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by: Amaris Mae
Amaris Mae
GPA 3.75
Latin American Policy
Cynthia McClintock

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About this Document

A guest lecturer came to speak on March 19th, 2015 about Argentina and the economic crisis. Lecture notes are in black and text notes are in blue!
Latin American Policy
Cynthia McClintock
Class Notes
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This 6 page Class Notes was uploaded by Amaris Mae on Tuesday March 24, 2015. The Class Notes belongs to PSC 2484 at George Washington University taught by Cynthia McClintock in Winter2015. Since its upload, it has received 109 views. For similar materials see Latin American Policy in International Studies at George Washington University.

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Date Created: 03/24/15
Argentina Guest Lecture 1980s Begin to turn towards democracy 1983 Democratic elections resulted in the leader of the radical party Raul Alfonsin Center left party Challenges in the 19805 Economic Recession Hscalde c High debt ln ann Unemployment 9 Political unrest 9 Capital ight 9 Lack of con dence in investors Military Military expenditures Prosecuted military of cers form the military government For violations of human rights 9 Attempted coups 0 But Alfonsin survived this 1989 Alfonsin was defeated by a governor Carlos Saul Menem Peaceful transition of power Menem Combatted in ation Pegging the peso to the dollar Privatizing Argentine state owned companies were now privatized Major accomplishment Transport mining energy Economy grew by 35 in 4 years Reelect in 1995 Corruption threatened High international interest rate High external debt Less foreign investment Fernando de la RL Ja Perception of corruption High in ation Still lots of debt Dramatic transfer of power 4 presidents in a very short time period Until Duhalde Who took power for 2 years Duhalde called for elections early in 2003 Argentina elected Nestor Kirchner Kirchner Regime Was another governor of Santa Cruz Nestor had power until 2007 His wife was elected in 2007 And reelected in 2011 The guest lecture hopes this quotKirchner regimequot ends in December Kirchner stopped the economic chaos of the previous years Generated a consumption driven growth for several years At least for 10 years 8 9 growth a year Signi cant growth Populist economic policy To generate demand and consumption Price subsidies Tank subsidies Price control On basic food items Poverty deduction policies Cash transfer to families Increased wages and pensions Poverty was reduced from 40 to less than 10 5055 of the Argentine electorate bene ted from these policies Felt included And politically empowered How did they maintain this growth How was this nanced Cash from a windfall of commodity prices Agricultural produce ex soybeans sold to China0 Internal borrowing Spending Controls on the dollar exchange rate To reduce imports And to limit hard currency buying Negotiated the debt Higher taxes on income Higher tariffs on imports They nationalized industry Nationalized private pensions The exact opposite as what was successful for Menem Consequences of this Policy Reduced productivity and supply of goods and services In ation came back Although arti cially the government has controlled the statistics institute Reduced income Impacted capacity to consume Meager savings in the population Scant foreign investment Reduced foreign exchange research Hurt the government ability to invest in infrastructure and importation of parts and technology Closed market International isolation Reducedinnova on Economic slowdown and contraction Since 2012 investment production has declined JHDJHI Economic growth of 12 a year Commodity prices have plunged Reduced demand from China Hurts subsidies and investment even more Politics of the Kirchners This argentine regime populist regime An imperfect pseudodemocracy Economic policy that generates an electoral majority Not by much but they do win Electoral majority allows the regime to control the legislative and judicial Change the constitution And regulations on elections So they can get reelected Progressive banners Social equity justice Economic development Sometimes socialism De nitely antiimperialism Elected democratically but do not govern democratically Tight and pervasive control of the state Limited respect of the rule of law Rampant corruption Weak or nonexistent separation of power Hyper presidents Parliaments are acquiescent Are only rubber stamps Restriction of individual liberties human rights and freedom of the press Opposition parties are fragmented and weak judges are progovernment not like Venezuela which imprisons its opposition leaders Venezuela Madero has gained special power Could even cancel elections Opposition party is trying to set election dates But the government is not cooperating Argentina and China Argentina bene ted a lot in the early 2000 from growth in China China bought a lot of soybean and grain exports China was going to build railroads Lots of problems Rails do not t the trains Trains aren39t as fast as they were supposed to go Nisman Case Prosecutor found dead in his bathroom Possibly Kirchner Was arguing