Transcript Lessons from Argentina: debt, restructuring and the IMF

Debt crisis, default, and beyond:
the Argentine experience
Alan Cibils
Political Economy Department
Universidad Nacional de General Sarmiento
Buenos Aires, Argentina
June 3-6, 2013
Eurodad-Glopolis International Conference
Prague
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Topics
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Factors contributing to Argentina’s debt
buildup
The role of the IMF
Default: good or bad?
Argentina post-crisis
Lessons
June 3-6, 2013
Eurodad-Glopolis International Conference
Prague
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Arentine Public Debt: 1966-2000
(billions of US dollars)
160
Military
Alfonsín
Menem
140
120
100
80
60
40
20
0
1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
June 3-6, 2013
Eurodad-Glopolis International Conference
Prague
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Argentina’s 1990s public debt build-up:
main causes
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Privatization of social security:
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Policy environment:
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Promoted by IMF and WB, it generated a large
fiscal gap covered by borrowing (debt)
Fixed exchange rate
Inability to conduct independent monetary policy
External interest rate shocks:
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Higher interest rates turned Argentine debt
structure into Ponzi scheme
June 3-6, 2013
Eurodad-Glopolis International Conference
Prague
4
Argentina’s public debt build-up and IMF
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IMF:
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Wrong diagnosis of the problem:
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Confused fiscal spending with debt service
IMF still insists on this wrong diagnosis (probably
explains its “success” in Europe)
Lending conditioned on austerity
Austerity deepened recession:
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June 3-6, 2013
increased capital flight
Increased deficit
Increased debt
Eurodad-Glopolis International Conference
Prague
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December 2001 default
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Default became inevitable:
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Following three years of recession and austerity
Important to admit that situation was unsustainable
Alternative: downward cycle of debt and austerity
Only real solution was default +devaluation
Liberated fiscal resources for other socially
necessary and productive uses
 No longer needed access to IMF or financial
markets due to fiscal surplus
Default IS an option to be considered
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June 3-6, 2013
Eurodad-Glopolis International Conference
Prague
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Post-crisis Argentina
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Between 2002-2007:
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Since 2007 (to present):
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High economic growth, lower unemployment and poverty.
Causes: recovery of own currency, devaluation and ability
to conduct independent exchange rate, monetary and fiscal
policies
growing inflation (25% yearly for the last four years)
Currency appreciation, economic slowdown, higher poverty
and inequality
Neoliberal media blame Argentina’s current
economic problems on the default:
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This is FALSE—problems are political and home-grown,
unrelated to default.
June 3-6, 2013
Eurodad-Glopolis International Conference
Prague
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Lessons
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Default IS an option (¿necessity?)
Recovering currency/monetary policy is key
Changing economic strategy is key:
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Abandon neoliberal agenda/IMF
Economic policy should be focused on
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June 3-6, 2013
Sustainable development
Employment
Education and Health care
Income distribution
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Prague
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