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Argentina in the Aftermath of International Financial Crisis: Commodity Booms and the New State Capitalism

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:

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Argentina in the Aftermath of International Financial Crisis: Commodity Booms and the New State Capitalism

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  1. 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

  2. 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

  3. Regional growth over the century GDP per capita, LAC and Asia relative to US

  4. Commodity Prices Against 1970s Base • OcaOc Ocampo, Jose Antonio, 2009, Latin American and the global financial crisis, Cambridge Journal of Economics, 33.

  5. Argentine Growth 3rd Highest in Region, 2000-2008

  6. Commodity boom helped improve external balance sheet positions throughout the region and created space for counter-cyclical macro-economic policy

  7. 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)

  8. Transmission mechanism of the crisis is through trade not finance • Data on correlation of export decline and GDP decline

  9. 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

  10. Argentina: No credit to crunch • Data on credit

  11. 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

  12. Argentina: the “bad” left or an example of the new state capitalism? • Kirschnerismo involves increased state ownership & social spending Central Government Expenditures (% of GDP)

  13. Room for countercyclical policy and state intervention is shrinking Fiscal and current account balances (% of GDP)

  14. Argentine fiscal situation in comparative perspective

  15. Growth prospects for remain strong Real GDP Growth 2009-2011 (OECD)

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