Download Argentine Economy

Argentine Economy
Profesor:
Luis Argüero
A review of the Kirchner era 1
Luis Ignacio Argüero
A review of the Kirchner era
Luis Ignacio Argüero, PhD.
I.
Introduction
After the Congress elected Eduardo Duhalde as the new president of Argentina in
2002, the economy started suffering very deep changes that would shape the economic,
social and cultural aspects of the country in the upcoming decades. Duhalde had been
governor of Buenos Aires Province up to 1999, when he ran for the presidency and lost
against Fernando de la Rúa. He was a well-known politician, leader of one faction of the
Peronist Party and a popular figure among the lower and middle urban classes. This group
had suffered the hardest hit due to the policies implemented during the 1990s, as
unemployment rose, social spending was frozen and the poverty rate increased in the last
years of the convertibility regime.
Duhalde made important changes in the economic system in his first month as
president. Some of the most relevant measures that had long-term implications are:
- The Argentine Peso (ARS) was devalued to 1.4 ARS per 1 United States Dollar (US$)
at first, and then was liberated. The ARS had, for most of the year, a value of over 3 ARS
to 1 US$. After that, the peso had a dirty float system, where the government
intervened to control the value of the ARS. The Central Bank of Argentina was once
again allowed to print ARS without backup.
- Public utilities’ rates were frozen and pesified. Therefore, electric, gas, water and
other companies could not increase the price of their services to adjust to changes in
the value of the ARS. As a consequence, income of these companies, measured in US$,
plunged.
- Implementation of export taxes. The devaluation of the currency meant that
exporters would get more ARS for the same amount of US$ exported. They are the
main beneficiaries of any devaluation, as costs are paid in ARS and income is received
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Luis Ignacio Argüero
in US$. Knowing this, the government decided to get a part of those benefits. A 5% tax
was set on the export of manufactures, and a 20% one for agricultural products. This
provided the Central Government with an important amount of money, which was (and
is still) used to finance social programs. The government forced exporting companies to
settle the money they received at the Central Bank of Argentina. During the
convertibility regime, a law was enacted to let exporting companies be paid abroad.
The mandatory settlement at the Central Bank provided Argentina with a lot of US$, as
the bank gave AR$ to the exporter.
- The government was allowed to regulate prices. Although this only applied to
public utilities at first, during the Kirchner era (especially during Cristina Kirchner
presidency), this control was intensified.
These policies helped stabilize the chaotic situation that the economy was living in
the months following the fall of the convertibility regime. During the first quarter of 2002,
the GDP dropped 16.3% year on year; but in the second quarter a timid recovery can be
seen. We must consider that from April to July is the season in which soybeans are
harvested (and exported). This brought Argentina a lot of resources, which were used to
compensate the losses in international reserves from the Central Bank due to capital flight
and disinvestment. In just a few months, Argentina became a country with low labor costs,
as salaries were in 2002 one third of what they used to be a year earlier (measured in US$).
The devaluation made imports very expensive and helped exporters, who saw their labor
costs decrease drastically. As a consequence, Argentina enjoyed a very positive trade
balance, with almost 9 billion US$ in imports and over 25 billion in exports.
Revenues coming from export taxes and VAT (increased by inflation) surged in 2002,
while expenses remained low in comparison, with an important increase in social
programs. This made Argentina have a primary fiscal surplus of 1% of its GDP. The default
declared on debt denominated in foreign currency implied an important short-term saving
and helped the Minister of Economy Roberto Lavagna to increase its ability to implement
stabilization policies.
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By December 2002, the macroeconomic situation of the country was much calmer
than a year earlier, but social tensions were still strong, particularly after the killing of two
leftist militants on the hands of the police. Social programs were still limited,
unemployment and the poverty rate were high and an inflation of 40% was eroding the
income of those who had a job. Duhalde, who was expected to be president until
December 10th 2003 1, called for elections in April 2003, to hand in power a month later.
Duhalde excluded himself from the election and supported Santa Cruz province governor,
Néstor Kirchner.
Up to May 2003, Duhalde managed to sign an agreement with the IMF to delay
some interest payments, which gave the new government some space to control the
economy and more power to negotiate with international organizations. When Duhalde
handed in power, the economy had this numbers:
-
Retail prices increased 2.1%, while wholesale prices declined 2.4%.
-
Trade balance had a surplus of 7 billion US$ up to May 2003 (just when the
soybean harvest begins).
-
Argentina had a fiscal primary surplus
-
GDP was growing at a 5 to 6% rate, from May 2002 to May 2003.
-
Unemployment was 16%, much lower than its peak a year earlier.
-
The ARS appreciated and it was sold at 2.8 per 1 US$. This discouraged speculators,
and people who had bought US$ to protect their assets ended up losing money.
-
The Central Bank kept on buying US$ and increasing its reserves.
Néstor Kirchner finished at the second place in the general election. The first place
was for Carlos Menem, the president of Argentina from 1989 to 1999. Both had to go to a
ballotage. Alberto Fernández, leader of Kirchner’s campaign and later Chief of Cabinet
said: “We knew that the second place was enough. The society was polarized, people
were so for or against Carlos Menem, that any person would get the anti-Menem vote”.
Knowing this, and realizing that he wouldn’t be able to get the 50.1% needed to be
1
This is the original date at which former president Fernando De la Rúa’s term should have ended.
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elected, Carlos Menem withdrew from the election and Néstor Kirchner became then the
new president of Argentina. With only 22% of the votes he got in the first election, a
reduced group of representatives at the Congress, his power was very limited.
Kirchner had to face several issues that Duhalde could not solve: credit was almost
non-existent, a high dependency on the international price of commodities, the holders of
Argentine bonds were fighting to get paid, the debt with the IMF, World Bank and Paris
Club, the purchasing power of salaries was minimum, and social tensions were still
important. With reduced power and a complex socioeconomic situation, just a few had
hopes that Kirchner could lead the country to its highest growing decade in over a century.
II.
Kirchner presidency (2003-2007)
Kirchner’s political coalition, Frente para la Victoria (FPV), obtained 22% of the votes
in 2003. But a later victory on the representatives’ election in the Buenos Aires province
gave the FPV enough representatives to be the first minority. Kirchner was a low profile
politician, governor of the southern province of Santa Cruz, the second largest province,
with a small population, concentrated in its capital Rio Gallegos. Kirchner was governor
from 1991 to 2003 and changed the constitution twice in order to legalize his re-election.
He was accused by the opposition for controlling the province as a landlord, naming
friends as judges, securing his popularity on the 40% of total jobs that were provided by
the public sector, and controlling the media. His supporters claimed that he invested a lot
of money in infrastructure, that he managed to maintain a good financial situation despite
of the crisis and that he could secure certain benefits for the province that would have
long-term implications (like having the oil exporting provinces to keep the revenues from
export taxes, a benefit that agriculture exporting provinces do not have).
During the whole period of his presidency, Kirchner enjoyed a very high rate of GDP
growth: 8.8% in 2003, 9% in ‘04, 9.2% in ‘05, 8.5% in ’06 and 8.7% in ‘07. This growth was
influenced by the extraordinary global situation, with China demanding a lot of food
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(especially soybeans) that Argentina could provide and with Brazil enjoying a high rate of
growth (it is Argentina’s main trade partner). Kirchner had a professional control of the
fiscal and monetary policies, continuing the line drawn by Duhalde in 2002-2003. In fact,
he kept the same Minister of Economy, Roberto Lavagna, in an unprecedented sign of
continuation of economic policies. This decision was influenced by the need of Kirchner to
gain as much power as he could. After Kirchner won the midterm elections of 2005, he got
rid of Lavagna and started a more heterodox policy, less concerned about long term
imbalances and more concerned about short term impacts of his policies.
The high growing rate of the first years was also influenced by the delay in solving
unresolved issues due to the fall of the convertibility, like the re-negotiation of the
external debt, the update of contracts signed with companies controlling public utilities
(and tariffs), the compensation to banks due to asymmetric pesification and a reduced
government expenditure in salaries (measured in US$) due to the devaluation.
Kirchner implemented an array of policies that proved to be very popular:
1.
He dismantled the Supreme Court that had ruled the judicial power since
the 1990s, and which had approved all the measures that were presented and
implemented by the neo-liberal government of Carlos Menem. The removal of the 4
judges that formed what was called the “automatic majority” (so called because their
votes were always in line with the interests of the Executive Power), was a very popular
measure for a society desperate to find people responsible for what had happened in the
country in the last years. The newly appointed judges had a more pro-government
intervention than their predecessors, with two women balancing the gender composition
of the Court. The renewal of the Court was praised not only by the citizens, but by the
political opposition as well, who gave their votes for the destitution of former Supreme
Court Judge Eduardo Moline O’Connor and for the appointment of the new judges.
2.
His government gave a renewed impulse to the judgment of those involved
in crimes during the last military government (1976-83). The laws of Punto Final and
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Obediencia Debida 2 were nullified, and this allowed the Justice to be able to once again
accuse people involved in crimes against mankind during the Dictatorship. Hundreds of
former military people (today in their 70s and 80s) were detained across the country, sent
to trial, and in most cases condemned to prison. In 2013, Dictator Jorge Rafael Videla died
in prison, establishing an unthinkable end to the most powerful person in Argentina from
1976 to 1981, and the one who ordered the detention and disappearing of about 10,000
people. The human rights policy of Néstor Kirchner was praised by most of the public and
by the political opposition. The Congress, once a conservative, liberal, pro-business entity
that had supported the policy of considering the crimes of the dictatorship as a closed
case, now was clearly moving towards the left, with a more progressive, pro-government
intervention ideology, that supported dealing with what happened in the country 30 years
before (this change does not only include nullifying the previously mentioned laws, but
also giving life time stipends to political prisoners and families of the disappeared and
financial backup to institutions ran by the families of the disappeared , like Madres de
Plaza de Mayo and Abuelas de Plaza de Mayo).
3.
The union of South American presidents, in what was called the “pink tide”,
gave president Néstor Kirchner pro-government intervention policies an international
context. People saw this as a sign of the change of era, from one in which countries
followed what Washington based institutions (IMF, World Bank, US Treasury) suggested,
to a more independent, pro-Latin American stance. We should consider that until the
1980s, when countries in the Southern part of South America (Brazil, Paraguay, Uruguay,
Chile and Argentina) regained democracy, neighbors were considered a threat. In fact,
most conflict hypotheses included the invasion from neighboring countries, and this
created diplomatic, political and economic tensions. Democracy helped countries to reestablish peaceful relations and was the base from which regional integration schemes as
Mercosur were signed. The 1990s saw Latin America adopting the “Washington Consensus”
2
Punto Final: It established the statue of limitations for those crimes done during the dictatorship. Those
crimes not denounced up to 60 days after the law was passed would not be accepted.
Obediencia debida: The law of due obedience says that low ranking officials (under the rank of colonel) were
obeying orders from their superiors, and therefore couldn’t be judged again.
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policies, which included trade liberalization and privatizations. The crises in Brazil in 1999,
in Argentina in 2001 and Uruguay in 2002 helped the left wing parties to gain popularity,
and finally they started winning elections. The pink tide started with Hugo Chavez election
in 1999, and the coup d’état that he suffered in 2002. This made many people in Latin
America aware that a new model of development would be opposed by the status quo,
but that the possibility of successful military coup d’états was much smaller now than in
previous decades. Luiz Inacio “Lula” Da Silva was elected president of Brazil and Néstor
Kirchner of Argentina in 2003, Tabaré Vazquez in Uruguay in 2005, Evo Morales in Bolivia
and Michele Bachelet in Chile in 2006, Rafael Correa in Ecuador in 2007, Fernando Lugo in
Paraguay in 2008 and Ollanta Humala in Peru in 2011.
Seeing the failure of the Washington consensus policies in the 1990s and Latin
American countries electing left-wing leaders, the political opposition of Kirchner could
not clearly explain which policies they would implement if they were to run the
government. The popular support of like-minded governments helped Kirchner to gain
acceptance on the policies he implemented and gave Latin America an unprecedented
sense of unity. The political union of Mercosur –which had come under fire during the
beginning of the century due to the crises – became more clear when the whole bloc
rejected the proposed Free Trade Area of the Americas (FTAA) in 2005 in the Mar del Plata
(Argentina) summit.
a)
Economic performance – The external sector
The four years that Néstor Kirchner was president were the most successful in terms
of GDP growth in the last century. Many factors influenced this performance:
1.
Argentina departed from a very low point. The GDP had collapsed from 1999 to
2002, totaling a decrease of 20%. The country had an important upside potential.
2.
Price of commodities increased drastically since the beginning of the 2000s. This
phenomenon was even stronger for crops that were exported to China, as soybeans, and
for cereals, of whom Argentina is a large producer (corn, wheat, sorghum). Graph 1 shows
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that the increase in the price of food has been a worldwide phenomenon. Some authors
calculate that every year 30 to 40 million Chinese enter the middle class. This means that
they start consuming more goods, and more food. This presents a big opportunity for
countries like Argentina, which are important producers and have a large surplus of food.
