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1/ @CIPPEC recently released an excellent report concerning the causes and potential solutions to the current crisis affecting #Argentina. The takeaway, “Hay que exportar para crecer.”
https://www.cippec.org/publicacion/los-desafios-macroeconomicos-tras-el-acuerdo-con-el-fmi/ …
2/ they note that 15 of the 16 of the recessions the country experienced since 1945 have been caused by a deficit in the current account. And these deficits are associated with budget deficits that increase the demand for dollars. Or the ‘los déficits gemelos’
3/ the #Kirchner era policies led to an overvalued peso after ‘10 to “aumentar el poder adquisitivo de los salarios privados por encima del crecimiento de la productividad laboral.” Or, raising demand without increases in productivity leading to inflation.
4/ the overvalued exchange rate led to Argentina’s exports to be more expensive & imports cheap. According to the authors, “La pérdida de USD 25 mil millones [de exportaciones] explica el total del deterioro de cuenta corriente experimentado entre 2011 y 2017”
5/ #CFK also oversaw an unprecedented increase in government spending that was “muy por encima de los máximos históricos.” This led to a yawning budget deficit that @mauriciomacrio inherited from CFK. Or the “la pesada herencia”
6/ the current crisis must be seen as the continuation of a decade long crisis created by populist economic policies caused by “la política de apreciar y luego mantener el tipo de cambio real bajo, la persistente expansión del gasto público y el colapso de las exportaciones”
7/ the way out is to correct for the twin deficits. The government needs to “estimular las actividades transables para aumentar las exportaciones y la producción que compite con importaciones.” Indeed, export promotion and import substitution is key to any program.
8/ the suggestions to do this are to promote a competitive exchange rate, maintain high foreign exchange reserves, incentivize exports, reduce the budget deficit, and reduce overseas tourism.
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