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					        Role of IMF in Argentina




University of Economics in Bratislava, Slovakia
Peter Latika, Branislav Maleš, Peter Šesták
                                              18.9.2009
                 ARGENTINA
                           GDP composition
•   Total area: 2,780,400 sq km
•   Population: 40,913,584
                               agriculture;
•   Capital: Buenos Aires        9,90%
•   GDP in PPP: $573.9 billion (2008 est.)
•   Currency: Peso
                                             industry;
               services;                      32,70%
                57,40%
   Degrees of currency independence:

For example:
 Common currency ( like EURO )

 Foreign currency for use in the domestic
  economy
 Use own currency, but fix it to a foreign currency
          Argentina's currency board

   In 1991, Argentina adopted a currency board
    based on the dollar
   Government must have the dollars needed to
    cover government´s liabilities
   Holding dollar reserves on a one-to-one basis
    against pesos promised to convert pesos to
    dollars on demand
Exchange rate Peso/USD 1995 - 2008
Argentina´s Experience With CURRENCY
               BOARD
   Export plus import as a percent of GDP grew
    well over 7% annually during the first half of the
    1990s
   Federal expenditures fell from more than 27% of
    GDP at the end of the 1980s to about 20%
    during the 1990s
   the federal budget was balanced during the first
    half of the 1990s (even a surplus in 1994).
   Inflation fell from nearly 100% at the beginning
    of the 1990s to nearly zero for the rest of the
    decade
Inflation in Argentina, the green curve
But... Unemployment remained high
Argentinean export was less competitive
       Current Account Balance 1995 - 2008
         The crisis in the end of 1990s

   The federal government cut transfers to regional
    governments, forcing them to downsize
    spendings
   Lower private spending—which further disrupted
    tax revenues
   High interest rates - federal debt service
    payments grew rapidly (by 2000, interest costs
    alone were about 17% of national government
    spending)
         The crisis in the end of 1990s

   The combination of slow economic growth and
    high government borrowing rates forced the
    government to make restrictive fiscal policy.
   Growth slowed down and unemployment rose…
                Inevitable default

   The whole system collapsed in Christmas 2001
    as Argentina defaulted on its dollar debts,
    abandoned the currency board, refused to
    convert pesos to dollars, and floated the
    currency
   Exchange rate was no longer tied to the dollar’s
    performance
   Fiscal policy depended no longer to the quantity
    of dollars
   Domestic interest rate came under control of
    Argentinean central bank
      IMF allocations of SDR in Argentina

      Stand-By and Extended Arrangements (In millions of SDRs)

               Board        Expiration or   Amount
                                                        Amount Drawn
               Approval     Cancellation    Agreed
Stand-By
Arrangement
               29.7.1991     30.3.1992        780           439

Extended
Arrangement
               31.3.1992     30.3.1996        4020          4020

Stand-By
Arrangement
               12.4.1996     11.1.1998        720           613

Extended
Arrangement
               4.2.1998      10.3.2000        2080           0

Stand-By
Arrangement
               10.3.2000     23.1.2003       16973          9756
              The road to recovery
   President Néstor Kirchner
     Abandonment of the currency board
     Plan Jefes y Jefas de Hogar (2002)
         2 million jobs
         Multiplier effect more than 2.5% of GDP

         provided needed services and new public infrastructure,
          improve social unrest
         Export rose, Real GDP growth 9%, inflation 9%, poverty
          rate 23%
        Gross domestic product 1995 - 2008




        2002     2003   2004   2005   2006   2007   2008
GDP %   - 10,9   8,8    9,0    9,2    8,5    8,7    6,8
       Main factors for recovery
   Efficient and creative management
   serious technical evaluation
   transparency
   strong political will
   flexible currency
Thank you for your
    attention!

				
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posted:6/28/2012
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