Volume 46 Number 180,
January - March 2015
Argentine Development After the Financial Crisis
Mine Aysen Doyran*
Date received: March 10, 2014. Date accepted: August 5, 2014
Abstract

This article reviews the features of the economic recovery in Argentina following the 1999-2001 financial crisis and up through to the present. It examines the development alternatives presented by the presidencies of Duhalde and Kirchner as compared to Menem, looking at literature on Argentina published during this time period. This article ascertains that Kirchnerism is not a coherent mode of governance that has broken with neoliberalism, as the academic literature would claim, but rather a balancing act between the sovereign economic interests of Argentine corporations and the demands of the international financial system facing semi-peripheral economies in the web of global integration. Kirchnerism exposes the contradictions of a dependent economy with a history of instability.

Keywords: Economic growth, financial crisis, development strategy, economic policy, macroeconomic structure.

INTRODUCTION AND BACKGROUND

This work explores the evolving role of Argentine development policy following the 1999-2001 financial crisis and up through to the present. During this time period, Argentina experienced two main changes. The first was in response to the December 2001 financial crisis, which caused the government to default on its debt and officially abandon the "convertibility regime" (the so-called "convertibility plan") in January 2002. Between 2003 and 2008, Argentina challenged the "conventional wisdom" that recovery must be based on a painful program of fiscal restraint. However, with the aid of heterodox self-financing measures, Argentina managed to achieve vigorous growth (annual rates of 8% and 9% in some consecutive years), while avoiding the lethal mix of hyperinflation and fiscal imbalance of the past. And, "after slowing rapidly in 2009, the Argentine economy resumed robust growth in 2010, with a rate well above the regional average at 9.2%" (ECLAC, 2011a: 97).

Argentina’s trajectory coincides with the rise of the so-called leftist governments in Latin America. Shortly before his inauguration, in May 2003, President Néstor Kirchner declared, "the age of neoliberalism has come to an end" (cited in EDI, 2004) when he embarked on the journey to find a way out of the profound 2001 crisis.1 However, critics of Kirchnerism emphasize what they saw as the model’s mistaken macroeconomic policies (which would lead to higher inflation and deficits) and the active promotion of state interventions in the economy above the free market as a mechanism to set prices and promote social policy and national sovereignty (Gallo et al., 2006: 209). For example, the centrist José Castañeda (2006) equated Kirchnerism with the "Latin American shift to the left," arguing that it was similar to the "virulent, strident nationalism of Chávez," opposed to the orthodox free market model and only sought to redistribute the income of the wealthy to the poor.

By contrast, other economists have hoped that Argentina’s success could serve as a benchmark for a "new development strategy for the Latin American continent."2 Cunha and Ferrari (2009) believe that this perspective has spread among Brazilian economists with a Keynesian and structuralist perspective, who hold up Argentina as an example of the "new developmentalism" oriented towards the global economy (Bresser-Pereira, 2006, 2012). Contrary to the "old developmentalism," based on protectionism and import substitution, this model prioritizes "export-led industrialization," and is characterized by State-directed strategies through "subsidiary but strategic" industrial policies. In this new development paradigm, fiscal prudence and market openness coexist peacefully alongside social equality and a stronger State (Cunha and Ferrari, 2009: 2-3).

This article examines how Kirchnerism represents a new model that is a break with neoliberalism. It reviews the path of Argentine recovery and offers an assessment in the framework of the debate on State-led growth or "new developmentalism." It also explores the continuities and differences between pre- and post-crisis policies in the intersection of domestic and global capitalism. This article argues that framing Argentina solely in terms of a new model would conceal the continuities and tensions with the neoliberal accumulation of the previous age, as other Latin American academics, such as Azpiazu et al. (1998), Cunha and Ferrari (2009) and Guillén (2011) have previously examined. Moreover, even though the most recent situation of Argentina is analyzed in the context of the new "model" discourse, it could be attributed to "local" conditions and interpreted as "self-imposed." This approach reveals neither its origin nor evolution, which show signs of structural contradictions inherent to a dependent economy and a past of instability. In simpler terms, the collapse of the Argentine economy that gave rise to a new macroeconomic structure may now be moving in the opposite direction.



