Volume 43, Number 171,
October-December 2012
Argentina and Brazil:
Macroeconomic Challenges
Eduardo Bastian and Elena Soihet
The Argentinean Macroeconomic Regime (2003-2010)

The macroeconomic regime that Argentina chose to follow starting in 2002 was very different than the Brazilian strategy. Following the convertibility crisis, the main goal was to maximize economic growth, create jobs and recover industry, although price stability was not considered sine qua non for this goal. In general terms, it can be said that Argentina’s macro regime was sustained by the following pillars:

A competitive exchange rate (stable), fiscal surplus and surplus in the payment balance of public accounts and monetary policy that sought to avoid appreciation of the real exchange rate, accumulate international reserves, facilitate recovery of liquidity and ... limit the expansive monetary effect created through sterilization actions — starting in mid-2002 — due to the accumulation of reserves (Damill & Frenkel, 2009: 1-2).

Concretely, the fiscal policy was oriented towards obtaining a fiscal surplus, which is related to the fact that the country, following the default, did not have a foreign market for its public bonds. Monetary policy came to be directed based on a regime of monetary goals. The government announced the goals for the total m2 that the central bank would seek before the year began.6 Still, despite the fact that there were monetary goals, the pillar of the Argentinean macroeconomic regime was to maintain the real exchange rate high and competitive, because monetary goals required the buying of currency to maintain the flexible currency management strategy. In this way, Argentina effectively controlled the exchange and not the supply of money, in such a way that monetary goals took on a secondary role.

Finally, there is another element that must be mentioned in the context of the exchange rate: export taxes that consisted of taxes on traditional exports, mainly on agricultural and petroleum products (Frenkel & Rapetti, 2008: 216). To put it simply, these export taxes can be understood as a fixed tax on exports. For each unit sold abroad, the price obtained by the exporter in pesos is taken from the product of the exchange rate by the difference between the price in foreign money that the exporter obtains minus this fixed tax (Amico, 2010: 17). So, for a given value of the exchange rate, the price obtained by the exporter in national currency with the export tax is less than what it would be if this tax did not exist. Because the exporters will not accept selling at lower prices domestically than what they can obtain in the international market, the export taxes resulting from reducing the price obtained by exporters in national currency mean that part of the increases in foreign prices of commodities will not be passed on to prices in the domestic market (Levy-Yeyati & Valenzuela, 2007: 208; Amico, 2008: 46).

In practice, introducing these export taxes ended up creating something similar to a multiple exchange rate system, which contributed to “diminishing the pass-through of devaluations for goods-salaries prices, but also to capturing part of the income obtained by sectors that are traditionally competitive because of the real competitive exchange rate”7 (Frenkel & Rapetti, 2008: 216). In this way, these export taxes functioned not only as a mechanism to combat inflation, but also as a source of income for the Treasury.

To summarize, the Argentinean macroeconomic regime represented a break, at least partially, with orthodox economics. On the one hand, there were some elements of continuity. For example, fiscal policy was still based on seeking surpluses, and in the first years of the new macroeconomic regime, the country even registered nominal surpluses.8 However, there was at least one important break: economic policy was no longer managed based on the idea that combating inflation is absolutely necessary for development. In this sense, there was no nominal anchor for prices, and currency control was meant much more to obtain a depreciated exchange rate that would drive exports than as a mechanism to contain inflation. In this way, the main goal was to stimulate economic growth and create jobs.

6 In general terms, the monetary authority in this case established a goal for the M2 growth rate for the year, which consisted of a band of inter-annual variation in growth of the monetary aggregate. More specifically, a base value was established as a reference for the M2 growth rate, but an upper and lower limit for growth of this monetary aggregate was also established.

7 According to Frenkel & Rapetti, the contribution of these exporters accounted for 63% of the surplus registered by the federal administration in 2006 (Frenkel & Rapetti, 2008: 216).

8 The search for fiscal surpluses made Gonçalves conclude — inspired by the document A Program for Popular Economic Recovery from the Argentinean Association EDI (Leftist Economists) — that the Argentinean case, at least at the beginning of Kirchner’s government, was not a break with orthodoxy. According to Gonçalves, there are three possible routes related to the neoliberal model of the 1990s: 1) continuity; 2) instrumental anti-liberalism; 3) break. For him, Néstor Kirchner’s Argentina, at least at the beginning of the government, was a case of instrumental anti-liberalism (Gonçalves, 2004: 135-140).

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PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 194 July-September 2018 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
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