clothes are exchanged

As I entered the trueque with the Fabrega family, Claudio told me that three years ago, when he was working, he had three credit cards. Now, his only credit is tied up in the stock of cleaning materials that he uses for barter. The trueque we attended attracts about 400 people to its daily meetings.

In the nearby suburb of Quilmes, is a converted factory where 10,000 gather to swap goods and services; and throughout Argentina the value of barter is estimated at half a billion dollars a year.

Leaving Argentina

Perhaps the saddest sight in the beautiful city of Buenos Aires are the long queues outside European embassies. Young people are seeking visas to return to countries that their parents and grandparents abandoned in search of a better life. The transatlantic tide has now reversed.

Paula Arias is leaving Argentina

My last coffee, at one of the elegant cafes, I took with Paula Arias, a young woman about to depart for Spain. Her father migrated to Argentina during the 1950s and worked in a factory before starting his own small business which is now on the brink of collapse. One of his daughters has already settled in Spain and Paula is about to join her.

"When I left my job I hadn't been paid for five months," she told me. "What else can I do?" I had no answer.