Friday, July 01, 2005
Argentina. Past, Present, and Future.
By: Jennifer Sobotka, The Enterprise Research Institute, 1996
After several futile stabilization attempts in the 1980s, Argentina finally implemented one of the most successful reform programs in Latin America. Inflation dropped dramatically, growth increased, and investors both foreign and domestic returned in droves. The Mexico crisis, however, had an enormous negative impact on the economy; since the beginning of 1995, growth has been negative, unemployment has soared and the budget turned sharply from surplus to deficit. Positive signs that growth might be resuming only reappeared in the second quarter of 1996.
This paper first looks at the early economic history of Argentina. We believe that the history and early patterns of a country’s political and economic development reveal much about those institutions on which sustained future progress depend. The paper then examines the reasons behind Argentina’s initial success, and describes the subsequent collapse that began with the Great Depression and continued into the latter part of the 20th century. Finally, it describes the results of the Convertibility Plan that broke the inflation cycle and analyzes some of the current issues that determine the outlook for Argentina’s future. The paper identifies policies and variables that are important indicators of the government’s resolve and discusses in some detail aspects of the economy that we believe are crucial for the continuing success of the reform program.
After several futile stabilization attempts in the 1980s, Argentina finally implemented one of the most successful reform programs in Latin America. Inflation dropped dramatically, growth increased, and investors both foreign and domestic returned in droves. The Mexico crisis, however, had an enormous negative impact on the economy; since the beginning of 1995, growth has been negative, unemployment has soared and the budget turned sharply from surplus to deficit. Positive signs that growth might be resuming only reappeared in the second quarter of 1996.
This paper first looks at the early economic history of Argentina. We believe that the history and early patterns of a country’s political and economic development reveal much about those institutions on which sustained future progress depend. The paper then examines the reasons behind Argentina’s initial success, and describes the subsequent collapse that began with the Great Depression and continued into the latter part of the 20th century. Finally, it describes the results of the Convertibility Plan that broke the inflation cycle and analyzes some of the current issues that determine the outlook for Argentina’s future. The paper identifies policies and variables that are important indicators of the government’s resolve and discusses in some detail aspects of the economy that we believe are crucial for the continuing success of the reform program.