Graph 1: Food price index
200
100=2002-2004 avg
180
160
140
120
100
80
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Food price
Meat price
Cereals price
Source: FAO
Argentina (together with the original Mercosur members) is one of the few
countries that has an important surplus of food, as it exports much more than what it
produces. Exports of agricultural products account for an important share of total exports,
the surplus in food trade accounts for more than 3% of the country’s GDP and food trade
represents an important source of government revenue. Therefore, the country (and its
government) profited a lot from the surge in food prices.
Export taxes were re-introduced during the Eduardo Duhalde presidency. The
“campo” (expression used to describe farmers, landowners and investors in the
agribusiness sector) accepted the tax because the devaluation of the ARS gave them many
benefits (due to reduced costs) in a context of general crisis. The tax consisted in 5% on
the export price of manufactures, and 20% in the most important agricultural products.
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The tax at first represented during the Kirchner decade an average of 10 to 13% of all
taxes collected, and between a 2 and 3.5% of the national GDP.
The “Campo” collected a lot of resources from the devaluation in 2002, as prices
continued growing. With the money they got, they invested in new machinery, cars and
real estate. Construction surged: in 2003, it increased 38% year on year, 20% in 2004, 17%
in 2005 and 15% in 2006. This real estate boom created a lot of jobs in urban areas and
many people were attracted to invest in this growing sector, generating a bubble that had
its first shake in 2009 with the global crisis and started its final burst at the end of 2011
when the government set many restrictions to the acquisition of US$ by Argentine citizens,
the currency that is used to buy and sell properties in this country.
Another important external factor was the high rate of growth of Brazil, the main
trade partner of Argentina. It grew at a 4% annual rate between 2001 and 2008. This
presented a significant opportunity for many sectors in Argentina, especially the
automotive industry. Even though the industrial sector is strong in Argentina (when
compared to its neighbors), the production has traditionally been sold at the internal
market. Exports of industrial products have been quite limited. But since the creation of
Mercosur and the agreements that Argentina and Brazil’s governments signed, the trade
of cars between these countries has increased exponentially. Generally speaking,
Argentina builds and exports middle and big size cars, while Brazil produces and exports
small passenger cars. Exports increased from about 100,000 units in 2003 to over 300,000
in 2007. In 2013, the amount exported reached 371,000.
Total trade between the two countries increased from 10 billion US$ in 2003, to 25
billion in 2007, and in 2012 they totaled 35 billion. Mercosur proved to be an effective
way to promote commercial exchanges among its members, and a common policy of
protection against foreign competition was complemented by the increase of the size of
the “local” market, as companies can produce for a market of 250 million consumers.
Considering the complete picture of international trade, Argentina enjoyed during
the Néstor and Cristina Kirchner presidencies an important trade surplus. The surplus
started with the turn of the century, driven by better terms of trade for the country and a
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reduction of imported goods due to the stagnation. This phenomenon was clearer in 2002,
when imports collapsed over 50% and it wasn’t until 2006 that the country reached an
imports amount similar to that of 1998, before recession started.
Graph 2: Exports, imports and trade balance of Argentina, 1993-2012
90
20
In billion US$
80
15
70
60
10
50
40
5
30
20
0
10
Exports
Imports
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
-5
1993
0
Balance (right scale)
Source: INDEC
Graph 2 shows the change of trend in the trade balance from 2000, and the surge of
exports and imports from 2003, even though this last number departed from a very low
figure. During the Kirchners’ presidencies, the size of the international business was 2 to 3
times the one that the country had during the 1990s. Some argue that this happened
because prices of commodities were very high; others argue that it happened because of
the pro-industrialization process that the government enabled, and that it managed to set
the right incentives for producers to produce, while maintaining social programs with their
taxes. We should understand that international trade has increased an average of 4% year
on year during the last decade, even when the crisis of 2008-2009 is included. Countries
all around the world saw an increase in the intensity of international trade, and this led to
a new array of preferential trade agreements, cross regional and multilateral, as the Trans
Pacific Partnership, or regional and bilateral, like the Chile-Colombia and Chile-Peru free
trade agreements.
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b)
Economic performance – The fiscal balance
Néstor Kirchner set two goals to define his macroeconomic objectives: achieve trade
and fiscal surpluses. We saw that the first was fulfilled. The second one was also achieved,
even though in recent years the surplus has vanished and now Argentina has fiscal deficit.
The fiscal surplus was sustained by a progressive increase in tax revenues, coming from an
increased economic activity and from the increase in international prices and demand of
Argentinean products. The internal market played an important role, as Value Added Tax
(a tax on consumption) is 21% in Argentina, and when people re-started consuming, the
government could collect a lot of economic resources. Companies also started making
huge profits, unseen in the 1990s, paying then corporate income tax. But especially after
2006, the “inflation tax” became central to explain government revenues (it will be
explained later).
Government taxes started representing a higher proportion of the national GDP, as
it moved from 16,1 in 1990, to 22.4% in 2000, to a low 20.7% in 2002, and then started
increasing, surpassing the 30% line by 2007 and reaching a 37% by 2012 3. The government
used this money to foster consumption, giving money and jobs to the unemployed,
increasing a 50% the amount of public employees, a number that surged from 2.21 million
people in 2003 to a staggering 3.32 million in 2012. This number does not include people
working for former private companies as Aerolíneas Argentinas, or state-owned
companies as the energy company Enarsa.
Graph 3 shows that even though Argentina had a primary fiscal surplus during the
1990s (0.8% in average for the whole decade), it suffered a significant financial deficit.
Argentina’s debt climbed throughout the decade, and it was quite expensive for
international standards. Therefore, it had to pay a lot of money as interests of that debt
3
The tax burden as % of GDP in Argentina is the highest in all Latin America. According to the OECD, second
is Brazil, with 36%, then Uruguay and Bolivia (26%), Chile (21%), Colombia and Ecuador (20%), Peru and
Paraguay (18) and Venezuela (13.7%).
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every year, and that determined the negative financial result. In 2001, international
investors showed a lack of confidence in the Argentine economy, as they saw its financial
deficit as too high. The IMF, among other institutions, called for Argentina to reduce its
deficit, and to do that Argentina implemented several budget cuts that proved to be very
unpopular and finally cooperated in the collapse. Several years later, economies from the
USA and Europe started showing deficits over 5%, and in some countries exceeded 10%.
The IMF decided this time not to be too harsh on these countries, and – contrary to what
happened with Argentina – continued lending them money.
Graph 3: Primary and financial results of Argentina
4
As % of GDP
3
2
1
2013 (est.)
-2
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
-1
1996
0
-3
-4
Primary fiscal result
Financial result
Source: Based on Ministerio de Economía
In 2003, Argentina posted a financial surplus for the first time in decades. This was a
direct consequence of the default that the government unilaterally declared on foreign
debt. The payment of interests of debt denominated in foreign currency climbed to 11
billion US$ in 2001, or 22% of all expenses. Therefore, not paying an important chunk of
that debt gave the government a lot of resources which led to the positive financial result.
In 2004, the primary surplus reached 3.9% and the financial surplus reached an
astonishing 2.6% of the GDP, a rarity in a world used to running deficits and financing
them with bonds. But after that, surpluses have been steadily decreasing, until both
became negative in 2011.
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Despite the increase in the tax burden, the Kirchner administration first and the
Cristina Fernandez de Kirchner administrations later, have done very little to change the
taxing system in Argentina. The most important change happened in 2007, when export
taxes for soybeans were increased in January and November, to reach a 35%. The tax for
wheat reached 28% and for corn 25%, while the tax for oil surged to 45% after it
surpassed the 100 dollars per barrel in 2007. A further increased on export taxes was
proposed in 2008, but it was rejected.
The most important tax is the VAT, followed by taxes on social security, earnings,
exports, credits and debits and others. The three most important ones are strongly related
to economic activity in the country, so the Kirchner administration was able to get a lot of
resources from people consuming more, shops hiring new workers and companies posting
high profits.
The use of these resources has been criticized by many, as they were mostly used to
hire new government employees and establish new social programs, not to renew the
insufficient infrastructure of the country, creating the basis for long term economic
growth. The money was used to pay for current expenses, and revenues were highly
sensitive to changes in economic conditions. After the collapse of Lehmann Brothers in the
last part of 2008 and the subsequent crisis, the numbers of Argentina started weakening.
Especially after 2011, when the high inflation, a slower pace of economic growth and
increasing demands from the population resulted in a growth of expenditures much faster
than that of revenues; as a result Argentina presented in 2012 its first primary fiscal deficit
since 1996.
c)
Economic performance – Inflation
High inflation has been a tradition in the Argentine economic history. But after the
episode of hyperinflation of 1989-1990 and the establishment of the convertibility regime
in 1991, Argentina enjoyed a decade of low inflation, even posting deflation in 2000 and
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2001. Deflation is widely seen by economists as a much serious problem than inflation:
when economic agents know that their money is going to be more valuable in the future,
they postpone consumption decisions. Therefore, most of them agree that having a low
level of inflation (say, about 2 to 4% annually) is healthy for a national economy.
Nowadays many Central Banks set inflation target policies, and manage the monetary
policy in order to achieve the inflation rate they have as target.
Néstor Kirchner became president when inflation had already been controlled in
Argentina, after it posted a 40.9% increase of the CPI in 2002. The first part of 2003 was
responsible for most of the inflation for the whole year (13.4%). In 2004 and 2005 inflation
moved to the one digit level, and when it started increasing once again in 2006, Néstor
Kirchner decided to make an “informal” intervention of the INDEC, the statistics bureau.
He removed most of the directors and managers, and appointed people with limited
experience, but who publicly supported the government’s policies. They re-arranged the
basket of goods and services that are surveyed, while keeping this data secret, as it was
protected by the statistical confidentiality law.
Figure 4: Annual change in the core price index
45
40
in %
35
30
25
20
15
10
5
0
-5
Source: INDEC (until 2006), San Luis provincial ministry of economy (2007-2011), and
Argentine Congress (2012-2013).
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The Kirchners’ administrations never addressed the inflation as an important
problem for the Argentine economy. The word hardly appeared in their speeches, and
their ministers of economy never designed a comprehensive plan to combat it. Moreover,
there was an explicit denial of the issue by government official, who time after time used
the INDEC statistics to say that inflation was under control, as it was below the 10% line.
Inflation became a real problem by 2010-2011, as it drove production costs too high and
made it difficult for products “made in Argentina” to compete against foreign made
products.
The denial of inflation also undermined the political support to the Kirchners. It
became very difficult for union leaders – traditional supporters of the Peronist Party – to
justify their claims of 25% increases in wages, when the official inflation was below 10%.
Economists working for the government could not answer a direct question about the CPI,
and budgets were horrifically drafted due to the miscalculation of inflation. The issue
became so tragicomic that the government ordered McDonalds to maintain the Big Mac
at a low price, so as to get a good ranking in The Economist magazine’s “Big Mac Index”.
As Argentina had some bonds’ premiums attached to the variation of the CPI, the
International Monetary Fund (IMF) started an investigation, and in an unprecedented
decision, censured Argentina for the quality of its official inflation and growth statistics on
February 1st 2013.
d)
The external front
Argentina declared in December 2001 the largest default in history, with an
outstanding debt of 138 billion dollars (but the government did not default the debt of
international organization). Of that amount, 88 billion were held by foreign investors.
Needless to say, the default made a lot of people and institutions around the globe angry,
and many governments reacted to the news coming from the Southern Cone. Moreover,
the interests of many multinational companies were affected, especially those public
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utility companies that were privatized during the 1990s and which were owned by foreign
investors, mostly European.
Argentina used to have an excellent relationship with European countries during the
90s, particularly with Spain. They supported Argentina so as to enter the G20 and gave
their positive opinions to the IMF, so it would continue lending to the country. The
climbing deficits made countries aware of the economic situation, and they called the
Argentine government irresponsible for not controlling the deficits. But the lectures hardly
had an economic foundation: the ratio of debt to GDP (about 45% by the end of 2000),
was lower than that of Brazil, France, USA, Canada and Japan, among many others.
Images of the crisis in Argentina were seen in developed countries, which could not
believe that a rich country, with many natural and human resources as Argentina, had so
many people poor and starving. This mitigated the harshness of their claims, but used
diplomatic ways to ask the Argentine government for a resolution of the conflict.
Argentina made a unilateral offer to bond holders in 2005, with three types of bonds
that would replace those in hand of creditors. The offer had a high rate of acceptance and
with another offer some years later, Argentina managed to refinance around 93% of its
original debt. The other 7% is pending of payment, after a long legal battle in the New
York courts, which finally moved up to the Supreme Court of the United States, who will
have the last word on this matter (Hornbeck 2013).
