Argentina s Post Crisis Economic Reform - 925 Words

Argentina’s Post-Crisis Economic Reform I. Summary a. Following a steep currency devaluation and the largest sovereign debt default in history, Argentina entered a deep recession with high unemployment and social upheaval i. Brought to power new gov’t ii. With it, a shift away from market-oriented policies toward greater gov’t control of the economy in the pursuit of social equity b. Policies reflect priority for financial independence, social equity, and what may be considered a commitment to populist macroeconomic policies c. What stands out to many is the policy choices Argentina’s government has made i. Trade protection ii. Managed exchange rates iii. Capital controls d. New emphasis on social equity placed strain on budget, but†¦show more content†¦Eliminated the currency board that had directed economic policy since 1991, limited bank and foreign currency transactions c. Social policy became the new priority d. Due to a lack of revenue, taxes were placed on exports and financial transactions i. Meant to be temporary taxes but became permanent with time e. Recovery took hold and Argentina was able to succeed with these expansionist policies due to strong demand for Argentine commodities i. Enjoyed nine years of solid growth ii. From 2003-2011, the value of Argentina’s soy exports to China (the primary exports) increased by 241% iii. Similar trends applied for other 2 major exports, soy oil and crude petroleum iv. â€Å"Prosperity based on good harvests and strong overseas markets obscured a dangerous vulnerability† v. (Colin M. MacLachlan, Argentina: What Went Wrong (Westport: Praeger, 2006), p. 36. f. Expansive fiscal and monetary policies reinforced growth and debt repudiation allowed for fiscal resources in the name of social equity g. Foreign economic policies were designed to carry out domestic political agenda, due in large part to the disdain of overseas financial institutions and meddling in domestic affairs, which some viewed as one of the main precursors to the deterioration in 2001. IV. The New Economic Framework a. 2003 to 2011: economy grew robustly with the exception of the 2008 global downturn i. Gov’t ran a fiscal surplus, reflective of