Forbes: (Argentina) Economic activity is almost dead and inflation is not even near to be defeated," he

[expat0tree]

They lead the EU is the stabbing of opposition opponents. And truthspeak.

They clock the highest annual GDP growth by comparison to other member states and their banks are more resilient and immune to downturns, politics aside.

 

[sergio]

So will there be a huge crash soon? The heightened talk about the economy on this site suggests that people are getting nervous.

 

[toongeorges]

They clock the highest annual GDP growth by comparison to other member states and their banks are more resilient and immune to downturns, politics aside.

The GDP per capita in Belgium, The Netherlands or Germany is more than 3 times the GDP per capita in Poland, which means that Poland is inreasing its GDP per capita in absolute terms less than Belgium, The Netherlands or Germany, because Poland's GDP growth is less than 3 times the GDP growth in the other countries. Relatively, Poland is improving, because its GDP growth rate is higher than in the other countries. The relative GDP growth of Ireland has been much higher than Poland's in recent years and they have a higher GDP per capita than other countries in the EU, except tiny Luxembourg.

If you say that Ireland is the envy of the EU, ok, but Poland? You are the first one to tell me that.

 

[toongeorges]

The answer is to implement the following things ASAP:

1. Change the judiciary
2. Enforce regulations and the rule of law in general, including debt collections
3. Restructure the education system from ground up and monitor progress

accountability, accountability, accountability...

One problem for this to happen is that the mindset of the people enacting the change must have been formed outside of Argentina. People who only know the Argentinian way of doing things will keep doing them that way.

 

[toongeorges]

Can we look to history? What countries were in similar situations who went on to recover and prosper, and how did they do it?

Yes, Germany once was in a very bad shape because of the humiliating conditions put on it after defeat in World War I. It led Germany to make a very drastic reaction, which led to a total German crisis from which everything had to be rebuilt. Since rebuilding Germany, Germans are allergic to budget deficits, because they are still traumatised by the hyperinflation of more than 90 years ago.

The crises in Argentina so far are not strong enough to induce in people a long lasting sense of urgency that everyone has to be responsible for this country to improve.

 

[expat0tree]

If you say that Ireland is the envy of the EU, ok, but Poland? You are the first one to tell me that.

Ireland created crazy tax incentives for multinationals such as Google and so their GDP expansion is not reflective of real productivity increases or improved innovation because of earlier investments in education, although I might be wrong on the longer term if that revenue gets reinvested properly and they show real improvements, we should see what happens next, for now i see Poland as the one breaking ground, another country that might prove as the fastest growing is Romania, in real terms they actually grew more than Poland in 2018 but it would make sense to see if their performance is uniform and stable, there are questions there, their banks may or may not endure volatility in the years to come.

Poland on the other hand rose from the ashes in the early 90s (lesson for Argentina) and was the only EU country to avoid 2018 recession, it's because polls have a good understanding on austerity and know how to live within their means, last year 2018 was successful for them once again, registering 4.8% real GDP. This year 2019 Europe is expected to slow down significantly and Poland is still forecast to pump out 3.3% in real growth (expected to be the highest unless Romania proves to become the new leading star), with growing manufacturing base, this demonstrates Poland's incredible resilience and continued improvements in industrial productivity, their rate of education is something like 9.8% because they don't believe in not educating their children, it's the mentality that matters in these cases, also more hard working Ukrainians continue pouring there to take up various low bracket jobs so they are blessed with having enough solid work force to continue growing their industries. Besides the numbers alone, another reason why I had chosen Poland as the shining star of Europe is because they are serious about expanding and modernizing their military turning them into a regional power serving as the only true buffer between Russia and Europe.

 

[Ries]

Austerity has failed in every country it has been tried in.
There are papers discussing how Austerity in the UK pretty much directly lead to Brexit, tracking the leave votes to the councils that were cut the most in tax monies. The result of the recession was to short the common citizen, to make the bankers whole. It failed on every front.
Which sounds like what you are proposing here- thats basically the Macri program.

https://voxeu.org/article/brexit-blame-it-banking-crisis

 

[expat0tree]

Austerity has failed in every country it has been tried in.
There are papers discussing how Austerity in the UK pretty much directly lead to Brexit, tracking the leave votes to the councils that were cut the most in tax monies. The result of the recession was to short the common citizen, to make the bankers whole. It failed on every front.
Which sounds like what you are proposing here- thats basically the Macri program.

https://voxeu.org/article/brexit-blame-it-banking-crisis

I do not support Macri's program because he borrowed too much and did too little.