MANAGING THE CRISIS OF A COLLAPSED ECONOMY

Argentine recovery is dependent on successfully resolving the contradictions that a semi-peripheral economy must face. What explains Argentina’s unorthodox recovery in the context of globalized capitalism and how can this model continue to work? This question can only be answered by considering the successes and limitations of Kirchnerism as a growth strategy and looking at it how it has achieved development within the realm of capitalist social relations. According to the International Monetary Fund (IMF), "the Argentine economy grew 94% between 2002 and 2011," which is one of the highest economic growth rates in the "Western hemisphere" and indeed in the entire world (Weisbrot et al., 2011: 1). There are two economic schools of thought on the Argentine recovery that seek to explain this surprising turn of events. This section will review and analyze the data and arguments of these two unorthodox views of Argentina, aiming to offer a critical synthesis.

The academic literature indicates that two major factors are responsible for recovery: domestic policy and external demand. The first perspective, which agrees with Keynesianism,3 emphasizes the role of domestic policies in recovery as the "result of demand," especially in terms of consumption and domestic investment (Weisbrot, 2012; Cohen, 2011, 2013; Frenkel and Rapetti, 2007, 2008). This approach is a response to the abandonment of the idea that the Argentine case is the result of external demand and the commodities boom derived from the rising prices of agricultural exports, especially soy (Weisbrot, 2012; Mercille, 2013). First, they rebut the neoliberal principle that "strict fiscal policy" is "key to resolving the economic crisis," the so-called convertibility system developed based on restrictive monetary policy, but with excessive "international debt" and an "unsustainable public debt" (Weisbrot and Sandoval, 2007: 1). Second, as Cohen (2011) demonstrated, expansionist policies with a certain degree of fiscal prudence drove gross domestic product (GDP) growth, despite the fact that Argentine capitalization is based on the export of consumer goods: "Higher taxes, pro-poor redistribution and spending, job creation programs, loose monetary policy with careful attention to a competitive exchange rate" refute the hypothesis that economic recovery requires a painful policy of fiscal restraint (Milberg, 2012).

 

Figure 1. External Debt of Argentina Before and After Recovery

Source: Created by the author based on data taken from the Inter-American Development Bank (2014),
Latin American and Caribbean Micro Watch.

 

However, looking at the nominal value of exports, the argument that this sector is insufficient to initiate or sustain recovery seems plausible. When measured as proportion of GDP and value in dollars, Weisbrot et al. (2001) showed that agricultural exports (agriculture, hunting, fishing, forestry) accounted for 5% of GDP in 2002 and hovered around 3.7% of GDP in 2010 during the commodities boom. When the data is analyzed on a quarterly basis, some trends in the various phases of recovery emerge.4 Based on these figures, the manufacturing industry (food, beverages, tobacco byproducts) and industrial manufacturing constitute a larger portion of GDP than agriculture in 2002-2010, staying around 6.5-5.5% and 8.3-6.9%, respectively (Weisbrot et al., 2011: 7).

Because looking only at the magnitude of trade or other sophisticated data is no guarantee of real recovery, the data presented updates the analysis of external accounts beyond the framework of recovery and shows that the external sector tends to be cyclical and, more recently, has grown vulnerable to the second phase of the global recession (2010-2012). Figure 1 shows that following the expansion between 2000 and 2007, the share of exports in GDP growth fell from 0.38% at the beginning of the recovery to negative (-) 0.82% in 2012. Net exports (current exports-current imports) as a share of GDP also fell from 15.01% to 2.31% in the same time period (2002-2012).

Based on the premise of "demand-led recovery," the Argentine economists Frenkel and Rapetti (2007) emphasize the relationship between the real exchange system and GDP growth. They observe that the macroeconomic structure, especially the "competitive and stable real exchange rate" policy, was a key mechanism in the resolution of the Argentine crisis and brought about rapid growth and job creation in 2002-2007. Because the more competitive parity-based exchange rate policy mitigated "restrictions on the balance of payments," this drove commercial sectors, especially the export industry. In addition, the more stable exchange rate depended on the currency interventions of the Central Bank of Argentina and the accumulation of foreign reserves – assuming that higher reserves could contribute to a positive external balance (reduced debt coefficients) and also provide an ample margin for counter-cyclical spending (Frenkel and Rapetti, 2008: 222).

