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Volume 51 / Social Sciences

ECONOMICS: ARGENTINA


MIGUEL A. KIGUEL, Senior Economist, The World Bank

THE WORKS ANNOTATED BELOW date from 1982-89, although most are from the more recent years. These works deal primarily with: 1) inflation and stabilization (especially the Austral Plan); 2) strategies for growth; 3) fiscal incentives and trade policy; 4) regional development programs; 5) financial deregulation and crisis; and 6) foreign debt.

The evolution of the Austral Plan and its eventual failure continued to be topical and were the focus of many studies, e.g., Blejer and Liviatan (item bi 90013896), Frenkel and Fanelli (item bi 90013804), Kiguel (item bi 90013907), and Taylor (item bi 90013873). Much attention was devoted to the heterodox approach of the Austral Plan. Based on fiscal adjustment accompanied by wage and price controls, this approach offered an appealing change from the traditional orthodox alternative, which relies chiefly on tight monetary and fiscal policies. Moreover, the implementation of a similar approach in other countries (e.g., Israel, Brazil, Mexico) stimulated interest in the topic. It is curious to note that the literature reflects the evolution of the Austral Plan itself, the over-enthusiasm of earlier works gradually cooling into the more balanced recent assessments. The latter are not necessarily critical of the heterodox approach, but point instead to the fact that balancing the budget - the principal failure of the Austral Plan and of the follow-up heterodox programs - is the key element in any successful stabilization attempt.

Another group of works examines an old question that remains one of the biggest puzzles in Argentine economic history: why has a country as rich in human and natural resources as Argentina failed to achieve sustainable growth? This issue is the focus of the 1987 World Bank Country Study (item bi 89013949), and studies by Conesa (item bi 88002654) and Moyano Llerena (item bi 88002661). In addition, many works on subjects such as industrial and export promotion (items bi 88002869 and bi 89000662) and tax and other incentives aimed at specific regions of the country (items bi 89000667, bi 89013927, and bi 89000457) are closely related to this topic. In fact, the rampant, increasing intervention of the public sector in the allocation of resources, the large swings in incentive policies, and the lack of concern in maintaining macroeconomic stability are the main reasons for the frustrating growth record of the 1970s and 1980s.

There is also a large body of literature on financial sector policies (items bi 88002663, bi 90013763, and bi 88001708) which evaluates the financial liberalization attempt implemented during the Martínez de Hoz era and the subsequent crisis in the financial sector in the early 1980s. The Argentine experience is very valuable in this respect, since it points out quite clearly the difficulties encountered in a financial liberalization process, especially when it is undertaken in a context of large macroeconomic imbalances fostered by massive government budget deficits and without adequate government supervision.

The role of the public sector, especially in issues affecting the size and allocation of government expenditure, is analyzed in important works by FIEL (item bi 89013945) and Schenone (item bi 89013951). Both studies show the increase in the size of government expenditure (especially by the State and local governments and public sector enterprises) and stress the need to reduce such expenditures. This is necessary not only to stop inflation, but also to allow and encourage the private sector to take a more active role in the growth process.

Two key macroeconomic issues that continue to draw the attention of researchers are the external debt and the determinants of the real exchange rate. The first is analyzed by Feldman and Sommer (item bi 88002657) and Vitale (item bi 88002658). Much of their discussion centers on the origins of the debt and its repercussions on the performance of the financial sector, the budget deficit, and growth. The second issue is examined by Cottani (item bi 88003198) and Cavallo and Domenech (item bi 89003247), in two works which discuss how the real exchange rate was affected by the macroeconomic policy mix and its implications for exports.

There are a few unique and interesting works that stand out from the mainstream macroeconomic studies. Silberstein (item bi 89013930) is the author of an enjoyable, non-technical essay on the history of Argentina's currency; Green and Laurent (item bi 89013933) investigate the history of the large Argentine conglomerate Bunge & Born; and finally, Gutiérrez and Korol (item bi 89003248) narrate the evolution of the well-known enterprise Alpargatas.


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