that the government covered up an Iranian bombing ofjewish center Because they needed a trade deal with Iran 1994 Iranians could also be responsible it is rumored Iranians have also obtained nuclear technology from Argentina Through Venezuela In the 905 Kirchner wanted a strong relationship with Iran There was also an Israeli embassy bombing 1992 The two attacks were two of the rst terrorist attacks in Latin America City Bank Argentina wanted to negotiate the debt So bond holders were to be paid 6070 of the bonds original value But 10 of the bond holders didn39t want to lose money quotVulturesquot Argentina deposited the money to pay the people who accepted the negotiated amount in the City Bank But then the other 10 of bondholders said that Argentina could not pay some bond holders and not the rest 9 Judge in New York agreed and said that City Bank could not pay back the bond holders until Argentina reached an agreement with everyone Brazil has a strategic alliance with Argentina Unclear who bene ts more from that Fragmentation even in UNUSUR Should have been working with Venezuela But no one can get the dialogue going They need to have Madero agree to it The government has to at least liberate the political opposition 9 Stuck UNUSUR is not more effective than the OAS in the Venezuelan issue Real threats are money laundering Reasons why US should get involved The human rights reasons are not a security threat 9 LE Venezuela is not a security threat to the US 0 But that was the only way to get sanctions on Venezuela Which Colombia rejected Because of UNUSUR Pegged for Failure Argentina39s Curse Worst political crisis since the 9705 Five president in two weeks Published in 2002 Looted supermarkets Urban riots US responded with indifference Donald president a tot he time Unemployment is at record levels Nearing 20 Fiscal de cit rose to over 9 billion 14 billion in foreign debt Which has to be paid from government revenues 1990s Resident Carlos Saul Menem Balanced budget With new taxes spending cuts and massive privatization Opened the economy to international trade Matched its currency with the dollar Credibility pan staked on the availability y of foreign nancing and hence on the government39s credibility with nancial markets 0 Priority in nical stabilization over competitiveness Linked the peso and the dollar not because of signi cant trade between the two which would have been smarter The credibility plan offered promise of future bene ts form the world39s only quotremaining super powerquot It also represented a wall between politicians and currency Strong economic growth Means it can39t react well to shock Praise of Wall Street Argentina39s choice resembled the gold standard Financial shocks from Mexico East Asia Russia and Brazil Recession in 1998 Blame free markets for the crisis Prior to everything was privatized Even the post of ce Why President scal de cits Disappointing export performance World nancial volatility Argentina was also the rst casualty of a new US reluctance to offer rescue packages to countries Foreign debt also came from a multibillion dollar rescuer package organized by the IMF The government didn39t spend the good years paying down debt Was swayed by the cries of the Peronism government and those in the provinces who held sway with the Peronism Also wild patronage employed by Menem in his campaign between 1997 and 1999 Argentines evade taxes at much higher rates Compliance was about 50 in the 1990s ln ation was still high in the 905 spite the convertibility plan So Argentina was expensive but imports cheap because a peso equaled a dollar Argentina couldn39t export The government sought to reduce costs for exporters But the prices of key exports resources were falling American interest rate rise corresponded to the Mexican crisis 19941995 And the upturn of interest rates corresponded wither deepening of the Argentine crisis US can be blamed for lack of consistency with responding to the crisis The fund were to promote adjustment reward good reformers avoid moral hazard But they had played nice what Menem too long Moral hazard was then a focus with de la Rita Argentina collapsed mainly because of nancially biased integration into a volatile world nical market Which surged with the country s progress Argentina39s Debut Saga No Movement Most investors took their defaulted debt and exchanged it for securities in 2005 and 2010 But others took the cheap defaulted debt in order to chase payment of Fu principal plus interest In New York court where the laws were written NML capital Hedgefund Led this approach Aid that Argentina was banned from paying its exchange bondholder unless it coughed up the 13 billion interest they wanted International rami cation of default are also expected to be slight Argentina has been locked out of the capital markets for 13 years Argentina Didn39t Fall on Its Own Wall Street39s complicity in all events Investment bankers inlays and bond traders served their own interests Foreigners poured funds into Argentina with reckless abandonment Making a crash more likely Mid 20001 debt swap Gave Argentina more time to pay its debt but jacked up the interest cost


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