Table 1: Argentina public debt structure before default
Total public debt
Medium and long term
Bonds (in foreign currency)
Loans (from international organizations)
Short term
Holder’s residence: foreign
Holder’s residence: domestic
Source: Maurer and Musaccio 2006, p.17
Gross balance
(in billion US$)
141.25
138.01
95.79 (93.5)
42.22 (33.14)
3.24
88
53
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The country also has a debt of about 10 billion US$ with the Paris Club, a group that
includes governments from many developed countries. Argentina made an offer in 2011
that was rejected by the Club, which made a counter-offer that was not approved by
Argentina. Looking for new credits in the international market, the government realized in
2013 that it had to close these discords in order to get a convenient rate, as the risks of
default are higher for a country with many open conflicts.
As named earlier, the main change in the external policy came from the union of
Latin American leaders. Nevertheless, this union did not lead to a homogenous foreign
policy. Argentina, together with the other members of Mercosur, took a protectionist path,
not signing significant free trade agreements as other countries in the region did. It is
remarkable how Chile, Peru and Colombia moved in a very different direction, signing a
collection of FTAs with countries all around the globe and joining trade alliances as the
Trans Pacific Partnership. The country also failed to coordinate policies with its neighbors
in many fields. Brazil and Argentina are the second and third producers of soybeans in the
world, and a better efficiency could be achieved through cooperation. In the energy sector,
Argentina started showing a higher dependence on foreign oil and gas, and it discontinued
the supply of energy to Uruguay and Chile. This led to changes in the energy matrix of
both countries: while Uruguay started the works needed to be connected to the Brazilian
network, Chile constructed several liquefied natural gas (LNG) re-gasification plants, in
order to receive gas transported by ship.
The most important international conflict Argentina had in the last 10 years came
with an unexpected counterpart: Uruguay. Uruguayan president Jorge Batlle negotiated
with and gave permission to two European companies to establish paper mills in the
Uruguay River shore, just some days before his presidency finished. The paper mills would
attract the largest FDI to Uruguay in its history, valued over 1 billion USD and that would
create thousands of jobs in an underdeveloped part of the country. Argentina and
Uruguay had signed in the 60s agreements that forbid settling polluting companies near
the shore, so as not to pollute the other country. Paper mills use an abundant amount of
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Luis Ignacio Argüero
water and need to be located near a river. In order to attract the investment, Uruguay did
not comply with this agreement.
Protests erupted on the Argentinean shore, as thousands of the nearby city of
Gualeguaychu feared that the mills would affect the environment. They organized a
massive demonstration in April 2005, and started a picket in the international bridge that
connects both countries. The picket later became a permanent protest and lasted for
almost four years. This hurt a lot the touristic industry of Uruguay, as the flow of
Argentineans to Uruguay diminished due to the transportation difficulties arising from the
closing of the bridge. The conflict hurt also the excellent diplomatic relations that both
countries had had throughout their history and inflicted a lasting wound in both sides of
the river.
The protest could not stop the construction of one mill, but it made the investor in
the smaller mill to withdraw from the project. The plant started producing by the end of
2007, when Argentina had already filed a complaint at the International Court of The
Hague. Both countries agreed later to conduct permanent researches on the pollution that
the mill produces. These two advances helped to create the idea that the picket wasn’t a
useful method of protest anymore. In April 2010, the court said that there was a breach of
agreement by Uruguay and that from now on both countries should monitor the pollution
levels very closely, so as to make sure that the population on the Argentine side is not
harmed.
Kirchner started his presidency with very limited power. He implemented several
policies that were very popular, and achieved a high level of growth and a reduction of the
unemployment rate. As months went by, he persuaded former opposition representatives
to move into his files, and when mid-term elections in 2005 were held, the FPV achieved a
clear victory. His wife, Cristina Fernández de Kirchner won a seat in the Senate
representing Buenos Aires Province. Her figure became very popular and in 2007 most
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Luis Ignacio Argüero
people were asking if it was Néstor who was going to run for the re-election or if she was
going to be the candidate of the FPV. The question “Is it going to be a pingüino or a
pingüina?” became the subject of speculations that ended when Néstor announced that
Cristina was going to be the candidate. Néstor thought that the two of them could
alternate the presidency for many terms. His plan ended in October 2010, when Néstor
Kirchner had a heart attack and died.
III. Cristina Fernández de Kirchner administration (I)
The good performance of the economy after its worst crisis, the popularity of Néstor
Kirchner and his wife Cristina Fernández de Kirchner (CFK) contributed to winning the
2007 presidential elections with over 45% of the votes. The FPV won in most of the
provinces, securing the majority of the senators and representatives. The Kirchnerism,
which started as a timid movement that had to make allies in order to build its power, was
enjoying in 2007 a much comfortable situation, being the main political party both in
popularity and representation. Nevertheless, the FPV lost in 3 of the 4 major districts:
Santa Fe and Cordoba provinces and Buenos Aires Autonomous City. This tren would
continue throughout the CFK presidencies, in which the FPV even lost elections in Buenos
Aires province, the most important district that concentrates almost one third of the
country’s population.
Even though Cristina Kirchner promised changes during her campaign, she
continued all the policies started by her husband. She also designed and started some
relevant policies:
-
Science and Technology, previously a secretary, was upgraded to ministry. Its
budget increased and the investment in research and development increased radically.
Most of the research and development (R&D) in Argentina is done by the public sector
(over 70%). Argentina has traditionally had some science and technology (S&T) intensive
areas where it had a relative high level of development: nuclear energy, radars and
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Luis Ignacio Argüero
biotechnology, among others. Moreover, in recent years the software design industry
posted exponential increases, and concentrates mostly in Buenos Aires City.
Expenditures in R&D increased, from an average of 0.43% of GDP that it had during
the 1990s to a 0.65% in 2011 (second highest figure for Latin American countries,
following Brazil’s). There have been many successful policies in this field, as the Raices
program, that offered Argentine scientists and researchers living abroad incentives to reestablish in Argentina. Over 1,000 people moved back to the country due to this program.
The number of researchers at Conicet, Argentina´s most important S&T institution
doubled since 2003, and salaries surged 9 times in from 2003 to 2012.
-
Control of internal and international trade. Guillermo Moreno became secretary of
internal trade in 2005. He led the unofficial intervention of the statistics bureau, the
INDEC, by appointing his acquaintances and people who lacked technical expertise but
had a complete commitment to the government’s social and economic plans. His
“successful” action gave him a lot of credit within the government, and he became a very
important figure during the CFK presidencies. He was given the task of controlling
inflation, and he applied controversial methods to do it: he set price controls, threatened
businessmen so as to force them not to increase prices, he organized groups that went to
supermarkets to control prices, he organized trucks that went to poor neighborhoods to
sell meat and fish at popular prices, and he “informally” forced supermarkets not to
advertise their prices in newspapers.
Moreno intervened in the meat market forbidding exports in order to control prices in
the internal market. The policy had a short term effect, while in the long run, it made
producers sell the cows and produce soybeans in their farms. Seeing that his strategy was
not stopping inflation, he fined the private companies that calculated inflation. And then,
some Congressmen decided to step in and be the ones to make public the monthly
inflation index.
But he designed two other important “policies”: one was the control that he set on
international trade. In order to secure a highly positive trade balance. First, he forced
importing companies to export goods for a similar amount of money that they were
A review of the Kirchner era 21
Luis Ignacio Argüero
importing. He thought that companies would increase their investment in Argentina,
trying to replace imports with products made in Argentina 4. Importing companies started
signing agreements with exporting firms, so these sold their production to importing firms,
which exported those goods to the clients that the exporting company already had. This
zero sum game generated ridiculous situations, as car makers Porsche exporting wine and
BMW exporting rice in order to import cars. This policy implied a high transaction cost to
companies and did not help to the substitution of imports. The other important policy was
the restriction on the exchange of foreign currency, which will be explained later.
-
CFK implemented a wide range of policies related to civil rights, among them:

Same-sex marriage became legal

Same-sex couples can legally adopt children

People can decide their gender according to how they feel, independent of the
gender they had when they were born.
a) Economic performance: international reserves of the Central Bank
The Central Bank of Argentina accumulated a lot of international reserves until the
middle of 2011. A high level of reserves is important for countries that rely on that for
backup of their national currencies, as it gives them stability and more independence, as
they can gain access to international funds with low interest rates. Countries with high
level of reserves can think in the long term determinants of their growth and invest in
strategic areas that could help them achieve that growth. Most countries in the region
consider the commodities boom to be something transient, and they decided to create an
anti cyclical fund to use the money saved in the good times when the price of
commodities decline. Others, like Argentina and Venezuela, decided to spend that money,
4
He applied a logic attributed to the Import Substitution Industrialization policies that were popular in
Argentina and Latin America from the 1940s to the 1980s. Juan Domingo Perón was the main figure of this
policy here, and those who recognize themselves as Peronistas see the industrial development as the basis
for economic growth and social justice, even when for securing industrial activity the country has to set very
high tariffs on imports in order to protect it.
A review of the Kirchner era 22
Luis Ignacio Argüero
increasing current expenses by creating subsidies, stipends and so on. In 2013, when
capital started to outflow from developing countries, the first group of countries could
apply a prudent monetary policy in order to deal with the new scenario. Argentina and
Venezuela, on the other hand, have been struggling with high inflation and insufficient
dollars at their central banks. Graph 5 shows that in 2004 Argentina and Venezuela had
the biggest international reserves at their central banks in the region (excluding Brazil).
Nine years later, they have been surpassed by Peru, Colombia and Chile. Even a poor
country as Bolivia has in its central bank two times the amount of US$ per inhabitant that
Argentina and Venezuela have.
The use of those funds which could have been saved gave more heat to an economy
already growing at a high rate: the government increased its participation in the economy
to a level never seen before. The problem arose when – as we saw earlier – the central
government started having a fiscal deficit and had to print pesos in order to deal with that.
When the bad times came, Argentina did not have the money to use in pro-growth
policies. A new scenario of stagflation (stagnation plus inflation) was installed, hurting the
economy of the popular classes the Kirchners so many times said they were defending.
Graph 5: International reserves of South American central banks
70000
60000
50000
40000
30000
20000
10000
0
2004
Argentina
Paraguay
2007
2010
Bolivia
Peru
Source: Central banks of the selected countries.
2011
Chile
Uruguay
2012
2013
Colombia
Venezuela
A review of the Kirchner era 23
Luis Ignacio Argüero
b)
Economic performance: monetary policy.
Up to December 2001, Argentina had the convertibility system, in which the Central
Bank had to have a US$ in its reserves for every ARS circulating. When the economy
contracted and there was an important capital flow, the system collapsed. From 2002, the
Central Bank regained the ability to implement an autonomous monetary policy. It
increased the monetary based, devaluing the ARS against all other major currencies. But
since 2003, the value of the peso stabilized around 3 ARS for every US$, until in 2008/09 it
moved upwards due to the international crisis. In the same period, the Brazilian Real got
revalued from 3.5 per every US$ to 2 Real per dollar. Kirchner could have revalued the ARS,
but such move would have meant becoming a more expensive country and economic
expansion would have slowed down, “cooling” the economy. This would have meant also
a decrease in government revenues, as export taxes are related to the exchange rate of
the AR$ to the US$.
In graph 6 we see that up to 2011, the real value of the ARS was below that of the
“convertibility level”, meaning that if we exchanged all the pesos that were circulating in
the economy into dollars, there wouldn’t be enough ARS to buy at the official rate. After
2011, that number changed, and by the end of 2013 Argentina had a “convertibility rate”
of 12.3 ARS per US$ and an official rate of 6.5. This means that if we all go to the bank to
exchange ARS into US$, there wouldn’t be enough dollars. That is one of the reasons why
the government decided to implement several restrictions in November 2011.
Restrictions started just after CFK’s re-election in October 2011. Citizens had to ask
AFIP’s (the agency that collects taxes) approval to buy US$. Even though it was suggested
that the purpose was not to let people getting illegal money buy dollars legally, and that
the amount would be related to the citizen’s income, there was no clear way to know how
much he/she was allowed to buy. A great sentiment of uncertainty was felt by many, who
feared that devaluation was coming and rushed to the banks to buy as many dollars as
they could. The government then set more restrictions, and finally forbade buying dollars
and kept them as savings.
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Luis Ignacio Argüero
This led to an increase in the price that the US$ had in the black market, and this
became known by the euphemistic term of “blue dollar”. By the beginning of 2013, the
gap between the two dollars had reached 100%, giving too many incentives to people to
illegally trade foreign currency instead of using banks. Notably, the price of the “blue
dollar” followed the value to its “convertibility level”: people and firms do not demand as
many pesos as the government is printing, and the more pesos the government prints, the
more value the “blue dollar” reaches.
