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Liberalism, Crises, and Structural Adjustment In Argentina

Liberalism, Crises, and Structural Adjustment In Argentina. 3/17/2010l. How much is a dollar worth?. Argentina: 1983 – 1994 Democracy and Neoliberalism. Washington Consensus ( Williamson, 1990 ) 1. Reduce fiscal deficits 2. Realign public expenditure priorities

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Liberalism, Crises, and Structural Adjustment In Argentina

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  1. Liberalism, Crises, and Structural AdjustmentIn Argentina 3/17/2010l

  2. How much is a dollar worth?

  3. Argentina: 1983 – 1994Democracy and Neoliberalism Washington Consensus (Williamson, 1990) 1. Reduce fiscal deficits 2. Realign public expenditure priorities 3. Encourage broad but moderate taxation 4. Let the market determine interest rates 5. Achieve a competitive, export-oriented exchange rate IMF in Argentina 1. IMF helps set overall fiscal targets: balanced budgets or surplus 2. Limited, targeted spending 3. Revenue-neutral (or –enhancing) tax reform • Eliminates 21 “distortionary” federal taxes • Reduce payroll taxes • Broadens VAT, corporate, and personal income tax bases • Increase tax compliance – computerization, audits,etc. 5. Control inflation: Currency peg

  4. Argentina: 1983 – 1994Democracy and Neoliberalism Washington Consensus (Williamson, 1990) 6. Implement free trade policies 7. Encourage FDI 8. Privatize enterprises 9. Deregulate industry 10. Stabilize and enforce property rights Some Names to Remember • Alfonsín, President 1983-1989 • Menem, President 1989-1999 • Cavallo, Economy Minister 1991-1996 IMF in Argentina 7. Financial sector reform to encourage investment • Banking supervision, transparency, and autonomy 8. Privatization where possible, esp. banking and public service corporations; replace the state-run Pay-As-You-Go system with private pension funds 9. Labor market reform to improve flexibility • decentralize collective bargaining agreements • liberalize conditions for temporary employment • allow more flexible working hours.

  5. Argentina 1995 – 1999Argentina in the Global Economy • Global financial crises • 1995: Mexican economic collapse • 1997: East Asian financial crisis • 1999: Brazilian peso devaluation • "The income gap between the poorest 10 per cent and the richest 10 per cent grew 57 per cent between 1990 and 1999." (Carrera and Cotarelo, 2003) • Throughout the 1990s new forms of social organization begin to form centered around the former middle class.

  6. Argentina 2000-2003The Crisis Years • 2000-2001, the de la Rua years: Renegotiation with the IMF • IMF agrees to 3 year $7.2 billion loan, with conditionality • IMF negotiates a $40 billion loan package; in December 2001 the IMF withholds payments and Argentina defaults • 2002-2003, the Duhalde years: Moving away from the IMF • Argentina lets its currency float; declines 70% against the dollar • Debts above $100,000 are converted to pesos • Checking (above $10,000) and savings ($3,000) accounts are "guaranteed" but frozen; small accounts are given the option to convert to non-frozen peso accounts. Later all accounts would be converted to pesos at an artificial rate of 1d = 1.4p. "But the crisis brought the state back in—as a critical protagonist and as the only actor with the extraordinary capacity to write new rules of the game and recover the command instruments of political economy." (Grugel and Riggirozzi, 2007)

  7. 2001-2003: Popular Response Spontaneous Insurrection • Marches, Meetings, and Public demonstrations • Unemployed workers movements, neighborhood assemblies, barter networks, etc. • Ollas Populares: food kitchens that often turned into political meetings • Escrache: gathering in front of a private house in order to denounce the inhabitant/s • “Cacerolazos,” Food Riots • Banging pots and pans together in the streets to emphasize that the people are hungry • Usually women; usually middle class, usually urban • Riots • Looting of supermarkets and shops • Attacks on public buildings, banks, and residences of political leaders • Street struggles against the police • Strikes • High levels of unionization • 9 strikes in the 1990s, 8 in 2000-2000 • Roadblocks • To seize/defend and occupy a position in order to make specific demands • Picketing, esp. by unemployed workers demanding greater social support – food and jobs

  8. Argentina 2003 – 2007“giving the Fund the kiss off” Nestor Kirchner (President, 2003 – 2007) • 2004: Arg suspends its agreement with the IMF; brokers new deal with fewer conditions • 2005: Debt restructuring cuts 70% of privately held debt (v. IMF) • 2006: 3 Jan - Arg repays the remaining $9.81 billion in IMF debt • 2006 Economic problems return • Inflation grows • GDP growth slows • Current account balance declines

  9. Argentina: 2008 – todayThe new global economic decline Cristina Fernández de Kirchner (President 2007 – present) • 2008 US housing crisis • 2009 Argentina begins a new debt swap program

  10. Questions • What is the proper role of the state in the economy? • Is "money" ever national? • Chasteen: "Neoliberals had few new ideas. Everything they recommended had already been tried in Latin America before 1930. So where did they get their impressive momentum?" • What is the relationship between neoliberal structural adjustment and political regime type? • Is the IMF - or a similar major international lending institution - a necessary feature in today's global economy?

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