From that perspective, the macroeconomic framework is behind the "wealth effect" Argentina experienced in the second and third phases of recovery (2002Q3-2004Q2 and 2004Q2-2005Q2):1) stimulate demand through more jobs and individual consumer spending,2) response from the supply of local companies in the form of investment, especially in construction and capital assets, 3) the private sector "foreign asset holdings" that acquired greater value in pesos with currency depreciation and drove private consumer spending. Investment derived from the increased profits of companies "was incredibly dynamic, growing at an annual rate of 42.7% during this second phase and contributed 57% of GDP growth" (Frenkel and Rapetti, 2007: 12).

The Brazilian economist Bresser-Pereira (2006) also views the situation in Argentina in terms of the demand management strategy, led by the State, but through the perspective of a "new developmentalism" and "structuralist macroeconomics" (Bresser-Pereira, 2012). He believes Argentina is a "paradigmatic" example of this "new developmentalism"5 (Cunha and Ferrari, 2009: 2-3), which demonstrates the failures of "Dutch disease," a liberal economic model based on minimal government intervention, the export of goods, an overvalued exchange rate and open capital market. On the contrary, Bresser-Pereira (2006: 28) advocates for currency management with low interest rates and "the use of capital controls, as needed," in keeping with the guidelines of what Kirchner and his Minister of Economy and Finance, Lavagna, achieved in 2000. The new model rejects a return to the protectionism (import substitution industrialization) of the "old developmentalism," which proposes an active role for the State, support for competitive national companies through export-driven industrialization and the creation of investment opportunities for the private sector. This matches up with Peter Evans' (1995) idea of "embedded autonomy" in which the State ensures private resources for development with relative independence from capitalist investors. For the state to be able to promote stable growth and social equality simultaneously, there must be more tolerance for "fiscal discipline aiming to achieve positive public saving" – thus the argument for a strong capitalist state.

Because there are no clear examples against which to judge the Argentine narrative since 2002, the State-led growth theory (or demand-led recovery) has both tensions and limitations. Although the "new developmentalism" operates within capitalism, it offers no consistent guidelines on how to institutionalize it. This includes barriers to the autonomy of the nation-State based on global and local capitalism and the attempt to implement policies in conflict with each other (social equality vs. tax saving) when inserted into the class structure of semi-peripheral economies. In that sense, implementing this strategy is still challenging because Argentine insertion in the global economy is unequal, there is a lack of effective regulations and there are strong ties between the State, foreign capital and national sectors.

Thinking of the second approach, the question arises as to whether this "new developmentalism" is the appropriate model for Argentina in its post-crisis era, or more specifically, if the crisis has even been resolved. This first relates to the articulation of Argentine capitalism in the global economy (and more recently, the 2007 global crisis). This integration goes against the previous development model. As Guillén argued, the "recession may be over, but the crisis still has a long way to go," pointing to a new cycle of "debt deflation" advancing in the global economy (Guillén, 2011: 189-199).

Although the high-risk mortgage crisis in the United States has not impacted Latin America to the same extent as previous cycles of deflation (like Mexico in 1994-1995, East Asia in 1997-1998), the global markets have clearly contracted and a regional slowdown will likely follow. This cycle is evidenced by the reduced growth of global trade, which went from 7.2% in 2007 to 3.3% in 2008 (Guillén, 2011: 199). Set off by the "exuberance of the financial markets" (financial asset bubbles and the Lehman Brothers collapse in 2008), the crisis led to a drop in stock prices, credit contraction, capital flight and the "depreciation" of the local currencies in Latin America (Ocampo, 2009: 711-713). This likely affected aggregate demand and employment, which contributed to the slowdown of GDP growth. As net exports began to shrink after 2007-2008 (see Figure 1), Argentine economic performance began to deteriorate. Starting in 2008 and 2009, the growth rate in Argentina fell from 6.76% to 0.85% and slipped again in 2012 (to 1.9%) with significant ups and downs over the four quarters (see Table 1).