The speed of the devaluation did not follow that of the “blue dollar”, and by 2014
the economy had so many imbalances due to the government’s lack of US$ that it was
forced to design macro-economic policies in order to stabilize the economy. Nevertheless,
so far it has not yet launched a plan to reduce the fiscal deficit, which would stop the
printing of new pesos, reducing liquidity and by doing that deflating the demand of US$.
Graph 6: Monetary base, reserves, US$ and back up of the Monetary base
400000
Million ARS
ARS
350000
14
12
300000
10
250000
8
200000
6
150000
4
100000
2
50000
0
0
2003
2004
2005
Monetary base
2006
2007
2008
International reserves
2009
2010
Value US$
2011
2012
2013
MB/Reserves
Source: BCRA
It is worth noting that during this period two phenomena occurred: sending
dividends of foreign companies to their headquarters were stopped, and the 100 peso bill
became one of the highest denominated bills in the world with the lowest value.
Regarding the first, the government made companies request permission to repatriate
A review of the Kirchner era 25
Luis Ignacio Argüero
dividends. Those permits were seldom approved, and the wiring of dividends plunged
from 4,397 million US$ in 2011 to 225 million in 2012. Companies have accumulated big
amounts of pesos that couldn’t be transferred, and started buying properties or unneeded
new equipment in order to protect their assets. Executives in Argentina had hard times
trying to explain the situation to their headquarters, which in most cases needed the
money to cover the losses that their European or American branches were posting.
The second phenomenon has affected the lives of many people, who had to carry a
lot of bills just to pay current family expenses, or to buy home appliances. The 100 pesos
bill were valued at 12 US$ by January 2014. Argentina could have printed without any
problem 200 or 500 ARS bills, but as the bills printing company was engaged in a
corruption case involving the vice president Amado Boudou, any issue related to printing
money became a highly sensitive one. The 100 ARS bill became one of the highest
denominated bills with the lowest value. Neighbors had its highest denominated bill
valued much higher than that: Paraguay (22US$), Bolivia (25 US$), Chile (40 US$), Brazil
(50 US$), and Uruguay (90 US$) have bills with more exchange value than the 100 ARS one.
In the meantime, the major change the government proposed regarding circulating money
was the issuance of a new 100 ARS bill, with the figure of Eva Peron in it. The bill was
originally designed to commemorate the 60th anniversary of her death. It is very expensive
to produce because of its details and was at first rejected by shop owners, but now is
widely used, despite the fact that there are two equally denominated bills with very
different design.
c)
Economic performance: Employment and salaries
Since Néstor Kirchner became president, Argentina has seen a decrease in the
unemployment rate. This has been caused by the increased economic activity due to more
internal consumption, an increased intensity in international trade, and an increasing
amount of public employees, both at the national and provincial levels. Nevertheless,
during CFK presidencies the pace at which public posts were created exceeded that of the
private sector, contributing to the growth of government expenditures (and therefore, its
A review of the Kirchner era 26
Luis Ignacio Argüero
fiscal deficit). The purchasing power of employees rose year on year, and the salary level
measured in dollars also increased.
Graph 7 shows that the number of prívate jobs increased 81% from the minimum of
2002, when by the end of the year the whole country had a mere 3.5 million posts. The
crisis hit many families, as inflation was high in 2002 and there were not too many jobs yet.
A year later, 200 thousand posts were created. From 2004 to 2008, the economy created
over 400 thousand jobs a year. The crisis in developed economies that started in the USA
in the second half of 2008 had a relative impact in Argentina: its origin was the financial
sector, which was very limited in this country. The indebtedness level of Argentina was
very low and it did not have a dependency on credit markets to finance its deficits, as it
was posting primary and fiscal surpluses at the time.
Graph 7: Number of jobs and average salary
7,000
US$
In thousands
1,600
1,400
6,000
1,200
5,000
1,000
4,000
800
3,000
600
2,000
400
1,000
200
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013*
Private jobs (left)
Avg monthly wage (Right)
Notes: * 2013: projected average salary by year’s end. The figure for the second quarter are considered
for the number of private jobs.
To calculate the average salary in US$, we consider the exchange rate of the US$ to the ARS in the last
day of each year.
Source: Based on Ministerio de Trabajo, Empleo y Seguridad Social.
Nevertheless, the recovery after the crisis did not create too many jobs, as from
2008 to 2013 the country created only 468 thousand posts. The stagnation in creation of
A review of the Kirchner era 27
Luis Ignacio Argüero
jobs has been steeper from 2011, and many economists fear that in 2014 the country will
start losing jobs. Despite this, the unemployment level continued decreasing throughout
CFK’s second term, as public jobs increased much faster that private ones (from 2008 to
2011, it was triple the speed of job creation in the public sector to that of the private
sector). Moreover, the amount of people actively looking for a job stagnated, contributing
to the decrease of the unemployment rate 5.
As it was said, the level of salaries increased both measured by purchasing power
and measured in dollars. Graph 7 shows how salaries measured in US$ collapsed after the
crisis, moving from 880US$ before it, to less than one third one year later. Since then, and
up to 2012, the average salary increased constantly year on year, even during the years of
the crisis. Having a devalued currency contributed to the recovery of the industrial sector
in the post crisis scenario: production costs decreased and companies could hire skilled
workers for a very low price.
In neighboring countries, salaries also grew when measured in US$, but with a
different scenario: the growth did not come much from the nominal increase of salaries
(which just happened mildly), but from the revaluation of countries’ currencies. In
Argentina, workers unions have to negotiate every year with company owners how much
their salaries would increase in a context of high inflation. Nominally, wages increased
about 12% from 2002 to 2004, 20% from 2005 to 2009 to 30% in 2010 and 2011, to 26% in
2012 and 2013. This last year was the first in the series that show that workers lost
purchasing power. Nevertheless, the loss is minimum. The labor market is adjusting to the
macroeconomic conditions (low or null economic growth, high inflation), by reducing job
posts and giving salary increases lower than inflation. 2014 and 2015 do not look very
favorable years to Argentinean workers.
5
The unemployment rate is calculated by the amount of people looking for a job to the total amount of
people who can work (neither children nor retirees) and are actually working or looking for a job. Those who
do not work and do not look for a job do not count. Therefore, when many people decide not to look for a
job, the unemployment rate diminishes.
A review of the Kirchner era 28
Luis Ignacio Argüero
d)
Politics: the fight against “El Campo”, the fall and raise of CFK
As food prices, especially soybeans, increased drastically during the last part of
Néstor Kirchner presidency and the first part of CFK’s, the government decided to
implement an increase on the rate of export taxes. Taxes were increased two times during
2007, reaching a level of 35% for soybeans, which angered the agricultural sector (“El
campo”), as this implied a cut in their earnings. But the government decided to go even
further with the augments and in 2008 proposed a law that would increase the tax rate
depending on the international price, reaching a 58% if the metric ton surpassed the 750
US dollars line. This proposal proved to be too much for El Campo.
Protests started arising in many parts of the country, where pickets and
demonstrations were organized. Provincial governments – in many cases – supported the
protests: the revenue coming from income taxes is not later distributed among food
producing provinces. As a consequence, any increase in the tax would not benefit
provincial governments, only the central government. The proposed law passed the
representatives chambers easily, but a close vote was expected at the Senate.
Thousands of people of were gathering at two different places in Buenos Aires, one
supporting the government, the other against the law. By 2 am, senators voted. It was a
tie. Vice president Cobos, who originally belonged to the UCR, a traditional political party
that was not an ally of the government, voted against the proposal drafted by its own
government. Kirchner followers accused him of treason, and from then on he was
excluded from making important decisions. Néstor and Cristina Kirchner was so angry that
she threatened to resign, only to be stopped by the Chief of the Cabinet, Alberto
Fernández.
The political opposition gained strength with that situation, and in context of
economic slowdown, won in the 2009 elections. Many people thought that the Kirchner
era was coming to its end. But the economy started growing once again in 2010, no other
leader appeared in the political arena and finally CFK got re-elected with 54% of the votes
A review of the Kirchner era 29
Luis Ignacio Argüero
and almost 40 percentage points of difference with the runner up. She also won the
majority in both chambers and when she started her second term by the end of 2011, she
had a very positive consideration among Argentineans. Very few people thought that she
would spoil that support in just two years.
e) Subsidies and public investment
The 1990’s saw Argentina putting into practice many of the “Washington Consensus”
policies, including the privatization of public utilities companies, a leaner regulation of
markets and a small role of the government in the economy. During the convertibility
regime, subsidies to energy and transport were very limited, with a clear bias towards the
unprivileged.
During the Kirchners administrations, national and provincial governments’
expenditures increased from being 28.7% of the GDP in 2003 to 47.8% in 2013. Despite
the concomitant increase in governments’ revenues, the money the public sector collects
is not enough to cover its expenses; therefore it has recently started posting fiscal deficits.
It is necessary to understand the nature of this fiscal deficit. Some economists may
argue that financing the public sector so it can invest in growth project would be
beneficial in the long run, as the productive capabilities of the country would increase.
Argentina allocates a very small part of its GDP to investments from the public sector.
Compared to other South American countries, Argentina has one of the lowest rates, with
about 2.8% of its GDP used by the public sector as investments (Graph 8). Ecuador ranks
first, with a figure over 10%, followed by Bolivia. Uruguay, Peru, Colombia and Venezuela
also show a higher proportion of GDP destined to public investment than Argentina’s.
Only Chile and Brazil show smaller figures.
But in historical terms, today’s proportion is quite high, as in the 1980s public
investment accounted for 1.5% of GDP, in the 1990s, for 1.6%, and from 2003 to 2008,
2.6%. Considering the government almost doubled its importance in the economy, the
increase of investments alone cannot explain the growth of the public sector. Two other
A review of the Kirchner era 30
Luis Ignacio Argüero
factors have a much more significance in explaining that growth: the increase of current
expenditures (with over 1 million new public employees and an important increase in the
population receiving pensions) plus an important part of the budget allocated to subsidize
the private sector.
Subsidies started to grow after the government abandoned the one peso one dollar
parity in 2002. Utilities’ tariffs were pesified and frozen, so no increase was allowed. At
the beginning this impacted only private firms, as they saw their profit margins plunge. All
of them had invested Euros or US Dollars in the 1990s, and now they were receiving
devalued ARS for their products and services. Some of them had a part of their
expenditures in US$, so they showed an important imbalance between their revenues and
their disbursements.
Graph 8: Public investment in South American countries
12
10
8
6
4
2
0
1982-1990
1991-1998
2003-2008
2010-2011
Source: Based on ECLAC (2012)
Some firms abandoned ship and initiated claims against the country at the
International Center for Settlement of Investment Disputes (ICSID). Others stayed in the
country despite their growing losses, as declaring bankruptcy and leaving the country
would hurt the holding company. These companies started requesting subsidies to the
government, so they could post a balanced result and avoid requesting loans or transfers
A review of the Kirchner era 31
Luis Ignacio Argüero
from companies’ headquarters. Firms that distribute electricity, for example, do not pay
the whole price of the electricity they receive and then sell to citizens and shops. That
difference is used to cover current deficits arising from everyday activities.
But the majority of subsidies go to subsidize the price that the final consumer pay
for certain services: electricity, gas and water tariffs in Argentina are by far the cheapest in
the region. Consumers got used to cheap prices, and the government justified this saying
that the money citizens do not use to pay for public utilities is used to consume other
goods, positively affecting the economy.
In 2013, subsidies accounted for 5% of the GDP, a number that has grown constantly
throughout the period, since in 2005 it was below the 1% line. An increase in social
programs, public employees and subsidies are the main reasons to explain the primary
fiscal deficit that the government is suffering from 2012.
Graph 9: Weight of subsidies in the economy
(In million ARS)
160000
6
140000
5
120000
4
100000
80000
3
60000
2
40000
1
20000
0
0
2005
Subsidies
2006
2007
2008
Public investment
2009
2010
2011
2012
2013
Subsidies as % of GDP (Right scale)
Source: Based on IARAF and MECON.
Moreover, subsidies have a strong component of inequality: residents of Buenos
Aires city, in average the wealthiest of Argentina, receive much more subsidies than
people in poor regions. And within the city and its suburbs, those using natural gas from
A review of the Kirchner era 32
Luis Ignacio Argüero
the pipelines – typically the richest – pay a much lower price than those using gas
cylinders. In 2013, 64% of subsidies went to the energy sector, including not only
electricity and gas, but petrol as well: one liter of gasoline is less than half the price in
Argentina than in Uruguay, and a 20 to 50% cheaper than in the other neighboring
countries. The government also pays the deficit that Aerolineas Argentinas (the national
carrier) has, which in 2013 exceeded 1.5 billion ARS.
