"The Road to Elections 2003: Argentina's Economic Future"

“The Road to Elections 2003: Argentina’s Economic Future”

Argentina is mired in a recession that has dragged on for four years and cut its GDP by at least 25 percent. Unemployment is at a historic high; poverty has doubled and four governments have collapsed. An improvised abandonment of convertibility, together with freezing bank deposits and a default on the nation's public debt, have left domestic and international confidence in Argentina in tatters.

To analyze this complex economic scenario and discus the adequate economic policies that should be implemented by the next government. “Argentina @ The Wilson Center” asked the senior economic advisors of the 2003 Presidential Candidates to give their views on the main economic policy issues. These issues included monetary policy, fiscal policy, trade policy, unemployment and development strategies.

Even though the focus of the debate was the 2003 economic platforms, all of the participants pointed out that economic policy could not be conceived as an isolated instrument within the public policy sphere. In contrast, they stated that the economic performance would be conditioned, to a certain degree, on the country’s ability to improve its political and economic situation.

Despite agreement among the different economic advisors as to, for example, the need to simplify and reform the tax structure, or to enforce more prudent and restrictive policies on government borrowing, their views dissented on the major targets and vertebral columns of their programs.

For Dr. Daniel Montamat, senior economic advisor for Rodolfo Terragno, economic policy should be centered on two concepts. First, sustained global productivity growth should be oriented to expand potential product, always bearing in mind the importance of microeconomic elements in this task; and second, the growth strategy should be export oriented. In his words, “These are the only means that have allowed for countries like ours to obtain social and economic development, in only few years”.

Dr. Julio Pierkas, advisor for presidential candidate Ricardo Lopez Murphy, stated that the policies that had to be implemented were painful but relatively easy to design. These policies should, in his view, promote the use of private sector practices and efficiency within the public sector. “The public sector should become an austere merit-based system audited by the private sector”, he concluded.

Menem’s economic advisor, Dr. Pablo Rojo, identified two main axes in his strategy. On the one hand, a confidence shock needs to be created promoted by the stabilization of monetary policies, the public fiscal balance and the unrestricted respect for private property. On the other hand, fiscal policies that will ensure the recomposition of the salary’s purchasing power need to be promoted.

The senior economic advisor for Adolfo Rodriguez Saa, Alberto Rodriguez Saa, explained that his platform was based on the elimination of “structural corruption”. To this end he proposed a legislation review that would aim at getting rid of all sorts of special privileges such as sectorial and other provincial benefits and special pension regimes. He also pointed out that the seriousness of the crisis required, “at least, similar measures to those implemented by Roosevelt during the New Deal”.

Fernando Riavec, senior economic advisor for Patricia Bullrich, based his economic policy on the re-founding of institutions and on the objective of fiscal solvency and the recognition that previous indebtness has imposed major costs upon society that justifies the removal of this instrument as a tool of economic policy.

Finally, Dr. Eugenio Diaz-Bonilla, senior advisor of Jose Octavio Bordon, diagnosed Argentina’s vulnerability to three different kinds of shocks: external shocks; internal shocks caused by political instability; and wrong economic policy decisions that were usually misguided by political considerations. His main program objectives were thus, to reconstruct values such as the rule of law, and to promote stability, growth, efficiency and equity, eliminating rigidities in a country that is, on his view, subject to profound volatility.

Guillermo Calvo, chief economist at the Inter American Development Bank, and Manuel Rocha, former U.S. Ambassador in Argentina, coordinated the debate.