Bajo_cero2 said:
a) there is not a neoliberal economy plan. They do have it in europe and you can se how does it works.
B) the nationalization of ypf
c) the high price of soy
d) the dolar corralito
those are strategic moves to avoid a crisis.
scotttswan said:
They appear more like strategic moves to try and fill in the holes of a sieve.
I have to agree with Scott on this one. None of this appears to be part of any plan or even of any consistent philosophy of government or economics. It certainly doesn't constitute a strategy. Instead, each move is a reaction to something, usually something that resulted from unplanned, though not unpredictable, consequences of a prior move. On each of Cristian's points -
- Neoliberalism in Europe - see comments below.
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- YPF - This government initially reacted to Repsol's lack of investment by trying to gain more influence over the company. So Nestor arranging a deal for his old friends the Eskanazis to buy 25% of the company, with the investment to be paid in future dividends that insured insufficient revenue retention to fund needed investments. It was a profitable move for the E's and presumably the K's, but a disaster for all other Argentines.
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Luckily for the K's, the E's were no longer important friends when the problem reached critical proportions, so Argentina could conveniently re-nationalize the company without concern for former friends of the K's. NOT strategic planning and not good government.
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Did anyone in government ever stop to consider the disincentives to investment in the price controls on gas that limit YPF's revenue to a third of the global price? It seems they just realized that when Repsol cancelled the long-term sweetheart contract to sell discounted liquid gas to Argentina. So now we pay 3 times more for imports, exacerbating the trade imbalance.
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Gradually decreasing subsidies and lifting price controls when things were booming a few years ago might have lessened the impact and attracted the outside investment that Argentina so badly needs. As for Argentina funding all its own needs, note that the price tag to exploit just the Vaca Muerta field is around $25 billion dollars per year. There is no way Argentina can fund this from government coffers, even if it could find the technical expertise to attempt it independent of private companies.
- Soy prices - Cristina claiming credit for the soy bonanza is like the rooster taking credit for the sunrise. We are all fortunate that the international price rose and stayed high, but Argentine policy had nothing to do with raising the price of soy.
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However, Argentine policies re: soy exports have contributed to increasing prices of meat and other edibles. When export controls and tariffs were re-jiggered to protect basic food supplies after the peso was allowed to float, meat prices were protected (to feed to populace) but soy prices were not (since soy has little local use). So predictably, to maximize profits, everyone on the campo planted soy in fields where cattle once grazed, and now we're facing a shortage of meat.
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I actually supported the government move to increase export tariffs on soy in 2009, which might have reigned in inflation over food prices, although possibly worsening the balance of payments. At that time there was no short-term concern for the trade balance, so the government took the "strategic" move to increase its tax revenues from farmers even at the cost of possibly reducing exports. That one time, this government lost, and the result has contributed significantly to inflation. (Please remember too that Cristina's stated objective in increasing the export tariff was to generate revenue that would improve the lot of the poor....)
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- Dollar corralito - Now three years after the campo fiasco we're suffering high inflation driven largely by food prices, PLUS a trade imbalance. So the government denies the inflation by compromising the official agency responsible for monitoring it and tries to control the imbalance administratively? These fail to demonstrate long-range planning, sound policy, or even common sense. But given their prior failures at planning, policy, and sensibility, what other choices do they have?
Bajo_cero2 said:
Mention me a free market country with full employment.
Show me the full employment in Argentina! This is another fiction of Moreno's INDEC. I know Argentines without work for months and many who are underemployed. One company I know recently posted 2 positions that don't even pay all that well, and they received almost 1000 applications, up from 700 the last time they posted a few years ago. Why the big increase in applicants? "There aren't many jobs available these days," said one employee there.
This is NOT a country at full employment, and anyone who can see knows that to be the case. The fact that Cristina regularly claims full employment makes it no more true than the official reports of 9% annual inflation.
Bajo_cero2 said:
Argentina has no credit. So argentina has to pay cash. . . . That s a simple rule in administration, you have to spend less than what you get.
Actually, Argentina's credit returned after the default, and the country's risk premium even declined to the average of other Mercosur states' until INDEC began publishing rubbish numbers that spooked the credit markets. So the risk premium tripled in a matter of weeks. This is not a sign of sound governance or strategic planning. You might even call it lying. And shooting yourself in the foot.
Bajo_cero2 said:
A fact, after 20 years of neo liberal politics europe is in a huge crisis.
Europe is in a huge crisis because they introduced a common currency without the governmental underpinnings to make it work. Nice experiment gone wrong, as predicted at the time by many economists. This has nothing to do with neo-liberalism or any other political-economic school of thought.
The European experience is irrelevant to anything currently happening in the Argentine economy or politics, although it's not dissimilar from the problems of 1999-2002, when Argentina was borrowing in a currency it didn't control and couldn't devalue. (Dollars for Argentina, Euros for Greece and Spain.)
Bajo_cero2 said:
So, argentina can spend only what argentina exports. Isn t it real austerity?????
Real austerity was what Argentina experienced when it let the peso float to market rates. Despite the hardships - which were basically history by the time I moved here, so I have no personal experience - it was a very successful move, and the economy rebounded quickly. The same strategy might even work again here!
With the rebound, there was tremendous opportunity to invest in infrastructure - to improve the roads, update the trains, modernize the hospitals, at least paint the schools. Public transportation, for example, was once a marvel of Argentina and could be again with some strategic investment. Until that happens, we'll see more private vehicles jamming the streets, polluting the air, and worsening the trade imbalance by consuming imported fuel.
From the beginning this government's only "strategy" seems to have been to placate the lower classes with bread and circuses - social programs and "X for all," whether X be football, car racing, or LCDs - in order to maintain their political support. To their credit, they have succeeded somewhat in reducing poverty and improving income distribution, at least in the short run. But these moves have overheated the economy and created demand that exceeds the national capacity to produce, thus causing dangerous inflation. Inflation can and has led to crises in Argentina's past.
Absent any
strategy to increase production capacity during these last 9 years, whether through public or private investment, Argentina now suffers shortfalls in supply that can be met only with imports. Strangling the flow of imports boosts prices for those available, only worsening inflation. The lack of many goods in the market and shortages of basic products like gasoline frustrate the populace, which can also lead to crisis.
Having done virtually nothing of any strategic value in their 9 years with almost unlimited, dictatorial powers, the K's have been reduced to lying - making claims about prices, employment, and the fiscal imbalance that are obviously false to anyone with moderate intelligence. Meanwhile, they cover up corruption at even the highest levels of the government, including the office of Vice President, further degrading their credibility. A crisis of confidence can easily morph into a political/economic crisis.
Now that confidence is suffering, we have a new knee-jerk reaction in play - appealing to nationalism. Whether regarding the Malvinas, the nationalization of YPF, or the trade missions to Angola and much-vaunted "sales" of harvesters that are not even manufactured here, we are seeing a flag-waving circus intended to distract from the problems at hand. It is yet another stop-gap measure to forestall public unrest.
So there are a number of factors that individually or in combination, could lead to a crisis in the coming months.
I have not lived in Argentina long enough to say whether this government is worse than prior governments or even potential future governments. Or for that matter, worse than the governments of the US, the UK, or Germany, each of which has its own critical failures. I can only say that this government is certainly not the government that Argentina deserves.
It may well take another crisis to change this leadership, in which case we can only hope for a government with greater competence and honesty.
! Wish I had it with me everytime I went to my Econ class. I went to LSE where all things private were evil and governments were the Messiahs who were to come to save everybody.