IV. Epilogue
What has been described above (a selection of economic issues that characterize
the Kirchners administrations) could be read in many ways. Government supporters say
that no other administration has created as many jobs as that of Néstor and Cristina, and
that the government reduced the indebtedness of the country, an issue that had been a
problem for the country since its origins in the 19th Century. They like stressing that the
Gini coefficient (that measures income inequality) diminished throughout the decade and
that Argentina took an independent path to economic development, not dictated by
developed countries.
On the other side, many economists have been warning about the imbalances that
the country has been showing. They said that in the long run the economy was going to
have to adjust its numbers (government expenditures, exchange rate of the peso, inflation,
increase of the monetary base), so they proposed the implementation of a comprehensive
plan in order to assure a soft landing. This view was rejected by economists and politicians
who supported the government, saying that adjustment (in the sense of contractionary)
policies were the main reason for the 2001/2 crisis, so applying them once again would
lead to the same situation.
By the beginning of 2014, those imbalances became clear, even for government
officials. They tried to implement some measures to control inflation and capital outflows,
while maintaining a high level of economic activity. Most economists agree that turbulent
A review of the Kirchner era 33
Luis Ignacio Argüero
times are coming, that it will be difficult to control and correct macroeconomic
imbalances while maintaining the purchasing power of salaries and assuring a certain level
of social peace. Most Latin American countries are in a stronger position from where to
face a less favorable scenario; but the resilience of Argentina has never stopped to amaze
analysts, and we may see a stronger economy after the storm has passed.
Bibliography:
BCRA – Banco Central de la República Argentina, Estadísticas e indicadores,
http://www.bcra.gov.ar/
CEPAL (2012), Estudio Económico de América Latina y el Caribe,
www.eclac.cl/id.asp?id=48062
FAO – Food and Agriculture Organization, Food price index,
http://www.fao.org/worldfoodsituation/foodpricesindex/en/
Hornbeck, J.F. (2013), “Argentina’s Defaulted Sovereign Debt: Dealing with the “Holdouts”,
CRS R41029.
IARAF – Instituto Argentino de Análisis Fiscal, “Informe económico 246”,
www.iaraf.org/descargar.asp?id=444
Maurer,N. & Musaccio, A. (2006). The Barber of Buenos Aires: Argentina’s Debt
Renegotiation, Harvard Business School. Harvard Business School Publishing: Boston.
MECON – Ministerio de Economía, www.mecon.gob.ar
Ministerio de Trabajo, Empleo y Seguridad Social, Observatorio de Empleo y Dinámica
empresarial,
http://www.trabajo.gov.ar/left/estadisticas/oede/estadisticas_nacionales.asp
Argentine Economy
Regional currencies and
employment creation:
The case of Argentina, 2001-2003
Luis Ignacio Argüero, PhD.
1
Abstract
Despite recent discussions on the possibility of re-issuing former European
currencies, few studies have analyzed the impact that regional currencies had on
economic activity. The case of Argentina from 2001 to 2003 presents a particular case
study to analyze this. Fifteen out of the twenty three provinces issued their own
currencies to deal with budget deficits and under the assumption that the increase
supply of money would spur the demand of goods and services. At the same time, the
country suffered its worst economic crisis, with an increase in unemployment, poverty,
a major devaluation of the Peso and the drop of economic activity.
This paper first briefly presents the characteristics of Argentina in those years and
introduces the list of provincial currencies that were issued. Then, it analyzes the
effect that quasi-currencies had on several employment variables, by comparing the
group of provinces that issued local monies with the group that did not. The
employment level in the industrial and service sectors is analyzed and similar
provinces are compared.
Provinces that issued currencies did not experience a rise neither in total
employment nor in specific sectors. Moreover, similar provinces show similar
performances or show that the provinces that issued their own currency have a higher
rate of destruction of private jobs. Quasi-currencies failed to increase activity and the
national government had to pay for their rescue.
1. Introduction
Bibliography on regional currencies (or quasi-currencies) is very limited, probably
due to the restricted experience on this phenomenon. National governments issue and
use their national legal tender in all their territories, instead of letting each province
or administrative jurisdiction to issue its own. The case of Argentina from 2001 to
2003 presents a very interesting experience: fifteen out of the twenty three provinces
of the country issued their own money. Therefore, it’s a unique case study to analyze
how these currencies impacted on regional economies. This analysis becomes relevant
in the current context, when several European countries are facing severe economic
conditions and, as they are not able to print their own money due to the existence of
the Euro and its control by supranational organizations. Rumors of issuing once again
2
nations’ former currencies have raised in recent political discussions1. Lietaer et al.
(2009), for example, propose that local governments issue their own “complementary
currency” in order to “link unused resources with unmet needs within a community,
region or country” (page 1). The theoretical increase in economic activity due to the
issuance of quasi monies should be analyzed in the context of factual cases and the
results seen on the regional economies that followed this policy.
This paper analyzes how employment behaved during that critical time of
Argentina, comparing the performance of those provinces that issued quasi-currencies
to those that did not. It is structured as follows: First, a brief introduction of the
particular conditions of Argentina in the 2001-2003 period and the quasi-currencies
that were issued are presented. Second, the evolution of employment variables is
analyzed, comparing two big groups: provinces that issued quasi-currencies and those
that did not. Third, the employment variables of provinces of similar characteristics
(one that issued local money, the other that did not) are analyzed, and their
performance in the industrial and service sector is presented. Last, the conclusions are
presented.
2. Background: the currency board system and economic performance of
Argentina
Due to the currency board regime implemented in 1991, the Argentinean
government had to have one United States Dollar (US$) in its Central Bank for every
Argentine Peso (ARS) that was circulating in the economy. This implied a drastical
change in the country’s monetary policy, as the government prevented itself from
printing money in order to deal with fiscal deficits. Previous experiences – especially
that of the 1980s – had showed that when the Argentine government chose to issue
more money, inflation spiked and the situation turned, in the long run, unmanageable.
Since 2011, with the collapse of the Greek economy, the international media has paid a lot of attention
to the possibility of troubled countries issuing once again their former currencies. The financial services
company Nomura Holdings even calculated that their depretiation would range from 25 to 60 %
(Fontevecchia 2011)
1
3
Graph 1 shows the evolution of inflation in Argentina. High inflation had been the
rule for the country until 1992, after the convertibility law2 was enacted. There were
three episodes of very high inflation: 1975-76, when it surpassed the 300% mark; 8384 (over 400%); and 1989-1990 (over 2,000%). The graph also shows that the 1990s
have been a unique case in the recent history of the country. The country even had
deflation in the period 1999-2001, a sign of the weakness of the economy at that time.
Once the country regained its capacity to print money once again in 2002, inflation
started once again to grow, surpassing the 20% mark in 2007 and being by the end of
the decade one of the highest inflation indexes in the world.
Graph 1: Inflation rate in Argentina (1970-2012)
∕
200
180
∕ ∕
∕ ∕
160
140
120
100
80
60
40
20
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
0
Source: INDEC (until 2006), San Luis provincial ministry of economy (2007-2012)
The implementation of the currency board system in 1991 had a very positive effect
in the short term, as it drove inflation to a halt and allowed for the stability of many
macroeconomic indicators. The poverty rate decreased quickly, banks regained
deposits that had been withdrawn due to the unstable situation and lots of foreign
companies decided to invest in the country. The privatization process that started with
the new government in 1989 had three very positive effects:
2
th
The convertibility law was enacted on March 27 1991, and established a fixed parity of 1 dollar to 10,000
Austral, a currency that would be eliminated to adopt the Peso as the new currency.
4
1. The government did not have to pay anymore for public utilities companies’
deficits.
2. A big flow of US Dollars entered the country, therefore enlarging the monetary
base.
3. The companies brought know how and a much needed money to invest in
infrastructure.
Some politicians have denounced the privatizations arguing that companies were
sold at a very low price. Relying solely on the influx of this kind of Foreign Direct
Investment (FDI) proved to be unsustainable, and by the beginning of the following
decade Argentina did not have more companies to privatize and the influx of US
dollars through this mechanism stopped. Moreover, the former public companies were
now sending their dividends back to their headquarters, money that had to be
transferred from the Central Bank of Argentina, who as a consequence lost
international reserves, having to take Pesos away from circulation. According to data
from the Ministry of Economy (2003), the participation of foreign companies in total
revenues of the top 500 firms in Argentina grew from 45% in 1993 to 63% in 2001.
Table 1 shows the evolution of FDI in Argentina until 2001. The amount of money
entering the country soared compared to the previous decade and provided the Central
Bank with much needed US$. FDI averaged 2.1% of GDP between 1992 and 1998, a
decent figure for a country with a recent history of economic and political crises. In
1999 the amount of FDI increases drastically due to the privatization of the local oil
company, Yacimientos Petrolíferos Fiscales (YPF).
Table 1: Foreign Direct Investment in Argentina, 1992-2001
FDI
FDI/GDP
1992 1993 1994 1995 1996 1997 1998
1999
2000
2001
4432
2793
3637
5610
6951
9161
7292
23986
10418
2166
------
1.2
1.4
2.2
2.6
3.1
2.4
8.5
3.7
0.8
Source: MECON (2003)
The influx of FDI increased also in most Latin America countries. From 1992 to
2000 it soared 4 times, and Argentina, Brazil and Mexico attracted most of them. But
the rate of increase of Argentina was below the ones from these other countries, and it
5
moved from being the first recipient of FDI in Latin America in 1992 to being the third
in 2000. FDI in Argentina plummeted with the crisis, regained momentum from 2004
to 2008 and then plummeted once again from 2009. By 2012, Argentina was the sixth
recipient of FDI in Latin America, behind Brazil, Mexico, Chile, Colombia and Peru.
2.1 Monetary policy
The monetary base3, which had increased very quickly in the previous decades,
started reducing its expansion since the convertibility law was enacted and by 1994 it
reached a one digit growth for the first time in 25 years. Those small changes
continued until 2001, when the monetary base was reduced 21% year on year. This
year, local governments decided to issue their own currencies.
Graph 2 shows that the monetary base was very high during the 1980s, a process
strongly connected to the high inflation that Argentina suffered during that decade
(see Graph 1). In 1990 the expansion was reduced an 87% compared to that one of
1989 and in 1991 and 1992 the expansion was reduced another 82% and 62% year on
year. From 1994 to 2000 (with the exception of 1997) the monetary base changed in a
single digit year on year, something unprecedented in the history of Argentina. But in
1999, the monetary base started to be reduced (-3%), a phenomena that continued in
2000 (-6%) and 2001 (-21%). The shrinking of the monetary base implies monetary
tightening, that is a reduction of the circulating money.
Graph 2. Annual change of the monetary base
3
Monetary base (or M0, as defined by the Central Bank of Argentina) is the sum of all monies issued by
the Central Bank plus current account deposits in ARS in this institution (BCRA 2012).
6
%
650
550
450
350
250
150
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
-50
1970
50
Source: Based on Central Bank
The inflexibility of the convertibility law, so beneficial in the first part of the
decade, became a hurdle for a government that had to face several external shocks: the
Mexican and Russian crisis in 1994 and 98, Brazil’s devaluation in 1999. The Mexican
crisis started at the end of 1994 due to the lack of confidence in the new elected
government and produced the devaluation of the Mexican Peso, disinvestment of
foreign investors and a big rescue package supplied by the USA. The Russian Crisis
happened in 1998 due to the 1997 Asian crisis, the decrease of the international price
of oil and a lack of confidence in the Russian Ruble, and produced a devaluation of the
currency. Both crises had an international repercussion, affecting developing
economies throughout the world: there was a flight to liquidity and to quality.
Investors, who had previously benefited from the globalization of their investments,
moved their resources towards developed economies. This had an important impact on
Argentina, a country whose economy depended heavily in the influx of United States
Dollars.
Brazil suffered from the Asian crises, as its international reserves were halved
between June 1998 and January 1999. On top of this, current account and fiscal
deficits put a lot of pressure on the Brazilian Real, reducing investors’ confidence on
the country’s economy. The Real was finally devalued 66% during January 1999. This
7
produced an important effect in the Argentine economy. First, trade between
Argentina and Brazil reduced drastically. Second, the devaluation made Brazilian
production costs to plummet. In labor intensive industries, as shoemaking or textiles,
Argentina’s production costs became much higher than Brazil’s, its main export
market and worldwide competitor4. Third, the unstable situation made investors be
more sensible to the risk of their investments and fueled the idea that investments in
Latin American countries implied a higher risk than the one they had previously
calculated.
As a consequence of the processes described above, economic activity declined and
Argentina suffered deflation, a phenomenon that proved to be as harmful as high
inflation. Deflation is, when looking at world numbers, quite rare in recent history.
For example, just 1 year in the last 50 finished with a decrease in the Core Price Index
in the USA. It was in 2009, when the economic crisis drove activity almost to a halt.
