“The recovery of the Argentine economy is surprising,” said the Nobel Prize in Economics, Joseph Stiglitz, in his last opinion column on the Project Syndicate portal. The economist stated that the recomposition of the Argentine domestic market is the result of State policies to strengthen the real economy. “Given the mess he inherited, the government of Argentine President Alberto Fernández at the end of 2019 seems to have achieved an economic miracle,” he considered.
According to Stiglitz, the Monetary Fund would make a mistake if it asks Argentina to advance in a new adjustment program to halt the recovery of recent months. “The IMF has gained new respect for effective responses to global crises, from the pandemic and climate change to inequality and debt. If this course were reversed with antiquated austerity requirements to Argentina, the consequences for the Fund itself would be serious”Said the economist.
“The Fernández government has indicated that it is open to any program that does not undermine economic recovery and increase poverty,” recalled Stiglitz, who is a mentor to the Minister of Economy, Martín Guzmán.
The disaster left by Mauricio Macri
The Columbia University professor shows once once more his support for the local strategy of not accepting an adjustment program that damages production and employment. “While everyone should know by now that austerity is counterproductive, some influential member states of the IMF may still defend it “, Stiglitz considered.
The Nobel mentioned, however, that it is necessary to reach a renegotiation with the IMF following the imbalances generated in the previous administration. “Given the huge loan size to be refinanced, an agreement that simply extends the repayment term from 4.5 to ten years is not enough to alleviate concerns regarding Argentina’s debt. ”
“The IMF now recognizes that its program did not achieve the economic objectives it had set. The Fund’s ex post evaluation attributes much of the blame to the Macri government. Cleaning up the financial mess created in the previous government will take years. The next big challenge is to reach an agreement with the IMF on the Macri-era debt, “he added.
The numbers that impressed Stiglitz
“From the third quarter of 2020 to the third quarter of 2021, the GDP growth reached 11.9 percent, and now it is estimated to have been 10 percent by 2021, almost double what was forecast for the United States, while employment and investment have recovered to levels higher than when Fernández took office, “he summarized Stiglitz, by listing some of the key data on the rebuilding of the domestic market.
The economist continued that “The country’s public finances have also improved, even implementing a countercyclical recovery policy, given by strong economic growth, higher and progressive tax rates on wealth and corporate income and the debt restructuring of 2020 ”.
“There has also been a significant export growth, not only in terms of value but also in volume, following the implementation of development policies designed to promote growth in the tradable sector ”, he added. “These include reforms to credit policies; a reduction to zero of export duties for value-added sectors, together with higher rates for primary products and investments in public infrastructure and research and development ”.
Criticism of the markets
Stiglitz stated that “despite this important advance in the real economy, the financial media have chosen to focus entirely on issues such as country risk and the exchange rate gap. Those problems are not surprising. The financial markets are looking at the mountain of debt taken with the IMF that is regarding to expire “, He said.
The economist considered that the crisis in Argentina was not an exclusive result of the effect of the pandemic but of previous financial imbalances. “Let us bear in mind that the Argentina was already in recession when the pandemic hit, largely due to the economic mismanagement of the previous president Macri ”, he pointed out.
“Everyone had already seen that movie. A right-wing government that favored business had earned the trust of international financial markets. But the policies of that administration turned out to be more ideological than pragmatic and they favored the rich and not ordinary citizens “, he indicated.
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