Argentina and the IMF: What to Expect with the Likely Return of Kirchnerism

NeoWonk

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Since Argentina is on the verge of a default, the IMF holds all the cards in its hand. If they continue to disburse the loan to Argentina, the country might have a fighting chance of avoiding a crisis, and even start on its path towards recovery. That would also be necessary to reduce the levels of unemployment and poverty that have soared in the last few years. But if the IMF presses on with austerity policies and withdraws support, Argentina will descend into chaos.
The IMF and Argentina
 

perry

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I believe that the situation will not improve whoever wins. The crash will be at its peak by 2021 and this will be a long protacted crash as the world situation is negative . This is not 2001 when the economy improved within a few years . This time it looks like a long crash similar to Greece that had been in recession for 11 years and only this year has shown economic growth.
 

NeoWonk

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I believe that the situation will not improve whoever wins. The crash will be at its peak by 2021 and this will be a long protacted crash as the world situation is negative . This is not 2001 when the economy improved within a few years . This time it looks like a long crash similar to Greece that had been in recession for 11 years and only this year has shown economic growth.
I don't think you can really compare Argentina to Greece namely because Argentina has control of its own currency - it can print at will - and it will print. It can default and it will default. Greece on the other hand is stuck in the Euro. It can't print at will as it would have done in the past. That's why it has been mired in recession for 11 years. By printing you can inflate away your debts - except those that are dollar denominated and on those you default.
 

NeoWonk

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Macri promised to bring back the country into the world, meaning greater integration with the global economy, following the old policies of the Washington Consensus. He liberalized the foreign exchange markets and renegotiated the foreign debt with the few holdouts—essentially the so-called Vulture Funds— which had bought Argentine debt for a pittance and sued in New York courts for full payment. He paid what was demanded so that the country could borrow in dollars. The notion was, once again, that foreign funds would flow, and that this would lead to growth. The IMF was brought back, as a seal of approval for good governance. Interest rates remained low, and often negative. The combination of low interest rates, and the absence of foreign exchange controls, meant that people could freely buy dollars, which led to capital flight and significant depreciation of the peso, as before.

Initially, the depreciation was seen positively, even if Macri’s economists did not admit it. Again, one must remember that a depreciation reduces real wages, and that was seen as necessary by Macri and his economists, in order to make the economy more competitive. Also, the depreciation and the fiscal adjustment—pursued at least formally—to control inflation, threw the economy into a recession with higher unemployment. This again reduced workers bargaining power, and had the desired effect of reducing real wages. But the worst part was that foreign debt more than doubled during the next three years, from close to $70 billion to about $160 billion, with no significant increase in exports. This increase in debt essentially financed capital flight, meaning dollars were borrowed in international markets and immediately sold to the public, which caused further depreciation of the currency.
Despite the depreciation of the peso Argentina failed to increase exports. This I think is the main failure of Macri and one of the main reasons for his demise.
 

Bajo_cero2

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I believe that the situation will not improve whoever wins. The crash will be at its peak by 2021 and this will be a long protacted crash as the world situation is negative . This is not 2001 when the economy improved within a few years . This time it looks like a long crash similar to Greece that had been in recession for 11 years and only this year has shown economic growth.
I disagree. First the idea is to stop the destruction that MM is making. Second, to start to recover. To freeze the public services, rise salaries, tax again minery and soy and to stop the capital flight is going to stop the freefall.
 

perry

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I don't think you can really compare Argentina to Greece namely because Argentina has control of its own currency - it can print at will - and it will print. It can default and it will default. Greece on the other hand is stuck in the Euro. It can't print at will as it would have done in the past. That's why it has been mired in recession for 11 years. By printing you can inflate away your debts - except those that are dollar denominated and on those you default.

Greece is actually much better off than Argentina for the reason it has the euro as its currency and cannot print freely this currency , Here it is not the case with the peso being overprinted causing massive devaluation and depreciation as has happened here in the last years and will accerelate in the coming years . Argentina foreign debt in us dollars is also larger than Greece either though its economy is much larger . Greece recieves over 26 million tourists per year compared to less than 6 million for Argentina .
 

Ceviche

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I actually love that less tourists come here. I have spent lot of time in Thailand whose main source of money are actually the tourists, and it can be quite hellish to see them everywhere and inflated prices cos of them
 

perry

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I actually love that less tourists come here. I have spent lot of time in Thailand whose main source of money are actually the tourists, and it can be quite hellish to see them everywhere and inflated prices cos of them
I agree with you Ceviche . When I go to Patagonia I love it that there is so few tourists especially in the Comarca Andina Valley.
 
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