 

 

Beginning around mid-2013, there is a "distinct reversal" in the global capitalist economy. But with the so-called "v-shaped recovery" that benefitted China and the semi-peripheral economies in early 2008-2009, the crash reached its limits (Rasmus, 2014). In 2009, the World Bank indicated that countries that exported commodities, like "Argentina, will perhaps see the sharpest growth falloff in the region as it experiences declines in export demand, commodity prices and investment" (IBRD-World Bank, 2009: 157). The "spread" of the crisis to the southern hemisphere is evident in declining growth rates in China and emerging markets, monetary restriction and the slight recovery of global financial centers, especially the United States, Europe and Japan (Rasmus, 2014). Because Argentina’s access to foreign markets is limited by the "dual nature" of the global recession, export-dependent growth limits (through strategic/open market policies) are evident. These limitations are clear in a context of energy trade imbalances ("from a surplus of $USD 6 billion in 2006 to a deficit of $USD 28 billion in 2011"), increases in the real exchange rate, currency flight (also due to "hoarding" depending on the exchange rate in effect) and the growing demand for foreign assets (ECLAC, 2013: 2).

The second approach also recognizes the capacity of the State to promote growth and income distribution, but within the confines of global capitalism. Without denying the growth performance of some Latin American economies (2002-2006), Caldentey and Vernango (2010) state that obstacles to growth are primarily export-based. Although these authors believe that some countries, such as Argentina, have strayed from neoliberal orthodoxy, as is clear in the monetary and fiscal policy of the Kirchner administration, they view this departure as more of a "question of rhetoric than of reality" and believe that it still adheres to the parameters of the Washington Consensus (Caldentey and Vernango, 2010: 642).

As Caldentey and Vernango also maintain, the break with a cycle of dependency is blocked by the reproduction of an "agro-export" model, which continues to export raw materials and labor to the global economy. In addition, looking at the direction of capital flows during the consumer goods boom, Latin America did not manage to become a "net destination of financial flows," strengthening global integration. Together with other countries that export raw materials, like Bolivia, Chile, Colombia, Peru and Venezuela, Argentina became a "supplier of financial resources" for the rest of the world. From 2002 to 2006, these countries transferred resources "equivalent to 5% of their GDP" to the global economy (Caldentey and Vernango, 2010: 637).

In line with the second approach, this article will analyze how the current policy rhetoric diverges from reality by looking at the post-crisis trajectory of development in the context of Argentina. Below, this article reviews real policy practices and their various outcomes and limitations. As has been stated, Kirchnerism is facing a series of tensions and contradictions regarding the role of state intervention in the economy and how to resolve the cycle of dependency in the process of re-industrialization. These tensions, profoundly embedded in the Argentine economic structure, are preventing this model from turning into a long-term development plan. At stake is how to consolidate industrial recovery beyond the Kirchner project.



THE ARGENTINE CRISIS AS BOTH A DEPARTURE FROM
AND CONTINUATION OF THE PAST

In the literature on the crisis analyzing the events that led to the collapse of convertibility, there is a tendency to focus on concrete policies as the underlying cause of the crisis and its subsequent development. Frequently, the emphasis is on a "local" approach, as if the causes and consequences of the phenomena analyzed and decisions made began and ended in Argentina itself. However, the solution to the Argentine crisis must be viewed dialectically, in terms of historical departures from and continuations of the previous cycles of accumulation.

The roots of the crisis in Argentina can be traced back to cycles of accumulation that expose the limitations of the strong Kirchner administration. As Azpiazu et al. (1998) argued, the Menem age of reforms and subsequent crisis originated in "structural transformations" introduced by the military regime between 1976 and 1983, which "managed to destroy the old economic model of industrialization to replace it with import substitution (ISI), setting the stage to implement neoliberal economic policies" (Azpiazu et al., 1998: 16). The arrival of Menem consolidated and deepened deindustrialization in favor of financial speculation, in such a way that deregulation and privatization became the main drivers of private earnings. The labor market was characterized by unequal development, as stable jobs in the formal sector disappeared and gave way to "badly paid unstable jobs in sectors of low productivity, such as small-scale commerce and small workshops. In 1997, only 29.7% of the population had a stable job in the formal sector, the lowest percentage since 1940, with the exception of 1996" (Azpiazu et al., 1998: 18). In the end, the winners in neoliberalism were large economic blocs, domestic capital and multinational corporations that maintained powerful control over the State.