The same thing happened in the United Kingdom. Germany suffered deflation in the
mid 1980s and in the last part of the 2000s. Australia did not have a year with
deflation in the last half century. A unique case in the developed world is that of
Japan, a country that has had deflation or very small inflation in the last twenty years.
Prime Minister Abe, who took office in December 2012, recognized deflation as one of
the biggest problem of the Japanese economy and established a “revolutionary” set of
economic policies that aim at reaching the 2% rate of inflation within two years.
Deflation is bad for the economy because economic actors postpone expenditures
and investments, knowing that the money they have will be more valuable in the
future. As Paul Krugman (2010) says “just sitting on cash becomes an investment with
a real positive yield”. Spending – or consumption – is the quintessence of capitalism,
as determines how market participants interact. Moreover, when firms or an
individual think about borrowing money, they know that they will have to pay – in the
future – in a currency that will be more valuable. Krugman also argues that a
deflationary economy should naturally see its salaries reduced, but that there is “a
downward nominal wage rigidity”, making it very hard to decrease salaries (unless
there is high unemployment, with scores of people accepting lower salaries because
4
The average salary for a manufacturing worker in Brazil diminished from 5.79 US$ per hour in 1998 to 3.57
in 1998.
8
they are in need). In Argentina, prices decreased 4% between 1999 and 2001 and
salaries remained stable (averaging 882 ARS in 1999 and 883 ARS in 2001), in a
context where the unemployment rate averaged 15%.
Former Ministry of Economy López Murphy and his colleagues (2003) agree with
Krugman in the sense that they argue that the 2001-2 Argentine crisis was due to the
many rigidities that the economy showed, which made it too vulnerable to sudden
changes in the international context (the Mexican and Russian crises and Brazilian
devaluation, seen above). They argue that there were three areas where the economy
lacked flexibility:
1. A low ratio of exports to Gross Domestic Product (GDP). This implied a limited
inflow of foreign currency through commerce. An external shock that reduces
the inflow of US dollars would require an increase of exports ten times the size
of the inflow reduction in order to compensate.
2. Labor regulations and business flexibility. This did not allow for the reduction of
wages and an easier adaptation to the new scenario.
3. Public spending. During 2001, the government tried to cut many expenses
(mostly in the areas of education and public health), which proved to be very
unpopular and led to widespread discontent with the government.
In July 2001 the National Congress approved a reduction of 13% in salaries higher
than 500 ARS (or US$) per month5. This reduced even further the public confidence on
the government and drove the public administration to a stall. Notably, a year later
(after the devaluation of January 2002) most workers accepted a deeper cut in their
purchasing power (around 35%)6. Cutting the real purchasing power of wages proves
to be a much easier task than reducing nominal salaries.
Tying the ARS to the US$ implied that the value of the local currency depended
upon the ups and downs of the North American currency, whose value is managed by
the Federal Reserve according to the circumstances, needs and policies of that country.
5
The article 14 bis of the Argentine Constitution says that the law will guarantee the “stability of the public
employee”. As a consequence, cases of public employees’ dismissal are extremely rare, making it very
difficult to reduce public expenses through the reduction of the payroll.
6
Annual inflation climbed to 40% and salaries grew 5.2%
9
As the US$ got revalued during the 1990s due to the strong economy of the USA, the
ARS also got revalued7. This made the ARS very expensive worldwide, hindering the
export capabilities of the country and hampering the incipient economic growth seen
in the first half of the decade. A declining industrial production, a negative trade
balance due to the low prices of Argentine agricultural exports and an increasing
foreign debt level attempted against the new government that took office at the end of
1999. Moreover, a rampant primary fiscal deficit due in part to the privatization of
the pension system put a lot of pressure on the national and regional governments,
who recurred to unpopular public expenditures cuts and new taxes on economic
activity.
These cuts could not stop the shrinking of the economy and served as a base for
pro monetary politicians to spread the word on regaining the capacity to issue money.
The inflexible monetary policy mixed with the other rigidities described above was
making the situation unmanageable. The governing coalition suffered the defection of
three ministers who did not support the cuts and in October the government lost the
mid-term elections: On top of a mounting economic instability, the government was
losing power and public support day by day. Worker unions, traditionally allies of the
Peronist Party (now the opposition) were against the policies implemented by the De
la Rúa administration and called for eight general strikes.
Despite printing money to increase public expenditures could have been a solution
to moderate social demands, the central government and the Central Bank –being the
only entity who could legally print the official ARS– did not agree to lift the
restrictions on printing money without backing, maintaining the one ARS one
US$ parity. The government rejected the abandonment of the currency board for
political issues, as at the time it was widely supported by the voters and even by the
political opposition. There was not a clear policy alternative to the currency board
system.
In this background, many provinces suffered their own economic problems. One of
the main policies implemented in Argentina in the 1990s was the introduction of the
It has been estimated that over the whole decade the real effective exchange rate of Argentina
appreciated by around 40 percent (O’Connell 2005).
7
10
private pension system. In order to compensate the Central Government (who would
pay current pensioners but won’t receive that money from workers’ contributions)
provinces accepted a 15% cut in the gross amount of money that they receive from the
Central Government due to the collection of federal taxes (value added tax – VAT –,
earnings, corporate, wealth taxes, among others). Moreover, the contraction of the
economy from 1999 to 2002 had a big impact on the tax revenues of provinces and in
2001 revenues decreased 10% year on year.
Opposite to the national government, provinces’ borrowing capacities are
generally more limited. In Argentina, provincial government traditionally borrowed
money from provincial banks – almost leading them to bankruptcy –, but in 1995 most
of these banks were privatized. Governments started borrowing money from private
banks and issuing more and more bonds. From 1996 to 2001, provinces’ debt increased
from 13.9 billion US$ to 29.9 billion. This money was mainly used to cover fiscal
deficits. During these years, provinces suffered from recurring fiscal deficits and had
to borrow money in order to pay interests and principals of previous credits.
Table 2 shows the evolution of the debt, compared to provincial revenues. The
debacle started in 1999, when the national GDP shrunk 3%. The deterioration
accelerated in 2001 and 2002, and until 2005 provinces had debt levels above a full
year of tax revenues. Trying to control governments’ fiscal deficits, the Congress
enacted in late 1999 the “Fiscal Solvency Law”. But in the following years this law
proved to be insufficient to organize provinces’ finances. As Vulovic (2011, p. 21-22)
says:
“Out of 23 provinces, 14 followed the national example and between 1999 and
2001 they passed their own fiscal solvency rules. These rules differed across provinces
in some of their characteristics, as well as in the degree of their accomplishments. As a
result, 12 provinces imposed a hard budget constraint, 10 imposed limits on debt and 9
provinces limited current expenditures. In 2000, out of 12 provinces imposing a hard
budget constraint, only 6 fulfilled their commitment and 3 provinces did not comply
with their expenditure limits. This non-compliance to the fiscal solvency rules was not
new to the Argentine provinces. In fact, at the time, 16 out of 24 provinces had
11
constitutional limits on the ratio of debt service to total revenue, ranging from 20 to 25
percent. However, in 2000 only 10 out of these 16 provinces complied with these rules.”
Table 2: Provincial debt over provincial revenues
1995 1996 1997 1998 1999 2000
2001
54%
112% 216% 169% 137% 112%
56%
47%
48%
64%
76%
2002
2003
2004
2005
Source: OPP (2006, p.8)
A solution had to be found in order to deal with fiscal deficits. Governors decided
that the best solution was to print their own money. A unique case in recent history
was being born: Argentina, a country which was not in an extreme situation – like war,
civil unrest or fragmentation – would have by the end of 2001 sixteen currencies
besides the official ARS.
3. Regional currencies in Argentina, 2001-2003
Fifteen provinces (out of 23) decided to print their own currency between 2001 and
2002. The bills they printed had a resemblance to the circulating ARS (see annex),
with most of them having the image of an important person or place related to the
issuing province (except for La Rioja, who picked the image of Eva Duarte de Perón).
Bills stated that the holder is entitled to the exchange of that bill into ARS at a one to
one parity – plus an interest – at a certain date. Quasi-currencies matured between 2
and 5 years after they were issued.
The characteristics of issuing provinces was not homogenous: Poor and highly
indebted provinces as Chaco and Formosa (who owed 61 and 105% of their GDP)
issued their own monies, but rich and with low debt-level provinces as Buenos Aires
and Córdoba (21 and 16%) did that as well. Heavily and lightly populated provinces
issued quasi-currencies, and provinces with high unemployment (Chaco, Corrientes)
and with relatively low unemployment (Misiones, Entre Ríos) issued them as well.
12
Even the national government issued its own quasi-currency (the Lecop8) to deal
with short term liabilities with provinces. Provinces issued currencies for an
astonishing 5.34 billion ARS, which together with the Lecop bills (3.2 billion ARS)
counted for almost the 50% of the total money supply 9 (Licari et al. 2003).
The
coexistence of the Central Bank with other “central banks” of provinces who also
printed money certainly hindered the capacity of the National Government to
implement a coherent monetary policy and by the end of 2001 it was common for
workers to receive their salaries in two or three different currencies, especially those
in the informal sector. Some quasi-currencies were accepted not at their nominal price,
but with a discount. This hurt even more the income of those who did not have a stable,
formal job.
Every bill of a provincial currency was in fact a bearer bond, as it established that
on a certain date the holder of that bill would be paid a certain amount of ARS. Except
for the case of the Lecop, all the others offered an interest to the holder of the bill, so it
could be used as an investment alternative as well. Nevertheless, the reminiscence of
some bills to the official ARS bills and the fact that they were commonly accepted in
the jurisdiction that they were issued helped to their acceptance as current money.
Moreover, it is commonly accepted among economists that the transactional capacity
of these quasi-currencies has been more important than its investment potential
(Argañaraz et al. 2003). Considering the inflation in 2002 was over 40%, the incentives
to keep the bonds as an investment were low, and the incentives to use them quickly
were high.
Table 3 shows the detail of the currencies issued by provinces. The provinces did
not follow clear patterns for the issuance of their monies. Buenos Aires province, the
most populated and economically important of the country, issued a 3.41% of its Gross
Provincial Product (GPP) in Patacón, representing therefore a significant part of the
money circulating within the jurisdiction. The 3.3 billion Patacón issued meant that
over 240 of that currency (nominally, they accounted for the same amount of ARS)
were printed per every citizen of the province. To reflect on the importance of this
number, we should consider that the minimum wage in 2001 was 275 ARS. On the
8
9
Lecop: Letras de cancelación de obligaciones provinciales (Letter of cancellation of provincial obligations).
Money supply here is considered as the monetary base plus the quasi-currencies.
13
other hand, Patagonian, oil-producing provinces as Chubut and Río Negro issued just
a 0.52 and 0.59% of their GPP in bonds and therefore the impact that these currencies
had on the economy was very limited: Just 49 and 36 ARS were issued per capita.
Table 3: Issuance of quasi-currencies by province
Province
Currency
QuasiCurrencies
Quasi-Curr. /
GPP (%)
(Million ARS)
Buenos Aires
Córdoba
Entre Ríos
Corrientes
Tucumán
Mendoza
Misiones
San Juan
Chaco
Formosa
Catamarca
Tierra del Fuego
Chubut
Río Negro
La Rioja
Patacón
Lecor
Federal
Cecacor
Bocade
Petrom
Cemis
Huarpes
Quebracho
Bocanfor
Bono Ley 4748
Letras
Petrobono
Petrobono
Bocade (Serie A)
Bonds per
inhabitant
(ARS)
3,306.4
700
348
200
168
138
130
100
50
50
45
30
20
20
5
3.41
2.90
5.04
4.88
2.54
0.97
3.09
2.92
1.25
2.75
2.69
1.63
0.52
0.59
0.29
240.36
229.3
301.82
215.75
126.13
74.98
133.84
161.95
51.07
102.19
135.95
299.06
49
36.42
17.37
Total: 5,310.4
2.36
145
Source: Author, based on Tomassi (2002), Licari et al. (2002) and INDEC.
The economic decline of 2001 hit particularly provinces and municipalities, as
their revenues depend heavily on transfers from the national government. A study by
Tomassi (2002) shows that in the year 2000, 83% of all tax revenue was collected by
the national government 10 . Taxes which are more inflexible to local economic
downturns, as VAT on basic goods or the wealth tax, go mainly to the national
jurisdiction, and later they are distributed to the provinces. Moreover, the Central
Government had to pay the interests of its debts, which spiked in 2001. In a context of
productive contraction, economic difficulties and political instability, provinces’
finances were far from being at the top of the Central Government priorities.
In 2001, when quasi-currencies started circulating, provinces needed the money,
as their capital expenditures had to be collected –in their majority– from local sources.
Just 15% of total investment in provinces was financed by national funds in 2001. By
2004, that number had crossed the 50% mark and in 2007 it reached 67% (Bernal
10
This figure increased during the past decade. By 2010, the Central Government collected 87% of all taxes.
