Crisynomics At Work: Argentina Is Low Debt Superstar

[sesamosinsal]

They don't have a fixed exchange rate - it trades within a band.

HA! So, it's fixed within a band... Geesh, silly me! Is Cavallo the Econ Minister in China these days?

 

[syngirl]

This forum is nuts.

Every expat I`ve met has gone a little bit kooky along the way (myself included). Add in the anonymity of the web and you`ve got the workings for a full on mental asylum

 

[camberiu]

I am not sure if I understand what you guys are arguing about. Is China a free market economy? No. Is China communist country (in the Marxist sense)? No. This is not a binary relationship. It is not one thing or the other. China is a managed economy. The state plays a heavy hand in many areas, including interest rates, banking and exchange rates. However, in many areas it is highly unregulated, like labor laws, environmental laws, tax laws and so forth.

 

[Joe]

I am not sure if I understand what you guys are arguing about. Is China a free market economy? No. Is China communist country (in the Marxist sense)? No. This is not a binary relationship. It is not one thing or the other. China is a managed economy. The state plays a heavy hand in many areas, including interest rates, banking and exchange rates. However, in many areas it is highly unregulated, like labor laws, environmental laws, tax laws and so forth.

The origin of this is debate is that many associate a market friendly economy with being a "Yanqui Client State". Bradly, Matias, et. al. are scared shiftless of the Neo-Liberals and falling under the iron grip of the Yanqui Capitalists. That is the reason they look to Venezuela and Cuba for economic models.

My point is that you can have a market friendly economy WITHOUT being a Yanqui Client State - e.g. China.

What are examples of what a China would do vs Argentina? Argentina put export tariffs on beef at one time. China would never put export tariffs on anything. Quite the reverse it would grant export subsidies in order to build its domestic industries and provide better paying jobs for its citizens.

 

[GS_Dirtboy]

Yeah, especially when it comes to the massive government expenditures, corruption and the housing bubble. Argentine ghost cities? Yes!

Bradley, I didn't write what you quoted me as writing about China. Not sure from where you got that.

GS

 

[camberiu]

What are examples of what a China would do vs Argentina. Argentina put export tariffs on beef at one time. China would never put export tariffs on anything. Quite the reverse it would grant export subsidies in order to build its domestic industries.

That is correct. However, I'd not call China a "market friendly" country either. It attracts lots of capital because it is a huge market and the labor costs there offset a lot of ridiculous policies imposed by the PRC. For a foreigner to open a company in China for example, it takes a lot of bribing to get all the permits and approvals necessary. Depending on the size of your company, the CCP might demand 51% ownership of the Chinese subsidiary, without investing a dime. You might also be required to hire a CO-CEO and a bunch of executives to your company, all appointed by the CCP of course. And they will never show up at the office at all to do any work. They only get paid. The judiciary system there also is a joke and any legal dispute with a local company or the state, you are VERY likely to loose. Companies invest in China mostly because the rewards are more than worth the risks. But it is in general an awful place to do business.

 

[Matiasba]

I think something was lost in translation here, because otherwise to me this sentence shows a real misunderstanding of inflation and demand... how do new consumers with big demand fit with inflation for you?

Probably I expressed myself wrong.

You have a strong demand, and the price goes up because of that. this is what you dont understand?

The internal demand of argentine economy has been growing unstoppable for ten years, with expanding internal market policies (which basically means giving people money to spend), social plans, inclusion policies, etc. Before 2003 we had almost half of the country totally excluded of formal economy, with no weight in it, without counting, without money to spend, without rights (for example without DNI) without subsidios of any kind. In these past ten years, that situation changed a lot, lots of them bought a moto, for instance, this is the typical product this people got in the last past years. Another example are laptops, 7 or 8 years ago you had BsAs full of locutorios with internet, a bussiness that did work (charging 1 peso per hour) but now you have a lot less, it is hard to find some one sometimes, and they are also much more expensive (since there are a lot less, more demand, prices go up). This is because gradually lot of people bought their laptops, lower middle class I mean.
Lots of people now have a job, lots of people now have vacation... the internal market grew up a lot, we dont have anymore a depressed economy. Jubilados, pensionados, Asignacion Universal por hijo, other social plans, etc, that gives a lot of money to new people that now consume. That is demand, and since there are almost no competition (there are lots of fields with monopolies, or big enterprizes controlling more than 80% of the market) the supply can put the price they want.

For instance, Sancor y La Serenisima have 85% of the milk market. In the past year, they increased prices for 42%, with the most pessimistic inflation data in 30%.

So when you have a strong demand, the supply controls the price. Its a demand inflation.

 

[Joe]

Using your example of investment in auto production. Everyone is building auto plants in China. Can you imagine that sort of enthusiasm in Argentina? GM is having more success (revenues, profits, growth rate) in China than in its own home market - can you imagine that in the Argentine market?!?!?!

Let me ask you this, would Argentina be better off modeling itself off of Venezuela or China?

 

[camberiu]

Let me ask you this, would Argentina be better off modeling itself off of Venezuela or China?

I don't think that is a fair question, as both are bad models, but on different things. I think a better question would be: Should Argentina follow a model that rewards entrepreneurship, individual initiative, rule of law and risk/reward? Or should Argentina follow a model centered in central planning, bureaucracy, statism and corporatism?

 

[Joe]

I don't think that is a fair question, as both are bad models, but on different things. I think a better question would be: Should Argentina follow a model that rewards entrepreneurship, individual initiative, rule of law and risk/reward? Or should Argentina follow a model centered in central planning, bureaucracy, statism and corporatism?

The problem with this is the former is quickly labeled as "Neo-Liberal" and something "that doesn't work in Argentina" and quickly dismissed. Yes I know it is BS but you have to play by the rules of the game. As a way of getting Argentines to look at alternatives, it is perhaps easier to digest country comparisons.

Indonesia is a country that has made strides reducing corruption. A resource rich country like Argentina.

There are so many better countries to model after than Venezuela.