Download Argentina in the Aftermath of International Financial Crisis

Argentina in the Aftermath of International
Financial Crisis: Commodity Booms and the
New State Capitalism
Sylvia Maxfield
Simmons College
Prepared for a Workshop to Precede the Montreal International
Studies Association Meeting, March 15, 2011
Generalizing Across the Region:
• commodity boom improves external and fiscal
balance sheets
• provides room for counter-cyclical policy
• transmission mechanism of the crisis is trade not
finance
You Can’t Have a Credit Crunch if there is No Credit
Argentina’s unique situation post-2001 crisis
Argentina’s New State Capitalism
Regional growth over the century
GDP per capita, LAC and Asia relative to US
Gold
Stand.
Interwar US
Postwar
Boom
Alliance ISI
for
Progress
Lost
Decade
Wash.
Cons.
Wash.
Diss.
US &
LAC on
par
LAC &
Asian
Tigers
outpace
US
LAC lags;
Asian
Tigers
outpace
US
LAC
slides,
Asian
Tigers
accelerat
e
Cont.
2002
LAC
starts to
outpace
US
LAC &
Asian
Tigers lag
US, with
incipient
recovery
Slight
LAC
increase,
Asian
Tigers
take off
Commodity Prices Against 1970s Base
• OcaOc
Ocampo, Jose Antonio, 2009, Latin American and the global financial crisis,
Cambridge Journal of Economics, 33.
Argentine Growth 3rd Highest in
Region, 2000-2008
Commodity boom helped improve external balance
sheet positions throughout the region and created
space for counter-cyclical macro-economic policy
Argentina’s macro-economic policy
response
• External and government balance sheets
aided by pension fund nationalization in Fall
2008
• Central bank relaxes monetary targeting rules
in 2010 (Fernandez fires Martin Redrado when
he refuses to do this – confirmation of his
successor required a public advertising
campaign to win sufficient congressional
support)
Transmission mechanism of the crisis
is through trade not finance
• Data on correlation of export decline and GDP
decline
No banking crises in 2008-2009
• Banking crises in 1980-85 (Argentina, Brazil,
Chile, Colombia, Ecuador, Mexico, Peru,
Uruguay)
• Banking crises 1995-2000 (Argentina, Brazil,
Colombia, Ecuador, Honduras, Jamaica,
Nicaragua, Paraguay, Peru)
• Supervision & regulatory reform; flexible
exchange rates (depreciation the norm);
central bank independence and price stability
Argentina: No credit to crunch
• Data on credit
Impact of crisis on unemployment
much lower than in prior recessions
Changes in unemployment rate (ILO)
Prior recessions: Argentina=1998-2002; Brazil=2001-2002; Chile=1998-1999;
Colombia=1998-1999; Mexico=1994-1995
Argentina: the “bad” left or an
example of the new state capitalism?
• Kirschnerismo involves increased state ownership &
social spending
Central Government Expenditures (% of GDP)
Room for countercyclical policy and
state intervention is shrinking
Fiscal and current account balances (% of GDP)
Argentine fiscal situation in
comparative perspective
Growth prospects for remain strong
Real GDP Growth 2009-2011 (OECD)