14
2011). The crisis came chiefly from the macroeconomic policy implemented by the
national government, and local administrations had little space to maneuver their
economic and financial policies.
On December 3rd 2001, after a two-day bank run, the President issued a decree
stating several restrictions on the withdrawal of money from banks. People could only
get 250 ARS per week from the banks and transfers to foreign countries were
prohibited, except for payments of credit cards issued in the country and for payments
related to international trade. These measures aimed at maintaining the convertibility
of the ARS by protecting the few US$ that the government had left and by restricting
the use of cash in the economy. These measures backfired on the government, as
people feared for their deposits and organized demonstrations in order to regain access
to their money. The “corralito”11, as the set of restrictions was popularly called, had a
huge impact on the urban middle-class, as these families had a monthly income above
the 1000 ARS that they were allowed to withdraw (in 2001 the average salary was 883
ARS). The poor people living in the outskirts of Buenos Aires joined the middle class
and between the 16th and 19th of December many shops and supermarkets were looted.
On the night of December 19th 2001, an spontaneous “cacerolazo” gathered tens of
thousands of people, who marched to the Congress and the Pink House (National
Executive Power headquarters). The alliance of the government with the middle class
had finally broken.
On December 20th 2001, president De la Rúa resigned due to his inability to
manage the social and economic situation. Having an important part of the economy in
informality –over 40% of the workers in 2001 were not legally hired (MECON 2001)–,
the decline of ARS circulating in the economy increased the acceptance of quasicurrencies. Moreover, the government had promoted the bankarisation of commercial
transactions, making mandatory for deposits or transfers of big amounts of money to
be done via commercial banks. This reduced even further the physical money in
circulation.
“Corralito” can be translated as small corral or pen and alludes to the impossibility of withdrawing
money deposited in banks.
11
15
The following default and asymmetric pesification of deposits12 added to the highly
unstable economic environment, and it was not until 2003 that the national
government started studying how to homogenize the monetary front and take quasicurrencies away from circulation. They were discharged and exchanged into BOGAR,
a bond that the Central Government issued to rescue quasi-currencies and restructure
provinces’ debt. By the beginning of 2004, the quasi-currencies were not circulating
anymore, and just a few bills were kept by investors or collectors.
The difference in the market price of these currencies was remarkable. The
Cecacor, from Corrientes province, had a market value of 52% over its nominal price in
May 2003 (Argañaraz 2003). The Patacón had a market value of 99%. When they were
rescued by the Central government, their prices increased and the price difference
between them was therefore reduced. When they were exchanged into BOGAR, the
Cecacor and the Federales (from Entre Rios province) suffered a 25% discount over
their nominal prices, followed by the Bocanfor from Formosa (15%) and the Quebracho
from Chaco (13%). Others, as Patacón and the bonds from Catamarca did not
experience any discount and were accepted at their nominal value (AGN 2007).
Comparing the rescuing discounts to the numbers depicted in Table 3, we see no
relation between the rescuing price of currencies and their amount per inhabitant or
per unit of GPP. Moreover, there is no relation either with the level of debt of each
province, which is an indicator of the capacity of a province to pay for its debts. Just as
an example, Buenos Aires and Entre Ríos had a similar level of public debt to GPP,
but they are the ones that suffered the largest and smallest discounts. The rescuing
value of the quasi-currencies, therefore, was not influenced by provinces’ ability to pay,
but by other factors.
Very few previous studies have tried to assess the impact of quasi-currencies in
economic variables. They have mostly suffered the limitations of the difficulties to
measure quasi-currencies impact on regional economies in Argentina, as the monetary
base of the country increased exponentially in 2002 due to the exit from the currency
board system (Frenkel and Rapetti 2007). Therefore, its original purpose (to increase
the monetary base to pay public salaries and increase activity) got diluted due to the
12
Deposits in US$ were automatically converted to ARS.
16
oversupply of official money. Nevertheless, a study by Argañaraz et al. (2003) has to be
highlighted, as it measured the impact that the quasi-currencies had by analyzing and
comparing two neighboring provinces with similar characteristics, one of which
printed its own currency, while the other did not do it. They compared Santa Fe and
Córdoba provinces, and found that “no positive effects can be inferred on the activity
level as a consequence of the emission of quasi-currencies” (Argañaraz et al 2003, p.22).
Despite the importance of this study, no further studies have measured the impact
of local monies in productive activity, employment, consumption or tax revenue. The
originality of this study lays in the research of the effects of quasi-currencies in the
employment performance of the main urban conglomerate of each province. By
comparing their results to the ones of the provinces who did not issue quasi-currencies
we will see if they had an effect on employment; by comparing two similar provinces
(one that issued a quasi-currency, the other not), we will be able to comprehend the
particularities of those effects.
In 2002 the new government re-instated export taxes which – as it is expressly
mentioned in the Argentine Constitution – go straight to the Central Government and
is not distributed among provinces. This tax (which ranged from 5 to 35% of the
exported value), together with the increase of the price of the products that Argentina
exports, provided a lot of money to the Central Government, but not to provinces.
4. Comparing the employment evolution in provinces
In the 2001-2003 period, Argentina saw its biggest decline in production and
employment in its history. Peaking at 21.5% in May 2002, the unemployment rate had
been increasing since the beginning of the century and has declined ever since,
reaching 6.9% in December 2012. With the increase in unemployment came the
increase of the poverty rate, which reached 50% in 2002, an unprecedented figure for a
country that up to the 1980s had less than 5% of its population living in poverty.
17
This study divides the 23 provinces of Argentina between those that printed
quasi-currencies and those that did not
13
. Even though provinces issued an
heterogeneous amount of quasi-currencies (depending on the their financial needs), we
believe that we can see some aspects of the consequences of those currencies by
analyzing how some macroeconomic indexes changed between 2001 and 2003.
Comparing the two groups will allow us to determine whether quasi-currencies had an
impact on those indexes.
Table 4 shows the figures for employment in provinces. Five indicators were
chosen to analyze the employment conditions of provinces:
 Activity rate: The total percentage of the population between 14 and 65 years
who have a job or are looking for one (the “labor force”);
 Employment: The percentage of the total population that has a full time job;
 Unemployment: Percentage of the labor force that does not have a job and is
actively looking for one;
 Demanding underemployment: The percentage of the working force that works
less than 35 hours a week and is actively looking for a job, or when the worker is overskilled for the job, or when the salary the worker receives is not related to the
responsibilities that the post implies;
 Undemanding underemployment: The same conditions as the above, but when
the worker is not looking for another job, or when he thinks – for any reason – that the
current situation fills his needs.
In May 2001, figures for the five variables measured show a difference of less
than one point between those provinces that issued quasi-currencies and those that
did not: the activity rate differed by 0.8 percentage points (pp), employment by 0.9,
unemployment by 0.5, demanding underemployment by 0.2 and undemanding
underemployment by 0.7 pp. With these numbers, we can say that there was certain
balance in the employment characteristics of both groups.
13
Buenos Aires province is excluded, as its economy is by far the largest of the country and it is much influenced by the
performance of Buenos Aires City, a federal district that has no “province” status. Río Negro is also excluded as it only
had one “urban-rural” conglomerate and its statistics were not fully gathered by the INDEC.
18
In May 2003, when the National Congress decided to rescue the quasi-currencies
and the economy was growing once again, every indicator differed by more than one
point: the activity rate differed by 1.9 pp, employment by 1.1, unemployment by 1.6,
demanding underemployment by 2.4 and undemanding underemployment by 1.6 pp.
By analyzing the chosen variables we see that:

The activity rate decreased for the first group (quasi-currencies issuing
provinces – or IP –) and increased slightly for the second one (NIP). No general
conclusion can be derived from the analysis of this indicator.

Regarding employment rate, both increased a little bit. When the actual
number of jobs in those economies is analyzed, we can conclude that the provinces that
printed quasi-currencies in fact created jobs at a similar pace than their counterparts.

The decrease of the activity rate in the first group (-0.5 pp) led to a decrease of
the unemployment rate (-1.8 pp). This happened partly because the unemployed
stopped looking for a job. As a consequence, even though those economies did not add
many jobs, the unemployment rate decreases drastically. In the NIP group the activity
rate and unemployment increased (+0.4 and +0.3 pp).

The most important changes can be appreciated in the underemployment rates,
as in the first group both indicators increased around 20% from 2001 to 2003 (10.1 vs.
12.2 for demanding and 5 vs. 6.2 for undemanding underemployment), while in the
other group they remained stable.
The increase in the supply of money in provinces did not lead to the creation of
more jobs, as the provinces that used only the official currency show similar changes
in the number of jobs. This result contrasts with the results of many studies (Davidson
1998, Atesoglu 1999, among others) which –based on Keynes’ (1936) theory– found
that there is a positive relation between money supply, income and employment. They
propose that an increase in the amount of money will spur the demand of goods and
services14. These studies were designed for countries, but a same logic could be applied
to provinces: if the supply of money increases in a context of excess capacity,
consumers will use the money, stimulating the demand of goods and services,
positively influencing the output and the employment of workers by local companies.
See Hemming et al. (2002) for a detailed explanation on the economic theories relating monetary
expansion and output.
14
19
In the case of Argentina, the provinces that printed their own currency –therefore
increasing the supply of money–, did not see an increase in the amount of jobs created.
Reasons for this may vary from jurisdiction to jurisdiction, but the issuance of quasicurrencies contributed to the uncertainty about the economic and financial conditions
of the provinces, reducing the level of confidence in the recovery, hindering
investments and therefore reducing the hiring plans of the businesses of those
provinces.
Table 4: Change in selected employment indicators in provinces, 2001-2003
(in %)
Province
Employment
Unemployment
Demanding
underemployment
Nondemanding
underemployment
Activity
Employment
Unemployment
Demanding
underemployment
Nondemanding
underemployment
May 2003
Activity
Other provinces
Provinces that issued quasicurrencies
May 2001
Catamarca
Córdoba
Corrientes
Chaco
Chubut
Entre Ríos
Formosa
La Rioja
Mendoza
Misiones
San Juan
Tierra d Fuego
Tucumán
39.8
40.5
35.9
33.5
40.7
37.8
32
38.1
40.7
35
40.1
42.3
40.2
30.9
35.4
30
29.2
35.1
32.5
28
32.8
36.4
33.6
34.2
37.8
32.8
22.3
12.7
16.6
13
14
14.1
12.6
13.9
10.7
4.1
14.8
10.6
18.4
12.5
9
8.5
8.4
7.2
8.8
9
10.3
10.2
14.5
13.1
7.6
13.1
3
6.3
4.2
7.1
2.8
5.4
2.7
7.9
5.1
4.6
5.3
3.5
5.7
40.2
42.9
41.6
40.8
37.2
34
41.2
40.2
38.1
33.4
39.1
40.8
35
34.4
37.4
34.9
34.1
32.1
31
36.6
34.6
34.5
30.9
33.8
35.5
30.8
14.6
12.9
16.2
16.5
13.7
8.6
11.2
13.9
9.3
7.6
13.6
13.1
12.1
8.7
9.9
20.2
10.2
14.5
10.9
7.6
11
12.3
17.7
18.3
12.4
16.1
4
7.1
7.5
5.6
3.1
9.5
2.5
8.1
7.1
5.3
3.9
6.3
4.9
Average
38.9 33.4 14.1
10.1
5
38.4
33.6
12.3
12.2
6.1
Jujuy
La Pampa
Neuquén
Salta
San Luis
Santa Cruz
Santa Fe
Santiago del E.
35
42.8
43
38.5
40.6
39.9
42.8
35
18.6
13.3
15.2
17.1
10.1
2.1
20.2
12.2
11.4
9.4
11
12.7
14.2
4.1
9.2
7
4
2.4
3.2
6.3
6.4
3.1
5.3
4.1
40.6
43.9
42.4
38.6
38.4
38.5
43.3
36.7
32.3
38.4
36.9
32.4
32.4
37.5
35.6
32
20.5
12.7
13.1
16.1
15.6
2.7
17.9
12.9
16.5
7.9
9.8
12.7
12.7
3
9.1
7
4.1
2.7
3.3
9.3
6
1
6.5
2.9
Average
39.7 34.3 13.6
9.9
4.3
40.3
34.7
13.9
9.8
4.5
28.5
37.1
36.5
31.9
36.5
39
34.2
30.7
Source: Author, based on INDEC (2001 and 2003).
