Lo que Argentina le fue a contar al FMI

October 09, 2010

IMFC Statement by José De Gregorio, President, Banco Central de Chile
On behalf of: Argentina, Bolivia, Chile, Peru, Paraguay, Uruguay.

Including this year, Argentina has had eight consecutive years of growth, a sequence which
has not been witnessed since 1964. Between 2003 and 2008 average annual economic growth
was about 8.4 percent. As a result of experiencing the worst global economic and financial
crisis in recent history, GDP growth was close to 1 percent in 2009 and growth projections
for 2010 are between 8.5 and 9.2 percent based on the annualized growth for the first
semester. Industry has grown 9.3 percent while the building sector is growing at 8.5 percent.
Exports increased by 11 percent in March and 20 percent in April at a time when imports in
the first five months of 2010 expanded by 43 percent. While the impact of the global crisis
seems to have been left behind, clear positive economic prospects lie ahead.
This is not the result of pure chance. The macroeconomic policy framework conceived since
2003 continues to aim at building a solid path for growth based on job creation and social
inclusion as its fundamental pillars. Argentina now recognizes that progressive redistribution
of income improves national welfare and creates a foundation for growth based on its own
resources, a welcomed development after having followed the recommendations and policies
that led to the 2001 social collapse.
From then on, the sound macroeconomic policy framework that has been implemented has
drastically modified the macroeconomic scheme. It is now based on a socially inclusive
development strategy capable of generating its own internal financing resources through
continuous external and fiscal surpluses. Responsible fiscal and monetary policies, a wellmanaged
policy of foreign reserve accumulation, coupled with an unprecedented disindebtedness
process based on the current account surpluses and the boost of growth as a
pillar of national repayment capacity, have laid solid foundations for sustainable growth. The
economy has been protected in this way from the historical pattern of stop and go, a pattern
which became even more acute during the era of globalization, as it depended on increased
flows of volatile external financing which, once again, proved to be unsustainable. Domestic
consumption and investment were stimulated and when the latest international financial crisis
took place it was possible to organize a countercyclical policy that not only safeguarded
domestic demand, but also sustained employment and protected the most vulnerable sectors
of the population.
At the end of 2009, the gross public debt, excluding the 2005 restructuring holdouts, was 49
percent of GDP (net of intra public sector debt it was 44.1 percent) while international
reserves in September 2010 surpassed US$ 50.5 billion. The dis-indebtedness process
reduced the debt-to-GDP ratio to international reserves and to exports. The substantial
reserve increase reinforced the government’s decision on dis-indebtedness in two ways. On
the one hand, the government created the Argentine Debt Reduction Fund aimed to meet
public debt maturing this year and, on the other hand, it successfully completed a debtrestructuring
process of the debt that had not entered in the exchange offer put forward in
2005, which increased the acceptance of the debt swap of the debt in default from 76.1
percent in 2005 to more than 91 percent at present. The success of this process will help turn
the page of a gloomy phase in recent history (the 2001 default declared by the government of
that time). In the last three decades, Argentina underwent debt-restructuring operations
subject to severe fiscal constraints, requiring continuous refinancing efforts, each time at a
higher rate, which only masked the fact that critical fiscal sustainability problems had come
to an end. Today, the country is committed to continuing to foster GDP to prove its capacity
and willingness to meet its obligations. Hence, this dis-indebtedness policy will further
strength Argentina’s policy framework and enhance its potential growth.
In 2003, after the 2001-2002 crisis, there was a slow process of recovery of past levels of
deposits and of the confidence of the private sector in the local financial system. Now the
financial system is sound, solvent, liquid, well-regulated and capitalized and strongly
supports the real sector of the economy. In March 2010, non-performing loans were at a
historic low of 3.3 percent of total loans, profits on assets reached 2.3 percent higher than the
90’s average, and operative efficiency increased in line with financial revenues. Increasing
lending to the private sector is one of the primary concerns of the Argentine government,
particularly because they are important to continue fostering industrial production and the
growth of small and medium-sized enterprises (SMEs). To this end, the government has
implemented a plan which aims to provide convenient credit lines of up to US$ 2 billion on
aggregate, which is open to the whole financial system. It is focused on financing projects
that increase private production capacity and exports, as well as the net creation of
employment.
Investment grew significantly during the period 2003-2008. While GDP grew at an average
