Is the Argentine Economy Going to Collapse?

[Fettucini]

Hey Fedecc, I agree with you about the current Kirchner administration, but in terms of your positive view of the IMF, can you give an instance with any third world country say in the last 30 years that is in a better position than before the IMF got involved? I imagine the IMF would say that in lending money to these poor countries they have created industry and thousands of new jobs that didn't exist before - is that how you look at it?

 

[fedecc]

Chile, Brasil, Uruguay to name neigbhors countries.

But first, the IMF does't give loans for productive enterprises (industry, infrastructure, etc), the world bank handles that. The IMF provides loans to sustain a country's currency and financial system.

Second, i didn't say the IMF was great, it certainly made some huge mistakes. I only said that it is often used as a scapegoat for a country's problem. For example, if you asked the average argentinian about the foreign debt, the will most likely mention or blame the IMF. Nevertheless the debt with the IMF was only but a tiny fraction of the foreignt debt. Today we have no debt with the IMF, yet our foreign debt is as high as it was in 2001. But with the persistent demonization most people belive without question that IMF= Foreign debt.

The thing is the IMF was and is very unpopular for it's infamous adjusment plans, wich often involved firing people, reducing wages, ets. And my family suffered that as much as the next argentinian. But the poeple often don't think that with a bad administration and a bad economy, adjustment comes wether you like it or not and wether the IMF is there or if it's not.

 

[perry]

Fedec while I feel your passion and sincerity I do not believe that you can blame Christina Kirchner for the problems of Argentine society. I too am very saddened by the crime explosion in the Capital Federal and also believe that inflation is high.

Fedec who can we blame for the inflation ? I notice that Argentine society can be shortsighted and at the first chance will raise their prices . I saw this in Palermo Soho where they have killed a lot of tourism with greedy practices. When the government tries to put controls the society then revolts and does not allow the government to govern.

Discipline and morals take generations to form and yes Argentina is an immature society that does not accept responsibility . There is a lot to critisize here but saying all that in all sincerity I would rather have the current government than the opposition .

Patience is needed now and lets give the lady a chance to implement her reforms . She still has over 2 years in power .

 

[Fettucini]

It looks like those countries you mentioned are going well now, but I imagine went through a lot of structural readjustment misery to get there. All i wanted to say is that many third world countries may have been better off without these loans from imf and world bank in the first place - obviously it was the fault of the governments themselves for accepting but am sure these loaners knew what they were getting these countries into.

There's an interesting article i found here http://www.globalissues.org/article/3/structural-adjustment-a-major-cause-of-poverty

Chile, Brasil, Uruguay to name neigbhors countries.

But first, the IMF does't give loans for productive enterprises (industry, infrastructure, etc), the world bank handles that. The IMF provides loans to sustain a country's currency and financial system.

Second, i didn't say the IMF was great, it certainly made some huge mistakes. I only said that it is often used as a scapegoat for a country's problem. For example, if you asked the average argentinian about the foreign debt, the will most likely mention or blame the IMF. Nevertheless the debt with the IMF was only but a tiny fraction of the foreignt debt. Today we have no debt with the IMF, yet our foreign debt is as high as it was in 2001. But with the persistent demonization most people belive without question that IMF= Foreign debt.

The thing is the IMF was and is very unpopular for it's infamous adjusment plans, wich often involved firing people, reducing wages, ets. And my family suffered that as much as the next argentinian. But the poeple often don't think that with a bad administration and a bad economy, adjustment comes wether you like it or not and wether the IMF is there or if it's not.

 

[fedecc]

Fedec while I feel your passion and sincerity I do not believe that you can blame Christina Kirchner for the problems of Argentine society. I too am very saddened by the crime explosion in the Capital Federal and also believe that inflation is high.

Cristina can be blamed of letting her husband run the show, that's all (and it's bad). But Nestor is the one to blame for the governments politics. And of course the presidents before him are to blame as well (and argentine society in general). The difference is that unlike the other presidents that had to endure enormous economical crisis (both local and international), Nestor ruled practically without problems and within an huge economic boom. Nestor was the only president ever that had all in his favor, the economy, the media, the unions, even the university. The tragedy is how he wasted all this and realy changed nothing for good.

