By Michael Soltys

Herald Staff

Economy Minister Amado Boudou confirmed Argentina’s desire to return to international credit markets as the last of 19 speakers at the annual forum of the Council of the Americas yesterday.
After boasting about the success of growth and exchange rate policies and the financial solidity since 2003 (six of the eight years of fiscal surplus in all Argentine history), Boudou then asked himself the question: “If we are so solvent, why do I give so much importance to returning to international credit?”

Because it was better to return when not under pressure, his answer began — Argentina will only need to meet 13 billion dollars in debt obligations in 2010 as against 20 billion this year and total indebtedness was less than half of Gross Domestic Product. The motive was not to plug any gaps but because Argentina owed it to world recovery to tap its full potential, owed it to its citizenry to improve public services faster and owed it to its private sector to obtain the leverage of international financing.

Boudou’s goodwill toward international markets nevertheless failed to address any of the specific doubts — the tarnished credibility of INDEC statistics bureau’s data, the holdouts from the 2005 haircut and Paris Club debt.
Within this context, there were expectations that the presence of International Monetary Fund Western Hemisphere Director Nicolás Eyzaguirre at the forum might be an early step towards restoring relations with the fund. But Eyzaguirre (who met with Boudou later in the day) largely confined his intervention at the colloquium to crossing swords with National Mortgage Bank Director Mario Blejer over the world’s recovery from recession.
An optimistic Blejer saw almost everybody recovering (even Germany and Japan) with China set to return to double-digit growth next year and most other players on three percent (including Argentina after a 2.6 percent contraction this year). So with state solvency and low indebtedness in the private sector and households too, what was Argentina’s problem? Basically lack of confidence, seen in capital flight — sorting out INDEC’s credibility was an essential first step towards recovering that, Blejer said.

Eyzaguirre was far more pessimistic because the intensity of United States deficit spending which had halted free fall could not be sustained at 15 trillion dollars and because of devaluation-hit Eastern Europe which is the “new Latin America.” Latin America itself was holding up well thanks to commodities with no capital flight, weathering this crisis better than its various predecessors since 1982 (Argentina was no exception) — those dependent on the US like Mexico faced the worst problems. The former Chilean finance minister foresaw a “fragile, slow recovery” with the private sector yet to return despite credit now being better than before the collapse of Lehman Brothers.
Fresh from meeting his colleagues at Jackson Hole, Central Bank President Martín Redrado described the changing challenges to defend stability and liquidity since last year — not just touching up interest rates but new regulations. But the system evolved in his five years at the helm centred on a floating exchange rate and a “simple strategy” had held up well with no banking crisis. Redrado was more worried about the heritage of a more distant past — a volatile Latin America had grown at half of the pace of South-East Asia in the last 30 years and a crisis-ridden Argentina at a third of the region’s, creating problems with globalization. Redrado saw part of his work as creating built-in buffers against the “Argentine idiosyncrasy.”

Always a magnet for heavyweights, the Council of Americas event was more pluralistic and federal than usual this year with both opposition politicians and provincial governors at hand.
Following introductions by the chief sponsors — Council of the Americas President Susan Segal (who expressed concern about the US fiscal deficit and the fact that markets were recovering faster than the economy) and Chamber of Commerce President Carlos de la Vega (who expressed the need for “visions rather than leaders”) — Cabinet Chief Aníbal Fernández started the ball rolling. Fernández presented Argentina as a country ideal for investment and tourism. He admitted that the model was not orthodox (impossible after the 2001 meltdown) but argued that GDP was now 52 percent higher than in 2003 after recovering to 1998 levels in 2004. Production came first in this model — industrial output was up 83 percent from 2003, advancing from 11 to 23 percent of GDP and unemployment a third of 2002 levels. Agriculture enjoyed record harvests with 31 million hectares cultivated in 2006-7 as against 23 million in 1995-6. Credit was up fourfold with the IMF fully paid off and 2012 bonds redeemed in advance.

Next came City Mayor Mauricio Macri, who quickly struck an opposition note by saying that on June 28 the people had voted for more ties with the world, less confrontation and greater predictability. Macri presented a strategic vision based on a tripod of industry, mining and tourism with his own metropolis a centre of culture and software — he also retorted to Fernández that agricultural acreage should be 62 million hectares. He closed with a parting shot at the tax on electronics (now awaiting passage in the Senate), which would broaden the digital gap — computer technology was a right not a luxury, he said.

The two governors, Salta’s Juan Manuel Urtubey and Chubut’s Mario das Neves, were both Peronists although not the closest to the Kirchners. Urtubey presented the backward level of his northern province (a third below the poverty line, a tenth destitute) as grounds for optimism since it made far more growth possible. He also proposed federal revenue-sharing reforms — not just a better provincial share but an infrastructure fund of three billion pesos to permit more roads, railways and connectivity. Das Neves spoke of how he had kept the 615,000-strong population of Chubut (rich in oil, fisheries and tourism) growing fast by providing jobs — unemployment was below five percent and per capita income 9,000 dollars.

Next followed two panels (software and parliamentary) with Production Minister Débora Giorgi sandwiched in between. Giorgi deployed official statistics to demonstrate how Argentina had weathered the crisis much better than the rest of the world thanks to the “solid policies” of President Cristina Fernández de Kirchner. While US industrial output had fallen 12 percent, Europe 19 percent, Brazil 13 percent and Mexico 18 percent with rising unemployment, Argentina had hardly suffered.