rate of 8.4 percent, Gross Fixed Domestic Investment grew 19.3 percent on average. Both
private and public investment contributed to this increase, while public investment grew by
31.2 percent, covering the social and economic infrastructure which was not attended to
during the 90’s, the private sector increased by 17.9 percent on average. In 2009, public
investment played a central role in the stimulus package with a 46 percent increase. To
support investments in the provinces, the Federal Solidarity Fund (Fondo Federal Solidario)
was established through the collection of 30 percent on exports of soy complex, which was
oriented to building schools, houses, drinking water processing plants, and drinking water
networks.
Other programs were oriented to support production and consumption, such as the Productive
Recovery Program (Programa de Recuperación Productiva (REPRO)) and the Local
Development and Social Economy Plan “Manos a la Obra”. The purpose of the REPRO is to
help distressed enterprises by providing direct support to different industries in an effort to
maintain employment levels and preserve jobs, while the “Manos a la Obra” Plan has
provided credit and technical assistance to thousands of small and micro enterprises,
cooperatives, and local development centers. All in all, this global financial crisis has brought
to the fore something Argentina has already learnt throughout its history: the crucial role
played by public intervention—the role of the State—in developing a sustained and inclusive
economic cycle. Increasing employment is the best policy for building continuous social
cohesion. Accordingly, the government has launched a number of programs to boost credit
for investment and consumption, combined with incentives and financing policies for SMEs,
in addition to working capital in general.
In the context of this global crisis, and as part of a key component of Argentina’s social
safety net, the “internal debt” that the government is committed to fulfill, the Universal Child
Allowance Program was launched, and other social programs, as well as the social security
system, were strengthened. These actions are key steps for fostering a more inclusive society
and enhancing distributional fairness as part of the policies aimed at ensuring that the results
of growth spillover to the whole population. The impact of the Universal Child Allowance
Program on poverty levels, health and education is unprecedented. It benefits workers in the
informal sector, the unemployed, and workers in domestic service who have children
younger than 18 years of age, and provides coverage for 3.5 million vulnerable children. The
government has budgeted 1 percent of GDP under this program. Similarly, the social security
system has also increased its coverage to 6.5 million beneficiaries and the government has
consistently advocated a policy of pension mobility to ensure pensions purchasing power.
Social spending on non-contributory pensions has also been increased. The Food Security
Plan has improved the subsistence capacity of 1,683,651 families and expenditure on
education has risen to 6 percent of GDP, in line with the Education Law. President Fernández
de Kirchner recently launched a program to distribute laptops (approximately 3 million) to
secondary school students, which will also have a major beneficial impact on public
education. Finally, health spending has also been raised, successfully preventing the H1N1
flu this winter and dengue fever.
To summarize, it can be said that Argentina, in the last eight years, has consummated an
unprecedented structural transformation. In 2010, the country celebrates its Bicentennial
anniversary as a free republic. It can proudly celebrate that economic independence has been
consolidated like never before in recent history. Argentina has overcome the external crisis
and strengthened its policy framework built on a broad-based productive and socially
inclusive development, promoting regional integration, a solid banking system, and a
substantial debt reduction supported by substantial international reserves. Growth has been
sustainable and social indicators have improved. The unforgettable lessons from the crisis in
2001-2002 have been learnt. If, at that time, the country had followed the advice that
International Financial Institutions traditionally gave (which favored unsustainable fiscal
consolidation, foreign exchange rate appreciation, relying on conditioned multilateral
financing, and in flows from market financing fueled by excessively liquid international
markets, rather than self insurance mechanisms, and market-oriented “structural reforms”,
i.e., pension fund privatization and selling national oil and strategic sector companies), the
results would have been totally different and today the country could well have been in the
middle of a crisis. On the contrary, Argentina is well placed to address the challenges of the
post-crisis world based on the structural transformation that the economy has carried out
since 2003. The government has put the country back on track and has restored its potential
for economic, human, and social development. Enhancing and continuing with these
realizations will be the main objective in the future.

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