In case of Argentina there is no choice but to tighten the belt, and are you arguing the opposite? When there is a twin deficit and a real risk of default? The whole idea of spending your way out of recession may work only in China where the GDP keeps growing at 6% + year on year, that's because besides working hard they also save their income for further investment, more so than anybody else. Argentina not only needs austerity but it needs a "true austerity" Greece style, it need to learn the value of work and money and what it means to spend paycheck to paycheck although ideally i would like the Argentine corrupt elite to pay its fair share as well and not dump it all on the poor class some of which can no longer afford to take a bus.

Austerity is really a cleansing remedy, it's an opportunity to reset the economy and start in a cleaner better more efficient way, there is too much waste here, too much inefficient outdated bureaucracy and outright corruption, besides that another positive side effect of deep austerity is the change of attitude in the next generation who are more likely to be motivated and have a better plan for themselves.

What do you suggest should Argentina do?

 

[Ries]

tightening the belt is a very vague prescription.
in most cases it means austerity, which means screwing the working class.
This didnt work in the GB, its failed in Kansas, its a flop in Greece, and it has not worked anywhere else its been tried.
If by "tighten the belt" you mean tax the wealthy more, make the tax system more transparent and efficient, encourage job producing business instead of financial shell games by hedge funds, sure- I am with you.
In the 11 years I have owned property here, I have seen bureaucracy lessen, corruption decrease, and significant infrastructure improvements- which the UK and the USA are unable to do.
I would suggest that, rather than taxing exports, the government encourage them. I would suggest streamlining the ridiculous export duty and customs systems, which add between 10% and 100% "friction" to exports.

Argentina has a lot of viable exports- the shoe industry, along with textiles and clothing, a wide variety of metalworking, including agricultural equipment, tools, hardware, along with furniture, jewelry, and culture- film, music, theater, dance, etc.

In every case, the government impedes exports of these things.
I know people in many different fields who have told me first person stories (anecdotes, yes, but true ones by people in the fields) of how ridiculously hard it is to send a performing arts troupe abroad, to export argentine made products, to travel to international trade shows, and so on.

The country needs jobs, tax income, positive foreign exchange flows, and healthy local manufacturing.
Most european countries,and, even the feeble USA, have government agencies that help local exporters. The Argentine government actively hinders.

Also, we need a middle ground between 100% duties on imports, or the replacement value in exports rule, that we had under K, and the open market to importing chinese trash that Macri wants.
Complete open borders will decimate argentine industry and jobs- we will end up like Uruguay, where everything for sale is Chinese, and all they sell is money laundering and tourism.
Complete isolationism is not workable.
A balance that supports the local industries with targeted tariffs, while allowing things like Iphones and laptops in, which Argentina does not and will not manufacture, with some tariffs, is what is needed.

In other words, a middle ground.

 

[expat0tree]

Any austerity is hard on the working class, but that's just the nature of an economic consolidation, work more spend less when the economy needs a period of time to re balance itself and make adjustments. I do agree with you on the middle ground approach tough but I still persist on balancing the budget in order to attract foreign investment and safeguard the budget but that's not enough and this is what Macri fails to understand. We need to change labor laws, which can arguably once again screw the working class but there is no other way to be competitive at an industrial level, otherwise we'll always be isolate out of necessity to protect the domestic industry because we cannot compete with the real world.

I agree on the export mafia rules, the country cannot hold them hostage just because they get paid in dollars, and we need transparency so that everybody can go online and see where tax revenues are spent but we also need to cut the size of the government and fire a whole bunch of people because it is unsustainable, this would hurts but that's the nature of austerity. Greece had the choice to leave the EU and simply default but hey they themselves were the ones to decide to stay and pay up! It's their problem that the economy isn't growing much but at least they've learned responsibility and serve as an example to other nations who are considering borrowing beyond their means to repay.

You mention Chinese imports but where else are we going to get goods that are not made in Argentina at an affordable price? To incentive the Argentine industry to flourish and stay competitive so that we do not crush once the borders are opened, you need to go house to house and talk to families with small children who often times fail to stress the importance of education and technological innovation, in this country, learning something, studying hard and then pursuing an advanced career path is not encouraged on any level so the structure of governance is only one problem, people themselves and their attitude towards higher education is what needs to change first and foremost and meantime -- austerity.