The changes in demanding underemployment are interesting, as it increased in 11
out of the 13 provinces that issued quasi-currencies, while just one out of the other
20
group of 8 increased. For non-demanding underemployment, the first group had 9
provinces in which it increased and 4 where it did not. For the other group, in 5
provinces it increased, while 3 did not. Reasons for the different evolution of the
underemployment indicators may be found in the economic conditions of that era: not
being able to secure the ARS needed to pay salaries, employers decided to hire people
on a part-time basis as the amount of people accepting those working conditions
increased. Many of the workers under the underemployed category are not legally
hired according to the INDEC, and are more vulnerable to being paid in quasicurrencies. It can be argued that quasi-currencies contributed to the enlargement of
the part-time working force and the illegal job market.
4.1 Comparing employment evolution in similar provinces
In order to understand more deeply the changes in employment conditions in the
context of the issuance of quasi-currencies, comparisons should be made between a
specific province that issued them and one that did not. We should be careful when
picking provinces to compare, as their conditions may differ greatly, therefore making
it impossible to compare. For example, those oil producing provinces suffered the 20012003 crisis in a very different way than those which produced crops, than those that
are industrial centers or than those that have an economy too much dependent on
transfers from the national government. We choose “similar” provinces based on these
conditions: industrial production, agricultural output, oil production, population,
geographical location, dependence on transfers from national government, public
employment, and national tax system. We identified three pairs of “similar” provinces:
Córdoba-Santa Fe, Chaco-Santiago del Estero, San Juan-San Luis. The first of each
set printed its own currency, the other did not.
The performance of provinces like Córdoba and Santa Fe has already been
compared in Argañaraz et al. (2003) study15. Both, being the second and third most
populated provinces in the country, have similar economies, with a very important
primary sector and an industrial base that supplies both the country and the Mercosur
Interestingly, this study found that Córdoba has shown a higher level of inflation, a lower collection of
the gross income tax, a steeper decline of industrial production and a predominantly lower retail sector
sales level, compared to the numbers shown by Santa Fe.
15
21
with their products. They both receive a similar amount of money from the
distribution of nationally collected taxes. Córdoba issued its own currency (the Lecor),
while Santa Fe did not. We concentrate in the period starting after the devaluation
(the beginning of 2002) and March 2003, when quasi-currencies were fully in
circulation and used in everyday life.
Graph 3: Employment rate change in Santa Fe and Córdoba, February 2002
– February 2003
(In %)
Source: Author, based on Ministry of Labor
Córdoba had been more heavily hit by the economic conditions that affected the
country since 1999. Having an important automobile industry, it suffered heavily due
to the appreciation of the ARS, the depreciation of Brazil’s Real (its main competitor)
and the dwindling internal market. Soon after the collapse of the currency board, both
provinces show a similar performances regarding employment creation. Santa Fe
could manage to create 2000 jobs between the first quarters of 2002 and 2003, while
Córdoba created 3000. Graph 3 shows that their paths to job creation are similar and
that there is no clear difference between them. We cannot see any impact of the quasicurrencies in Córdoba’s labor market.
Comparing other similar provinces, we obtain analogous performances in job
creation. Chaco and Santiago del Estero, two landlocked provinces with little
industrial tradition, high dependence on transfers from the central government (86
22
and 88% of their total revenue came from Buenos Aires in 2010), and a very important
role of the public sector in the economy, were compared. The first issued a currency
(Quebracho), while the second did not. Both have very low figures for their activity
rate, and saw an increase in this indicator between May 2001 and 2003: Chaco saw a
21% increase, while in Santiago it was of 5%. Increases in the activity rate can be seen
in this period in the poorer provinces (Formosa, Jujuy, La Rioja), as people who
depended on national pensions or other subsidies were forced to enter the job market
in order to get more income, as those subsidies dwindled due to the crisis and lost
purchasing power due to the devaluation of the ARS. From the beginning of 2001 to
the beginning of 2003, Chaco lost over 10,000 private jobs, or 22% of its total private
sector jobs. In the same period, Santiago del Estero lost almost 4,000, or 13% of total
private jobs. This difference suggests that, to say the least, quasi-currencies did not
have a positive impact in job creation.
Other comparable provinces are San Juan (which issued the Huarpes) and San
Luis (did not issue a currency). These provinces have the “industrial promotion area”16
status and they enjoy several discounts on national taxes. Numbers show a decline of
the unemployment rate in San Juan (-1.2 pp) and an increase in San Luis (+5.5 pp)
and the opposite can be seen in the demanding underemployment category: the
numbers increased more than 5 pp in San Juan and declined slightly in San Luis. The
attention must be focused on the actual job creation of both provinces: San Juan
destroyed more full time jobs than San Luis between 2001 and 2003 (3,500 versus
2,600, or 18% and 6.5% of all private sector jobs), replacing them for part-time jobs. A
serious deterioration of the formal, full-time job market can be appreciated in San
Juan, where companies decided to hire part-time workers. It is difficult to establish a
relation between quasi-currencies and these changes in the labor market, but as it is
argued above, in the jurisdictions where quasi-currencies were issued, workers used to
receive their salaries in two or more currencies, in cash, and this may have promoted
the creation of part-time jobs and the destruction of full-time posts.
16
The industrial promotion laws were enacted between 1979 and 1983 and established a series of fiscal
benefits for manufacturing companies settled in the provinces of La Rioja, San Juan, San Luis and Catamarca,
including special deductions in earnings and value added taxes.
23
In brief, similar provinces show similar performances (in the case of Santa Fe and
Córdoba) or show that the provinces that issued their own currency have a higher rate
of destruction of private jobs (in the case of Chaco and San Juan). No clear conclusion
can be drawn from this analysis. Some may argue that the issuance of quasicurrencies may impact specific sectors, as the service and industrial sectors would
supposedly benefit from more people buying goods due to the oversupply of money.
That is the analysis that we do in the following section.
4.2 Sector analysis
Two sectors were selected to see if the issuance of quasi-currencies had any effect
on specific segments of the regional economies: the service and industrial sectors. The
first one was chosen as quasi-currencies would allegedly boost consumption, therefore
increasing the sales of the retail sector, leading to the creation of new jobs. To measure
the “service sector”, we consider jobs in the retail and wholesale trade industry. The
second one, as the increased demand would positively affect the output of industrial
products, and some of them are produced locally –especially those produced by local
small and medium companies–17. We chose the jobs variable, as it is the one with the
most complete sectoral data by province. We analyze the period from the first quarter
of 2002 to the first quarter of 2003, when quasi-currencies were in full use.
Analyzing the figures for the manufacturing and service sectors for “similar”
provinces, we see a similar performance, albeit small variations. In the manufacturing
sector, Santa Fe increased its workforce in 2,500 people from 2002 to 2003; while
Córdoba just added 100 manufacturing jobs (the country saw an increase of 12,000
manufacturing workers in the same period). In services, Santa Fe lost 800 jobs, while
Córdoba added 1,000 (the country lost 16,000 service sector jobs in the period); most of
them were in the retail sector. Interestingly, both provinces added over one thousand
jobs in the primary sector, pointing at the importance that the development of
agriculture – with the impulse of higher commodity prices (especially soybeans) –
played in the recovery (Richardson 2009).
17
The devaluation of the ARS made imports plunge over 40% in 2002. The participation of products made
in Argentina increased drastically.
24
Variation of
service
sector jobs
1.3
0.1
9.5
1.2
11.6
1.2
-9
5.7
5.4
6.8
-0.4
-15.2
6.6
-15.8
1.8
-5.4
0
-2
-3.8
-3.3
-16.9
-0.5
3.3
-5.2
-4.5
-4.1
Average
1.91
National average
Jujuy
La Pampa
Neuquén
Salta
San Luis
Santa Cruz
Santa Fe
Santiago del E.
Variation of
service
sector jobs
Variation of
industrial
jobs
Catamarca
Córdoba
Corrientes
Chaco
Chubut
Entre Ríos
Formosa
La Rioja
Mendoza
Misiones
San Juan
Tierra d Fuego
Tucumán
Province
Variation of
industrial
jobs
Province
15.2
10.4
10.5
0.8
2.4
3.5
3.1
-4.3
-6.3
-5.2
3.8
-6.5
-4.1
0
-1.5
-1.5
Other provinces
Provinces with quasi-currencies
Table 5: Variation of employment in the industrial and service sectors, 1ST quarter,
2002 to 2003.
-4.34 Average
5.20 -2.66
Industry: +1.5 ; Services: -2.7*
*This numbers are for the whole country, including Buenos Aires province and Buenos Aires city, whose numbers have
an important incidence.
Source: Author, based on Ministry of Labor.
These results may raise the discussion on whether the existence of an increased
supply of currency may have helped Córdoba’s small businesses or if this increase may
have been the result of other factors. Table 5 shows that out of the other 12 provinces
that issued quasi-currencies, just one saw an increase in the amount of jobs in the
service sector (Misiones). One posted no changes and the other 10 posted a decline. In
average, IP saw a decrease in jobs in the retail and wholesale sectors of 4.34%, while
NIP show a decrease of 2.6%. The whole country saw a decrease of 2.7 for the same
period. Therefore, we can say that not only IP performance was worse than that of NIP,
but also to that one of the whole country, including Buenos Aires province and city.
For the industrial sector, IP saw a 1.91% increase in the amount of jobs, while
NIP show an increase of 5.2%. In average, the industrial sector of a NIP added jobs a
173% faster than in IP. In this case, both sectors show a better performance than the
whole country. The weight of the metropolitan area and its bad performance (+1% for
Buenos Aires province, -2.1% for the city) had an important impact on national
numbers.
25
Therefore, it can be concluded that the circulation of quasi-currencies did not
affect the employment situation neither of the industrial sector nor of the service
sector.
5. Conclusions
Recent buzz on the possibility of allowing European countries to reissue their
former currencies in order to have more independence in deciding their monetary
policy raised the discussion on whether this would have a positive effect on economic
activity. There are very limited cases of jurisdictions with more than one legal tender,
and the case of Argentina in 2001–2003 is interesting, for regional governments
decided to issue their own currency while still using the national one.
Previous studies have shown that quasi-currencies did not have an effect on the
economic activity of provinces. This study has shown that they did not affect job
creation as well. What is more, we see that when two similar provinces are compared,
issuing provinces destroyed more jobs than their non-issuing counterpart.
In the case of Argentina, this lack of growth in economic activity of provinces
forced the national government to rescue quasi-currencies, issuing a bond at a low
interest rate. This benefitted provinces that issued quasi-currencies, as they did not
fully pay for the monies that they had autonomously printed. The apparently
successful exit from a monetary system with many currencies into one with just one
legal tender brings perverse arguments for those who support the issuance of regional
currencies: In the case of Argentina it was the national government the one who at
last had to pay the burden of provinces’ decisions.
Of course, the logic would be different if national governments (instead of
provinces) are the ones that issue their own monies in a monetary union. Nevertheless,
the case of Argentina presents a negative experience and raises the question on – in
the case that quasi-currencies are issued and fail once again to increase activity and
create jobs– who is going to pay for their rescue.
26
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09_OPP_2006_ENDEUDAMIENTO.pdf (Last Access: 5/2013)
Richardson, N. P. (2009), “Export-oriented populism: commodities and coalitions in Argentina”, Studies in
Comparative International Development, Vol.44, No. 3, pp. 228-55.
Tomassi, M. (2002), “Federalism in Argentina and the reforms of the 1990s”, Paper prepared for the
Center for Research on Economic Development and Policy Reform project on Federalism in a Global
Environment. http://faculty.udesa.edu.ar/tommasi/cedi/dts/dt69.pdf (Last Access: 12/2012).
Vulovic, V. (2011), “Sub-national borrowing, is it really a danger?”, Economics Dissertations, Paper 77.
28
Bocade (La Rioja)
Bocade (Tucumán)
Bocanfor (Formosa)
Cecacor (Corrientes)
29
Federal (Entre Ríos)
Huarpes (San Juan)
Bono Ley 4748 (Catamarca)
Petrom (Mendoza)
30
Lecor (Córdoba)
Quebracho (Chaco)
Patacón (Buenos Aires)
Patacón (Backside). It reads “Law Nº 12774. Article 14: The issuance of Patacón 2 is approved and one or
many series can be issued. They mature in a maximum of five years since their issuance and will be
rescued at a 135% of their nominal value. They will be issued under the guidance of articles 742, 744
and 745 of Commerce Code. The Ministry of Economy resolves: To approve the issuance of Patacon 2,
that mature on November 13th, 2006”
31
Facultad de Arquitectura
y Urbanismo
Arquitectura
Forma y
Comunicación 1A
Ficha Nº 2
Cátedra:
Arq. Eduardo García Lettieri
Lunes a viernes de 9 a 21 h.
Torre Universitaria, Zabala 1837, primer nivel inferior.
C1426DQG - CABA
Teléfono: 4788-5400, internos 5002 y 2122.
Email: [email protected]
www.ub.edu.ar
Arq. Eduardo García Lettieri
Arq. Carlos Arrieta
Arq. Claudio Alberto Delbene
Arq. Raquel Arce
Arq. Roxana Di Risio
Arq. Juan Duarte