The truth about the failure of "argentinian miracle"

History of US - a History.
When Argentina's happened is what happened, for some reason, our press just applauded. Almost all the newspapers the same: a failure model, imposed a poor Latin American countries to the International Monetary Fund. For Russia, this is not terrible, but the United States, perhaps even backfire. In fact, Argentina's economic model is not a failure, but rather, how to implement it. Only an objective analysis can now evaluate the reasons for the collapse "Argentine miracle" and its implications for the world economy, in particular Russia.

Living Beyond Our Means

Argentine President E. Dualde in March 2002 stated that the responsibility for the Argentine disaster is partly the IMF. Indeed, Argentina in the early and mid-90's was a showcase of the achievements of the neo-liberal model of development, which was used in the country in accordance with the prescriptions of the Fund.

However, the obvious and certainly the overriding cause of the crisis was the weakness of the president and the government. Currency board system «currency board», which operated in the country for the past 10 years, requires compliance with strict budgetary discipline. But in Argentina, where unions are traditionally very strong and tough laws to protect the rights of employees, it is very difficult to achieve. A large gap in the budget was due to imperfection of the tax legislation, with the presence of a large number of unjustified privileges and loopholes that allow tax avoidance. What we found in the early 90's populist C. Menem, dobivshemusya based on consensus of the main political forces to reduce the budget deficit to a sustainable level, it was beyond the power of the government of Fernando de la Rua. Argentines continue to live beyond their means. The salaries of senior officials were, for example, $ 2.5 thousand per month.

Budget deficit continued to grow. This was accompanied by a number of factors, the most important of which was to increase to excessive size of public debt - the result of ill-considered policy on foreign borrowing - and the adverse consequences for Argentina international financial crisis 1997-1999. In particular, the devaluation of the Brazilian real in early 1999 led to a sharp decline in the competitiveness of Argentine goods, since this neighboring country accounts for about 30% of exports in Argentina.

Considerable losses are associated with the structure of exports, which, like a decade ago, the most important place is occupied by grain, meat and other agricultural products.

Significant foreign exchange funds are used to maintain foreign reserves at a level corresponding total money in circulation, which required the system «currency board». This reduces the opportunities for economic maneuver. In this situation, the government tried to avert a crisis with the help of partial and fragmented measures. Success is not produced.

Who won, who lost?

Expert judgment an opinion that from the Argentine crisis won U.S. States calmly watched as Argentina's economy is sinking. However, in this case we can speak only about the winners in the small at a loss in many more. Indeed, on the eve of a default part of the Argentine capital market left in the U.S., investors sought to avoid losses and determine the location for the more profitable and reliable enough to invest. However, in the U.S. rates are at very low levels. Much higher profitability of investments in Russia and Ukraine, and part of the capital of Argentina went into these markets (in particular, the Russian), despite the fact that it is an area of high risk.