Argentine Economy

[Nibu Raphael]

Why is still cheap in Argentina and in Brazil 2 to 1 these days? How come Brazil can not be as cheap as Argentina these days?

[Moore]

I read in the Clarin economy section a history of the Argentine economy. I already knew about some of it, but not in such detail. Between 1970 and 1992 (the beginning of the US$ convertibility era, which was apparantly the only relatively stable fiscal era in recent history) there were about 5 currency changes and 13 zeros were lopped of the national currency - about 3 zeros every 5 years or so. Thats about 300% average inflation per year. It was about 5000% in 1989, I believe Alfonsin's last year. That 5000% number (along with the largest sovereign debt default in world history) is in the record books - I think only interwar Germany may have had a higher rate until Hitler took charge. Have the fundamentals here changed - I think not. My forecast for August 15, 2010: 1 dollar = 200,000.00 pesos. 1/2 hour sexo convencional at Santa Fe 1707 - 8,000,000.00 pesos (30% cheaper) That is if the currency is still called "pesos".

[HappyGoLucky]

Economy on the mend?

Final del juego.

Published by The SAN JOSE MERCURY NEWS, August 11, 2005

http://www.mercurynews.com/mld/mercu...d/12355837.htm

RECOVERY FROM '01 COLLAPSE, BUT NOT PROSPERITY.

By Jack Chang.

Knight Ridder.

BUENOS AIRES, Argentina - According to economists, Argentina finally recovered this year from the economic collapse of 2001 that sent the currency plunging and pitched the country into social turmoil.

Unemployment rates have dropped to precollapse levels, shoppers have returned to glitzy Calle Florida in Buenos Aires' city center, and the nation is running big budget surpluses.

So, given all the good news, why does 55-year-old slaughterhouse worker Rodolfo Gómez still earn less than a subsistence-level income, about $300 a month?

A member of a cooperative that took over the slaughterhouse after its owners went bankrupt in 2001, Gómez takes pride in what he and his 500 fellow workers have accomplished.

They took a business that failed in the thick of the economic turmoil and restored it to relative economic health, he said, a feat aided by the growth of the overall economy.

Yet they haven't restored it to prosperity.

"At least people have work instead of sitting in their houses,'' Gómez said, as cow carcasses on hooks passed by. 'And at least my wages have risen, although it's not much.''

It isn't just workers casting doubts on the recovery.

So are foreign investors whose views of Argentina are colored by the country's default on government debt in 2001 -- still the biggest by any nation.

"I tell my clients this is a high-risk investment,'' said Maria Velez de Berliner, president of Alexandria, Va.-based Latin Trade Solutions. 'I will not be surprised if a collapse happens again.''

On paper, the big-picture numbers show an impressive comeback after a traumatic economic blow that impoverished millions within weeks.

Memories of the turmoil still haunt the country: the default; the unpegging of the Argentine peso to the U. S. Dollar, which reduced the peso to a quarter of its former value; and the bloody riots that consumed the country.

After free-falling by some 20 percent during the crisis, Argentina's gross domestic product has climbed back to virtually the same peak it hit in 1998, growing by nearly 9 percent in 2003 and 2004, according to an International Monetary Fund review of the country released last month.

The country's unemployment rate dropped to an estimated 12 percent this year after hitting a 2003 high of 20.8 percent, the report said. The poverty rate similarly fell from a 2002 high of 58 percent to about 35 percent last year.

Much of the economic growth can be traced to China's growing consumption of Argentine agricultural exports such as wheat and soy, which best weathered the crisis, Velez said.

The big economic question now confronting Argentina is where the country goes after two years of stellar growth.

Several Argentine economists predicted total GDP growth would stabilize at about 3 to 4 percent for the next few years.

'When you came from the bottom, you're going to have a great return,'' Velez said. 'Whether you can keep growth at 6, 7, 8 percent, that's highly questionable.''

Although the macroeconomics look good, new jobs aren't paying nearly the same real wages as precollapse positions and the recovery isn't helping enough pocketbooks, said Buenos Aires economist Juan Luis Bour.

For example, per capita GDP has risen but much more slowly than the total GDP. It reached $4,100 in 2004 after falling 65 percent from $7,900 in 2000 to $2,800 in 2002, IMF figures show.

The continued weakness of the Argentine peso, which still hovers at about a third of its precollapse value, also has suppressed buying power, Bour said.

'From the point of view of the people, they don't feel like they have the same money they had seven or eight years ago because they have lower incomes,'' he said. 'There is still a lot of uncertainty.''

Nonetheless, Bour said he believes that the country has emerged from the turmoil. The trick now, he said, is to make the argument to the rest of the world.

'The total GDP has recovered,'' he said. 'The government is now trying to convince everybody that the 2001 crisis is completely over, and it needs to do that through sound fiscal policy.''

That means doing in part what the government has done -- running large trade and budget surpluses and keeping inflation in check.

The administration of President Nestor Kirchner and Finance Minister Roberto Lavagna has also tried to maintain a cheap peso to spur exports.

Ironically, many of those policies come straight from the IMF cookbook despite what's been a largely antagonistic relationship between the country and the fund.

In its review of the country, the IMF board of directors wrote in June, 'Prudent macroeconomic policies in 2003-04 have provided an anchor for the recovery of confidence.'' Directors 'commended the authorities for their steadfast implementation of fiscal policy.''

[Jackson]

Thread Starter.