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September 27, 2002
The IMF's Current Take on Argentina
The IMF's Current Take on Argentina
"Argentina is experiencing an economic contraction of unprecedented magnitude in its economic history, with the cumulative fall in output in the four years to the end of 2002 expected to be over 20 percent—about twice that experienced in the Great Depression of the 1930s. GDP fell 6 percent in the first quarter (over the previous quarter), with consumption and especially investment contracting sharply, and unemployment has increased to about 25 percent. While the trade and current account balances have improved, this reflects the collapse of imports; exports have also fallen, largely because of a cutoff in trade finance. Inflation picked up significantly during the first part of 2002 and, while monthly inflation rates have recently moderated, this in part reflects temporary factors, including the continuing freeze on public service prices.
"Rapid progress is needed in four key areas: finalizing a fiscal framework that, to the extent possible, balances medium-term debt sustainability requirements and current cyclical considerations; developing a comprehensive strategy to address the very difficult financial condition of the banking sector, and applying this transparently and uniformly; establishing a sustainable monetary anchor for the authorities’ economic program; and reinforcing the independence of the central bank."
Posted by DeLong at September 27, 2002 11:42 AM
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September 24, 2002
Argentina Says It Will Skip International Loan Payment
By LARRY ROHTER - New York Times
RIO DE JANEIRO — The Argentine economy minister announced today that his country would no longer use its diminishing foreign reserves to pay back loans from the International Monetary Fund and other multitlateral lenders and would thus miss at least one payment due next month, a move that pushes Argentina closer to a formal break with those bodies.
Meeting with foreign reporters in Buenos Aires, the economy minister, Roberto Lavagna, also said that while Argentina hoped to reach a new accord with the I.M.F., it was "not going to sign just any old agreement." The government of Eduardo Duhalde, he said, "will not renounce its policy of social assistance," even if it means further delaying negotiations that have been bogged down for months.
"There are two priorities which we will not abandon," Mr. Lavagna said. "We will maintain social programs and ensure the financing of provincial economies."
There is considerable economic danger for Brazil now. The Brazilian market has lost 60% in value this year. Venezuela is also in considerable danger of political and economic turmoil.
If the market turmoil in Brazil is completely related to the election, there may be a quick turn around once the vote is cast. Still, the currency and stock market decline is disturbing.
http://www.nytimes.com/2002/09/26/business/worldbusiness/26BRAZ.html
http://www.nytimes.com/2002/09/26/business/worldbusiness/26PESO.html
Two important articles on micro and small business loan extension in Brazil and Mexico. The Brazil experience is heartening, the Mexican experience suggests quite a serious development problem.
Countries like Argentina can look different when one is not living in them. All the news about Argentina is focused on the IMF and social discord. The fact of the matter is there has been a lot of social progress in Argentina over the past fifteen years, including with no small significance the fact that with arguably the worse economic-social crisis in the past century happening, the country has not resorted to a military government.
In addition, the people as a whole are showing no small mount of restraint and non-violence. This is hard to see or evaluate in the midst of news reports that focus on certain social upheavals. But this is true about any country. From the point of view of television news, movies, and television programs, most Argentines believe that the United States is generally characterized by extreme violence, overwhelming problems related to the widespread ownership of guns, and of a kind of consumer materialism that alienates people from healthy social discourse and relationships.
Many in the U.S. would argue that while these problems exist there is so much that is good in the country. Likewise, there is much that is of a positive nature in Argentina that is overshadowed by superficial images, some of which capture a portion of Argentine life but do not reveal the whole of it.
Regarding specific IMF policies, Argentina has generally been very orthodox over the last decade in following these and the result has been continued decline in the quality of life even while a handful of people have become quite wealthy, a pattern that is common even in the most developed of countries.
It is time for all of us to realize that the cold calculations of financial and economic wizards are neither objective nor effective in meeting the human needs of people in health care, education, employment, and the development of truly participatory government.
More loans are not the solution to Argentina's problems in the long run; they've received lots of loans. But the harsh, competitive, and biased operations of neo-liberal capitalism are not solving the basic needs of people in Argentina. And, in the past months there has been more than a little evidence of arrogance, ignorance, and callousness on the part of IMF and U.S. government officials in their public comments on the plight of Argentina.
I am a United States "American" who has witnessed these events in Argentina.
Thanks for your interest.
Military governments were possible due to internal causes but also because of US supported and promoted such operations like "Condor" in Chile and the region, see recently disclosed documents. It costed tens of thousands of lifes.
Also, more recent governments that increased the debt were considered a model because they applied the ideas you mention. Bush (father) came here remember?.
Too difficult to explain and not to avoid responsibilities, but some are mutual with international institutions.
Regards