Juan Carlos Hidalgo
The Road to Argenzuela Juan Carlos Hidalgo Cato Institute Washington, DC September 23, 2014 1
Following Venezuela’s Example 1- Significant increase in public spending, including transfers and subsidies. 2- Expansionary monetary policy. 3- Nationalizations and expropriations. 4- Widespread use of economic controls. 5- Rise in protectionist measures.
2
Economic Growth in Argentina, 2000-2014
Source :International Monetary Fund.
3
“[Argentina] is a remarkable success story, one that arguably holds lessons for the euro zone”. Paul Krugman, May 3, 2012
4
Argentina: Government Spending
Source : Deloitte.
5
Inflation: Reality vs. Fiction
Source: INDEC and PriceStats Consultancy.
6
Nationalizations & Expropriations
March 2006: Aguas Argentinas.
September 2008: Private pension funds.
December 2008: Aerolíneas Argentinas.
April 2012: 51% stock of Yacimientos Petrolíferos Fiscales, property of Spain’s Repsol.
December 2012: Attempt to takeover the fairground of the Agricultural Association of Argentina (no legal effect due to court ruling).
2010-2013: Most of the railway network.
7
Foreign Direct Investment: Argentina vs Chile
Source: UNCTAD.
8
Quaterly Evolution of Capital Flight, 2002-2012 (billions of dollars)
Source: Jorge Gaggero, Magdalena Rua, Alejandro Gaggero with data from Argentina’s Central Bank.
9
Argentina’s Central Bank Reserves, 2007-2014 $60
Billions of Dollars
$50
$40
$28.2
$30
$20
$10 2007
2008
2009
2010
2011
2012
2013
2014
Source: World Bank.
10
F.A. Hayek on Exchange Controls (1944) “The extent of the control over all life that economic control confers is nowhere better illustrated than in the field of foreign exchanges. Nothing would at first seem to affect private life less than a state control of the dealings in foreign exchange, and most people will regard its introduction with complete indifference. Yet the experience of most Continental countries has taught thoughtful people to regard this step as the decisive advance on the path to totalitarianism and the suppression of individual liberty. It is, in fact, the complete delivery of the individual to the tyranny of the state, the final suppression of all means of escape— not merely for the rich but for everybody”. 11
The Won Decade?
Since 2009 Argentina has applied 337 measures that affect international trade, the most after Russia and India.
Argentina has the second highest inflation rate in te world.
It’s estimated that Argentines hold over $180 billions abroad.
It’s by far the country with the most cases (30) before the World Bank’s International Center for Settlement of Investment Disputes.
On July 30 Argentina entered into a technical sovereign default (2nd in 13 years).
World Bank: Poverty risks quadrupling.
Third in Latin America after Venezuela and Paraguay on perception of corruption according to Transparency International.
12
Thank you!
E-mail: [email protected] Twitter: @jchidalgo
13
Following Venezuela’s Example 1- Significant increase in public spending, including transfers and subsidies. 2- Expansionary monetary policy. 3- Nationalizations and expropriations. 4- Widespread use of economic controls. 5- Rise in protectionist measures.
2
Economic Growth in Argentina, 2000-2014
Source :International Monetary Fund.
3
“[Argentina] is a remarkable success story, one that arguably holds lessons for the euro zone”. Paul Krugman, May 3, 2012
4
Argentina: Government Spending
Source : Deloitte.
5
Inflation: Reality vs. Fiction
Source: INDEC and PriceStats Consultancy.
6
Nationalizations & Expropriations
March 2006: Aguas Argentinas.
September 2008: Private pension funds.
December 2008: Aerolíneas Argentinas.
April 2012: 51% stock of Yacimientos Petrolíferos Fiscales, property of Spain’s Repsol.
December 2012: Attempt to takeover the fairground of the Agricultural Association of Argentina (no legal effect due to court ruling).
2010-2013: Most of the railway network.
7
Foreign Direct Investment: Argentina vs Chile
Source: UNCTAD.
8
Quaterly Evolution of Capital Flight, 2002-2012 (billions of dollars)
Source: Jorge Gaggero, Magdalena Rua, Alejandro Gaggero with data from Argentina’s Central Bank.
9
Argentina’s Central Bank Reserves, 2007-2014 $60
Billions of Dollars
$50
$40
$28.2
$30
$20
$10 2007
2008
2009
2010
2011
2012
2013
2014
Source: World Bank.
10
F.A. Hayek on Exchange Controls (1944) “The extent of the control over all life that economic control confers is nowhere better illustrated than in the field of foreign exchanges. Nothing would at first seem to affect private life less than a state control of the dealings in foreign exchange, and most people will regard its introduction with complete indifference. Yet the experience of most Continental countries has taught thoughtful people to regard this step as the decisive advance on the path to totalitarianism and the suppression of individual liberty. It is, in fact, the complete delivery of the individual to the tyranny of the state, the final suppression of all means of escape— not merely for the rich but for everybody”. 11
The Won Decade?
Since 2009 Argentina has applied 337 measures that affect international trade, the most after Russia and India.
Argentina has the second highest inflation rate in te world.
It’s estimated that Argentines hold over $180 billions abroad.
It’s by far the country with the most cases (30) before the World Bank’s International Center for Settlement of Investment Disputes.
On July 30 Argentina entered into a technical sovereign default (2nd in 13 years).
World Bank: Poverty risks quadrupling.
Third in Latin America after Venezuela and Paraguay on perception of corruption according to Transparency International.
12
Thank you!
E-mail: [email protected] Twitter: @jchidalgo
13