Fedec who can we blame for the inflation ? I notice that Argentine society can be shortsighted and at the first chance will raise their prices . I saw this in Palermo Soho where they have killed a lot of tourism with greedy practices. When the government tries to put controls the society then revolts and does not allow the government to govern.

This argument can't really be sustained. During the convertibility in the 90s Argentina had one of the lowest inflation rates in the world (practically 0% for 10 years). What was that all about, did the argentine business men forgot how to speculate during those years, and then out of the blue they became greedy bastards again?? No, no they just percieved the Argentine currency in the 90s was a good value reserve as they trusted the 1 peso = 1 dollar policy. Now the situation is different, the perception is that the peso is in constant depreciation, and if you add a growth of the monetary base above the level of activity then you can have a better explanation of inflation than "damn those greedy business men!"...

Discipline and morals take generations to form and yes Argentina is an immature society that does not accept responsibility . There is a lot to criticize here but saying all that in all sincerity I would rather have the current government than the opposition .

Agree, but i also believe the people in public offices should give the example, and this government hardly falls under the category of responsible and discipline.

It looks like those countries you mentioned are going well now, but I imagine went through a lot of structural readjustment misery to get there. All i wanted to say is that many third world countries may have been better off without these loans from imf and world bank in the first place - obviously it was the fault of the governments themselves for accepting but am sure these loaners knew what they were getting these countries into.

There's an interesting article i found here http://www.globalissues.org/article/3/structural-adjustment-a-major-cause-of-poverty

The IMF does not explain neither the poberty of a country nor it's level of development. Chile is not doing well beacuse of the IMF nor Argentina is doing bad because of the IMF.
Most likely the IMF "formula" will work better in a country that is already doing well. That is, a country that has coherent and responsible economical program, good management and stability, etc. Chile is a good example, slowly but surely his economy grows, they have less poverty and a better quality of life. Nevertheless people often want magic recipes that takes them fast out of poverty, this is where the populists come in.

And like i said before, structural adjustment comes either way when there is a bad administration.

 

[Fettucini]

According to this piece the IMF and world bank are responsible for lot of poverty in third world countries as they take advantage of weaker countries and condition them in exchange for huge loans which ultimately lower the standard of living in those countries and keep them in a poverty loophole http://www.globalenvision.org/library/23/1524
Obviously it's ultimately the country's faults for taking the loans in the first place, but it all sounds quite sinister the approach.
There was also the claim by John Perkins, author of "confessions of an economic hitman" that they trick these countries with false economic reports saying their economic growth would be much higher than it evidently would be if they took the loans and followed the rules of the IMF and world bank, with the ultimate aim to keep those countries poor so they can be extracted of cheap resources. Do you think this could be true or this guy is just a sensationalist conspiracist?

The IMF does not explain neither the poberty of a country nor it's level of development. Chile is not doing well beacuse of the IMF nor Argentina is doing bad because of the IMF.
Most likely the IMF "formula" will work better in a country that is already doing well. That is, a country that has coherent and responsible economical program, good management and stability, etc. Chile is a good example, slowly but surely his economy grows, they have less poverty and a better quality of life. Nevertheless people often want magic recipes that takes them fast out of poverty, this is where the populists come in.

And like i said before, structural adjustment comes either way when there is a bad administration.

 

[Recoleta Carolina]

No, I do not think that the Argentine economy is going to collapse. Nothing like 2002.

What you can expect is higher unemployment, higher inflation, higher crime, and higher taxes and fees of all sorts. More of a drop in tourism which is one of the life lines of the economy. More stores and cafes going out of business only to be replaced by the latest fad. And, if we are really lucky, more Starbucks and McDonalds.

But, the upside to all this is that there will be fewer people on the road and traffic should improve!

