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More on Argentina's Devaluation and Default

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Thursday, 13 May 2010 13:57

My colleagues at CEPR, Mark Weisbrot and David Rosnick gave me grief for saying that Argentina's economy shrank in the year following its default. Actually, Argentina's economy shrank in the first quarter of 2002, the quarter immediately following the December default, and then began growing robustly. It continued to have robust growth for 5 more years until it got caught up in the world recession. If we were having an honest debate over Greece, then everyone would be talking about Argentina's remarkable turnaround. Instead, we have experts telling us that the economy shrank 20 percent following the default.

 

 

 

Comments (6)Add Comment
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written by izzatzo, May 13, 2010 4:42
See Bubba, I told you they were lying from the start didn't I, the same ones who said Communist China had higher growth rates than 'Merican Capitalism. That's why they won't let us visit Cuba, cause then we could prove it's just like Argentina and never recovered either after Castro's Five Year Great Leap Forward Keynesian Devaluation and Default Plan.

Stupid liberals.
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written by Mike, May 14, 2010 5:15
I am not so sure the graph shows robust growth. I could be wrong here, but the PBI figures are in pesos (at constant 1993 prices), so comparing 2000 PBI to 2002 PBI doesn't to me seem like an apples to apples comparison. While internal prices might be constant from 1993, the value of dollar-denominated goods or services you could be with a 2002 peso was about 1/4 what you could buy with a 1993 peso. To show the actual growth, wouldn't you need to show PBI in dollar terms or a trade-weighted basket of currencies?
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written by Min, May 15, 2010 3:27
"If we were having an honest debate over Greece, then everyone would be talking about Argentina's remarkable turnaround. Instead, we have experts telling us that the economy shrank 20 percent following the default."

Amen, brother! :)
Who supplies GDP data?
written by cas127, May 17, 2010 5:46
Who supplies GDP data?

The same governments that break faith with their creditors.

So they will break promises but they won't lie?

How does *that* work?

Any independent, external verification of GDP growth claims?

Given the *extremely* recent example of Greek deception and the Euro monitors' inability to detect it, you'll forgive the world's hard earned cynicism.
not so easy
written by Lucas, May 23, 2010 9:21
I am Brazilian, and we witnessed first-hand the Argentinian collapse so let me clarify what happened.

Argentina instituted a currency-board, fixing the exchange rate at 1 peso for 1 dollar in the early 90s. That effectively dollaryzed the economy and finishing inflation. The economy grew strongly until the Asian crisis. That growth plus the overvalued exchange rate lead to massive current account deficits.


I remember visting Argentina as a teen in 1998. While in Brazil we paid around USD 1,0 for a pepsi, in Buenos Aires it costed USD 5,0.

Argentina started to contract in 1997 with the Asian crisis, then its contraction accelerated when Brazil m(its main trading partner) devalued in 1999, until the collapse in 2001

I guess that in 2005 I heard an economist saying that Argentina would only reach its 1997 GDP levels in 2006 or 2007. Since ARgentina grew faster than his forecast, it eventually reached that pre-Asia GDP in 2006
No way can Argentina serve as a model for Greece
written by lonesome moderate, May 24, 2010 11:03
Argentina balanced its books by grabbing most of the value of the country's bank deposits (it's illegal for Argentines to deposit money abroad) by means of what was called the "corralito". This is what enabled them to bounce off the bottom so quickly, but I can't imagine Greece doing anything like that.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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