In this regard, one of the major challenges for Kirchnerism is how to resolve the contradictions between an underdeveloped industrial sector and the class alliances that have led it to depend on the external sector. The roots of this dilemma can be found in the historical experience of Argentina and its agro-export model. The resurgence of these alliances means they are repeated every time the country faces a debt crisis (Cunha and Ferrari, 2009). Below, we will see how the labor accumulation structures in the previous age remained as a "residual" feature of Argentine capitalism, even in the recovery subsequent to the crisis:

Profit distribution among the business community elite now has three features. First, the production of non-saleable goods and services is more profitable than goods and services that are saleable. Second, the production of products for export, especially those based on natural and non-renewable resources, is more profitable than other importable and exportable goods. Finally, the production of services is more profitable than their manufacture. Due to this new distribution within the elite, investment has been concentrated in sectors that require less-intensive use of technology and sectors that have lower growth potential in global markets. The result is a reduction of the long-term growth capacity of the economy of Argentina (Azpiazu et al., 1998: 17).

The consensus that emerged in Latin America was to be expected, with progressive parties (such as the Chilean leftist parties or the Peronist parties of Argentina) embracing neoliberalism in exchange for inclusion, and as a sort of concession to external pressures, to thereby qualify to receive loans from the IMF/United States aid (Gruel et al. 2008: 501-505). Moreover, neoliberalism meant that Menem was subject to a new cycle of instability characterized by greater socioeconomic inequality. He was initially supported by a population tired of inflation that could only be governed as long as the austerity regime seemed to producing results based on stable growth (and lower inflation) (Pastor and Wise, 1990: 492-493). However, this was just a spectacular example of "growth without jobs" (Green, 1995: 212) and unequal income distribution – the United Nations ranked Argentina 15th on a list of 155 countries with "income earned by the wealthiest 20% of the population" (Azpiazu et al., 1998: 18). However, aiming to push the neoliberal agenda, Menem had to purge the Peronist electoral apparatus of the unions that had long provided support based on protectionism and social programs. As is the case for many neoliberal regimes, the unions backed Menem despite evident attacks on their traditional programs and class interests. This was simply a case of "no other alternative," which could only be challenged by popular uprisings against the growing marginalization of the lower classes in Argentina.



ECONOMIC RECOVERY: ORTHODOX AND HETERODOX ELEMENTS

The class alliances formed under the Kirchner administration maintain some features left over from the earlier age, even though the institutional framework is now different. The main difference is the capacity of the State to intervene. Kirchner effectively capitalized on the extraordinary revenue of the commodities boom that generated a surplus to achieve rapid recovery. This was an important example of mobilizing fiscal policy to counteract a brief fall in demand, quite unlike the Menem era of "growth without jobs" and its major dependency on international credit. Between 2002 and 2007, private consumption grew 52% (Levitsky and Murillo, 2008: 17) and unemployment as a percentage of the total workforce fell from 19.6% to 8.48%, while poverty (the population living on less than two dollars a day), fell from 23.05% of the total population to 5.46% and to 1.87% in 2010 (see Table 2). These social indicators strongly differ from those in the United States and Europe where fiscal discipline (massive spending cuts) and austerity (as compared to government spending) prevailed over policy responses.

In addition, the government adopted measures on an ad hoc basis, which were fiscally more orthodox than what critics had anticipated. Aided by the rise in international commodities prices (oil and soy) and import substitution, Duhalde’s de facto devaluation and the external debt default led to the first phase of recovery in 2002 (Gruel and Riggirozzi, 2007: 100). Besides significantly improving the trade balance,6 this devaluation led to better fiscal balance (surplus) and stabilized conditions through direct interventions in the financial system. Argentina had already experienced massive capital flight when banks began their strategic withdrawal in response to the "mega debt swap" in mid-2001. This was equivalent to "30 million dollars in government bonds" and was supported by the IMF in an effort to conceal the risk of default (Damill et al., 2005: 56). After being in effect for one year until December 2002, the corralito (restriction on free availability of fixed-term cash accounts, bank savings accounts and loans imposed by the government of Argentina in 2001), was further tightened during the interim Duhalde administration – the Peronist president who governed Argentina from January 1, 2002 to May 25, 2003. A more restrictive version of corralito known as corralón or pesification was imposed, referring to the compulsory conversion of "foreign-currency bank deposits into pesos at a rate of 1.4 pesos per dollar" and the restriction on bank withdrawals (demand deposits and private savings accounts) to 1,500 pesos per week. In addition, "bank credits in foreign currency were converted into pesos at a rate of one peso per dollar" (Damill et al., 2005: 66).

