[Marxism] Argentina Elects Cristina Fernandez de Kirchner

[Walter Lippmann]

LOS ANGELES TIMES
Argentina Elects Cristina Fernandez de Kirchner: It's the Economy
By Mark Weisbrot
October 30, 2007

http://www.latimes.com/news/printedition/opinion/la-oe-weisbrot30oct30,1,816708.story?coll=la-news-comment&ctrack=1&cset=true

Cristina Fernandez de Kirchner on Sunday became the first woman
elected to the presidency of Argentina. Her victory is not difficult
to explain. Her political party, under President Nestor Kirchner (her
husband), led a dramatic economic turnaround that made Argentina the
fastest-growing economy in the Western Hemisphere over the last 5 1/2
years.

More than 11 million people, or 28% of the population, were pulled
above the poverty line as Argentina's economy grew by more than 50%.
Its 8.2% annual economic growth was more than twice the average for
Latin America. Unemployment has dropped from 21.5% to 8.5%, and real
(inflation-adjusted) wages have grown by more than 40%.

Fernandez's victory was thus predictable and relatively easy. But the
economic recovery that drove it was not so simple, and the people who
led it deserve more credit than they have generally received. The
Kirchners and their allies had to take on not only the conventional
wisdom of the economics profession but also powerful international
institutions such as the International Monetary Fund. Argentina's
success may have some important implications for other developing
countries.

When Argentina defaulted on a record $100 billion of debt at the end
of 2001, almost all of the experts predicted that this would be the
beginning of a long period of punishment. International financial
markets and foreign investors would shun the nation, they said, and
this would be very damaging. The government had better reach an
agreement with the IMF and follow its advice. And it had better play
nice with the defaulted foreign creditors.

The experts could hardly have been more wrong. The economy contracted
for just three months after the default and then began to grow. It
hasn't stopped since.

Contrary to a common belief, Argentina's expansion was not based on
exports or high commodity prices: Only about 13% of the growth during
the expansion was because of exports.

What did Argentina do right? Most important, the government got its
basic macroeconomic policies right. After years of seeing its
domestic economy crippled by an overvalued currency that made imports
artificially cheap, the Argentine central bank targeted a stable and
competitive real exchange rate.

In other words, the authorities made sure that their currency didn't
rise too high and didn't swing wildly as a result of movements in
financial markets. (Here in the U.S., where we have shed more than 3
million manufacturing jobs since 2001 -- the bulk of them lost
because of an overvalued dollar -- we might take note.) They also
kept interest rates low and made growth, rather than the lowest
possible inflation, the top priority.

These policies are mostly a no-no among central bankers and
economists, and Argentina had a few showdowns with the IMF, including
a brief temporary default to the fund in September 2003. But the fund
backed down, and most of the defaulted international creditors ended
up settling for 35 cents on the dollar in 2005.

Of course, Argentina hasn't gotten a lot of foreign direct investment
in the last five years, and it cannot directly borrow in
international bond markets. But these handicaps -- which if you read
the business press should spell doom -- turned out not to be all that
important. Nor are they permanent. In time, foreign investors and
lenders will find their way back to a fast-growing economy.

The lesson? Just as "all politics are local," so too are the most
important economic policies for most countries. Getting basic
macroeconomic policies right for your own economy is a lot more
important than pleasing international financial markets. That goes
double for failed international financial institutions like the IMF.
The fund not only oversaw the train wreck that collapsed Argentina's
economy from 1998 to 2002, it opposed the major policies that drove
Argentina's remarkable recovery.

The fact that Argentina's break with the IMF and its policies was key
to the country's economic success also has implications for other
countries. Over the last quarter of a century, the fund and its
allied institutions -- run from Washington -- have presided over
Latin America's worst long-term growth performance in more than a
century. As a result, most governments in the region have moved away
from the IMF. Its loan portfolio in the region has shrunk from $49
billion just four years ago to less than $1 billion today. But it
still holds sway in many poor countries.

Argentina's new government will face challenges, the kind brought
about by a fast-growing economy: keeping inflation in check and
assuring adequate supplies of energy. But these problems are
manageable. Of course, there are analysts who argue otherwise, but
their forecasts over the last five years have not been very accurate.

[Mark Weisbrot is co-director of the Center for Economic and Policy
Research in Washington.

Center for Economic and Policy Research, 1611 Connecticut Ave, NW,
Suite 400, Washington, DC 20009 -- Phone: (202) 293-5380, Fax: (202)
588-1356


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Walter Lippmann
Havana, Cuba
"Un paraíso bajo el bloqueo"
http://groups.yahoo.com/group/CubaNews/
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