 

[bigbadwolf]

As far as the IMF, it's far from being a perfect institution, but it has being extremely demonized here, as argentinians are fond to do so often, so we don't get to take responsability for our own actions.

I am also no fan of the IMF but you are correct in pointing out that the Kirchner government uses the IMF as a convenient scapegoat.

 

[bigbadwolf]

According to this piece the IMF and world bank are responsible for lot of poverty in third world countries as they take advantage of weaker countries and condition them in exchange for huge loans which ultimately lower the standard of living in those countries and keep them in a poverty loophole http://www.globalenvision.org/library/23/1524
Obviously it's ultimately the country's faults for taking the loans in the first place, but it all sounds quite sinister the approach.
There was also the claim by John Perkins, author of "confessions of an economic hitman" that they trick these countries with false economic reports saying their economic growth would be much higher than it evidently would be if they took the loans and followed the rules of the IMF and world bank, with the ultimate aim to keep those countries poor so they can be extracted of cheap resources. Do you think this could be true or this guy is just a sensationalist conspiracist?

Perkins is right but his book isn't that great. The IMF and World Bank are both instruments of US policy, and the main objective of both is to keep the Third World subjugated so that its resources can be siphoned off and so that it serves as a market for both cheap labour and for the finished goods of multinationals. I'm not saying anything new. What Perkins claims is that the loans themselves are often made at the point of a gun: the US, the "West," wants financial dependency -- the sine qua non for all subsequent exploitation. If they find a national leader who is not a willing dupe or stooge, "they" either asssassinate him or engineer a little coup. This is all plausible -- I know this to be true, in fact. But Perkins does not name names -- his whole account is so vague as to be unconvincing.

 

[fedecc]

Perkins is right but his book isn't that great. The IMF and World Bank are both instruments of US policy, and the main objective of both is to keep the Third World subjugated so that its resources can be siphoned off and so that it serves as a market for both cheap labour and for the finished goods of multinationals. I'm not saying anything new. What Perkins claims is that the loans themselves are often made at the point of a gun: the US, the "West," wants financial dependency -- the sine qua non for all subsequent exploitation. If they find a national leader who is not a willing dupe or stooge, "they" either asssassinate him or engineer a little coup. This is all plausible -- I know this to be true, in fact. But Perkins does not name names -- his whole account is so vague as to be unconvincing.

I've heard lots of thing about the IMF, but that it was some sort of international assasination squad, that's the first time.

Argentina declared the bigest default ever and the IMF did nothing, no coup, no assasination. Argentina broke dependency witht the IMF and still it did nothing to prevent this. It's must be getting sloppy.

In my opinion, this hole argument is quite outdated. The Dependency Theory was huge in the 60s and 70s in latin america and it was the battle cry for many revolutionary movements. In a nutshell, the theory said that the rich countries worked to keep poor countries poor and keept them producing raw material, etc... And since the world was so unfair, the theory encouraged islationism and proteccionism., the periphery was supposed to "build it's own destiny...".

Anyway, the theory was long discarded even by some of it's former creator that later became "neoliberal" (Brasi's president Henrique Cardoso), mostly because it's main argument can't actually be empiricaly proved and because it has been evident that no country can develope itslef on it's own, so rejecting foreign relations with the rich countries is ridiculous.

For example, there is no causal relation between dependency and underdevelopment (Canada is a good example, fully dependant of the US and yet quite rich and developed). Economy is not a cero sum game.
This kind of thinking is circular, you are poor becasue you are dependant, and you are dependant becasue you are poor.

Basically, dependency failed to fully explain underdelopment in poor countries.

The IMF can be blamed for inadequate economic programs, and giving loans to irresponsable governments, no for working to keep poor countries poor. But i suppose it's condemned to be evil if it gives loan and evil if it doesn't.

Currently the Argentine government has being working on reforming the IMF. It's brillant plan consist on a new IMF the gives loans wihtout those pesky conditions, without control. It's seems they haven't figured out why the current crisis started in the first place.


PD: Is it "being" or "been"?