 

 

Critics who identify with Menem's economic policies accused the Peronist government of being rather unorthodox (anti-market), forgetting that the State acted as a "lender of last resort" for the external debt inherited from the dictatorship, which obliged the State to act as the "second best option" in light of the impossibility of increasing taxes enough to meet both external and domestic obligations. Symptomatic of financial integration in Argentina, monetary policy, especially the asymmetric conversion of credits and deposits, absorbed the financial losses in the name of the capitalist class. While the middle classes and lower classes lost out due to the mandatory pesification of their savings at a rate of 1.4 pesos per dollar, the private sector benefited from a debt conversion rate of 1 peso per dollar. With the lower value of dollars for debt, this pesification eased the load on the private sector to avoid widespread bankruptcy. Although the banks did suffer "net losses" due to pesification, the government compensated them by issuing new debt. The government issued "2.4 billion dollars in bonds (bonos cobertura) dominated in foreign currency in exchange for banks’ liabilities with the State" (Damill et al., 2005: 66).

Even so, the most importance differences from the Menem era were related to the social role of the State. There were attempts to redistribute income and contain social unrest by expanding social policy coverage for the poor in Argentina. The increase in social spending was a direct result of the increase in income from 15% of GDP in 2002 to 23.4% in 2009 (Weisbrot et al., 2001: 10), mainly due to fiscal surpluses, greater fiscal pressure on exports (soy and industrial byproducts), balanced local budgets and the suspension of debt repayment with the IMF (Damill et al., 2005: 64-65). In an environment of industrial recovery following devaluation, social programs drove the expansion of the formal sector ("se mi-skilled workers in the labor-intensive sector"), mitigated the impact of rising unemployment and even brought down the Gini coefficient (Lustig et al., 2011: 5).

The most relevant example of social programs was the Unemployed Heads of Household Plan (to combat unemployment), designed to create jobs with the income generated from export taxes. Launched in April 2002, the program benefited two million households in 2003 and was partially funded by a World Bank loan (Lustig et al., 2011: 5). Another social program was the Remediation Plan, which "distributed basic medication to the poorest social groups," (Riggirozzi, 2010: 72). Despite their limitations in addressing structural poverty and an approach restricted to "formal" jobs, these programs compensated the fall in aggregate demand and delayed the immediate crisis. They had other impacts though, such as reversing the negative forecasts for GDP growth at the end of 2002 and the beginning of 2003 and setting a "floor," both for the drop in GDP, as well as in minimum wage contraction. These measures were a "marked contrast with previous recessions, when social spending on safety networks fell in real terms" (World Bank, 2003: II).



KIRCHNER’S ECONOMIC POLICIES

Although Néstor Kirchner did maintain some of Duhalde’s policies, Argentina was facing new circumstances. Duhalde had to confront a structural challenge: how to get the country out of an immediate crisis without having to resort to external aid. Moreover, reductions in public sector wages, due to devaluation, contributed to increasing state revenue, laying the groundwork for potential recovery (World Bank: 2003: II).

As such, when Kirchner came into power in May 2003, economic recovery had already begun, forging the path to expand welfare. In that sense, Kirchner distanced himself from a long decade of "wage depreciation policy" by yielding to union demands for collective bargaining and an increase in the minimum wage. Extending social security reform to the informal sector and unemployed workers added more than a million people to the labor market. These policies, together with diplomacy of firm negotiations with the foreign holders of debt bonds,7 gave rise to a 70% increase in real wages and 30% increase in public spending (on housing, infrastructure and scientific research) (Levistky and Murillo, 2008: 17).

Despite these social achievements, Kirchner's Argentina was still facing tensions related to the attempt to advance an export-led agenda, especially for the extractive industry. This led to the resurgence of latent asymmetries in the post-crisis economic structure, especially the division between urban and rural populations. In a sign of continuity with the past, capitalist earnings were restored after the pesification of all debt that was in dollars. The groups that benefited from the industrial recovery were large monopolistic capital sectors such as steel (Siderar, Acindar), oil (Repsol, Petrobras), private utilities (Telefónica, Telecom, Edenor, Central de Puerto) and national companies (Loma Negra, Grimoldi) (EDI, 2004). The banks also benefited because the government injected liquidity into the financial system, allowing higher holdings of government bonds. This gave the banks a "new beginning" in the post-crisis period (Cibils and Allami, 2013).

