BOO CHANCO: ARGENTINA FINDS LIFE AFTER DEBT
CERRITOS, CALIFORNIA, January 3, 2005 (STAR) DEMAND AND SUPPLY By Boo Chanco ó A Happy New Year to all of you. We have a brand new year and bad old problems. No oneís going to hold his breath with the expectation that government is ready to be creative in approaching the crisis at hand. Yet, there is at least one example that bears greater examination in our search for new ways of addressing a typical third world situation like the one we have.
In my search for something positive to start the year right, I came across a New York Times article on what has happened in Argentina. This article was published just before Christmas and I thought it offered hope for a country like ours, but only if our officials are as gutsy and creative as the current administration in Argentina.
Argentina, as we all know, has the dubious distinction of having the largest ever default in history of more than $100 billion. It has defied the IMF and its international creditors, but instead of seeing all hell break loose as predicted by the international financial community, it has recovered quite well. The economy has grown by eight percent over the last two years, exports boomed, the currency has been stable, unemployment has eased and investors are gradually returning.
According to the New York Times, the good news about Argentinaís economy happened "at least in part by ignoring and even defying economic and political orthodoxy." The Peronist government, the Times reports, chose to stimulate internal consumption first and told creditors to get in line with everyone else.
I am sure we do not have a one to one comparison of our situation with Argentina, but it should still be useful to see why the approach used by Argentinaís President Nestor Kirchner appears to have worked. The threat often used by international creditors to dry up foreign investment inflows didnít matter much to Argentina. As soon as confidence in the ability of its government to govern was established, investments started flowing in, not from the West but from "non traditional" sources.
Latin American investors, used to turbulent conditions, came in. So did the Chinese and South Korea. But the bulk of investments, the New York Times said, "came from Argentines who are beginning to spend their money at home, either bringing their savings back from abroad or from under their mattresses." More money is coming to Argentina now than is leaving it.
This development supports the view that developing countries should perhaps start learning to look at each other for things like investments. The West does not have a monopoly of investment funds. In fact, we may be surprised to learn that even among Filipinos, there is significant capital available if only there is confidence in our governmentís ability to govern. Even a Russian cell phone company came to Manila not too long ago to seek Pinoy capital.
Interestingly, more than two million jobs have been created, according to the Times, bringing down the unemployment rate from 20 percent to about 13 percent. Those living below the poverty line have gone down by 20 percent from 53.4 percent.
High commodity prices helped Argentina. It also helped that the government of Mr. Kirchner imposed a kind of governance that brought fiscal discipline described by an IMF representative to the Times as unprecedented by Argentine standards. They now have a primary surplus that has increased steadily at both central and provincial levels. That, the IMF representative said, has been the main anchor on the economic side.
The investment climate has become attractive because it was possible to earn a decent return on investment. They have nevertheless delivered a healthy current account surplus so as to reduce the immediate importance of foreign investment, an Argentine economist observed.
What I can see from the Argentine experience is the importance of leadership. They were lucky to have a President who had what was needed to address the horrifying economic problems they had three years ago. We might have an economist as our Great Leader but she has thus far failed to show the kind of leadership needed in crisis.
Then again, it is the new year and a time for renewed hope. Maybe, just maybe, she will realize the folly of populism and get down to the business at hand. We shouldnít have to rely on the IMF and the credit rating agencies to make sure our officials do what is right. Argentina told the IMF and their international creditors to go fly a kite while they rebuilt the countryís economy. After all, no creditor can collect from a country whose economy is not growing as fast as it should to cover the needs of its people.
Maybe there is a lesson there too for the banks. If they allowed us a window to spend the little that we have for education and infrastructure, maybe we can have a better opportunity to pay our debts without courting a revolution where everyone is a loser.
Anyway, I just thought Argentinaís experience is inspiring. No need to cry for Argentina anymore. We can save our tears for ourselves.
The more I read and see reports on the Indian Ocean tsunami that claimed almost a hundred thousand lives, the more it becomes clear that it is a failure of international cooperation. Scientists in the Pacific Ocean side who were able to predict the tsunami were not able to give a timely warning because they didnít know who to call in the countries around the Indian Ocean.
I canít help wondering why they didnít just call up CNN, BBC and the rest of international media instead. International media has the ability to spread the warning within seconds. Take the holiday seekers in Phuket, for instance. I am sure their hotel rooms have television sets that are tuned to CNN and BBC. Hotel management can also issue a general alert so that they can all take precaution.
People were sunbathing in the beach when the first tide of death came on shore in Phuket. The grandson of the Thai King was out in the sea jet skiing. Two hours may seem a short time between the earthquake and the first tidal wave but if the information got to CNN and BBC soon enough, that is more than enough time to get people prepared.
Then again, Indonesia and Thailand were warned by the Pacific Ocean scientists because they are members of the scientific consortium. But the warning was coursed through government channels. That was a fatal flaw in the procedure. Emergencies like this should discard protocol. Get the information out through international media. Thatís the most efficient way of handling information of this vital nature. Forget the bureaucrats.
Hopefully, everyone learned a lesson here somehow a very expensive and heart rending lesson.
Reported by: Sol Jose Vanzi
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