Starting in 2005, driven by increasing commodities prices, the State promoted an export-led model, prioritizing the automation of rural activities and displacing small and medium-sized farmers. Some of the attempts to modernize agriculture include the establishment of pump-operated mills in Gualeguayechú in the province of Entre Ríos and the introduction of direct planting techniques from multinational companies, including Monsanto and Cargill. These measures made soy more profitable, but at the expense of agricultural labor, leading to the mass migration of the rural population and deforestation (Svampa, 2008: 91).

The evidence points to an unequal transformation of industrial activity following the 2002 devaluation. A reversal of "prolonged deindustrialization" paved the way for industrial recovery (Azpiazu and Schorr, 2010: 115). This expansion was notable for its duration and was not limited only to the production of consumer-intensive byproducts of natural resources (food, beverages). The improved performance of the manufacturing industry in 2001-2005 was due to the "rebound effect" of industrial exports brought on by low wages, price hikes and high "leisure capacity" (Azpiazu and Schorr, 2010: 116). In 2003 and 2007, industrial exports grew 19% annually, characterized by the creation of industrial jobs and new productive capacity, especially in metal-mechanic and engineering-intensive sectors that had faced challenges in the 1990s (Herrera and Tavosnanska, 2011: 101-107). From 2002 to 2007, "industry created over 410,000 new jobs, representing a 55% increase since the start of the period" (Herrera and Tavosnanska, 2011: 105-107).

Despite the investment of deindustrialization, the spirit of the previous age remained in the structures embedded in the current expansion, especially in capital ownership. Just like before, an export-led orientation prevailed in 2003-2007, as evident in the "export coefficient as the percentage of gross production value (GPV)" in sectors related to natural resources, such as food and beverages (33%-37.8%), leather (34.8%-30.1%) and oil refinement (23.1%-27.6%) (Herrera and Tavosnanska, 2011: 109). When analyzed by origin of capital, more than 40% of the 500 "principal industrial exporters" were foreign-owned in 2007, highlighting the predominance of transnational capital in the manufacturing industry (Herrera and Tavosnanska, 2011: 110). Azpiazu and Schorr concluded that while manufacturing exports grew 60.8% from 2001 to 2005, the "gross value of sector production in current dollars" only increased 13.1% (Azpiazu and Schorr, 2010: 116-117). In this case, large capital factions linked to the global economy and sustained by external demand (for example, agro-industry) were the principal beneficiaries of the post-crisis accumulation.

Said otherwise, the state promotion of "export-oriented investment opportunities" has not necessarily cured the "Dutch disease." Ricardian income and the withholding of the benefits of exporting natural raw materials and cheap labor still persist, despite Kirchner's radical rhetoric. In 2008-2009, Christina Fernández de Kirchner was even more tolerant of agro-business, implementing measures such as subsidies and export supports, "lifting the export prohibition" and "reducing export taxes" on wheat, corn and fresh fruit (ECLAC, 2011b: 14). Although there are occasionally major confrontations with groups dedicated to the agriculture and livestock business (especially major agricultural companies), Kirchner's responses to corporate demands have largely been complacent. In July 2008, the proposed increase in export taxes (35%) on soy beans was defeated by the Congress. Farmers continue to lobby for the elimination of all export taxes on agricultural products and have retaliated, hoarding assets (Barrionuevo, 2008). This has pushed prices up and lowered the soy supply in the domestic market. However, other capital factions are not opposed to the export tax. By promoting investment and supply for the domestic market, the tax created competitive advantages for manufacturers in crisis, that is, those entities that process commodities (Richardson, 2009).

Finally, the redistribution of oil income is a long-term challenge to which the agro-export (financial sector and oil companies) model continues to be opposed. The orthodox position has been that price policies in the energy sector (that is, maintaining consumer prices artificially low) transfers resources to consumers, which leads to low investment (production stagnation) and the increase in gas imports that could create bottlenecks (which have recently occurred). However, this perspective ignores the various attempts at the "removal of subsidies to allow for a gradual correction of industry and consumer incentives." For example, the 1.5 billion dollar joint venture between the state-owned YPF and the foreign company Chevron in July 2013 pushed the industry in that direction (Australian Government, 2013).

After years of infighting, Spain and Argentina have finally resolved the Repsol-YPF conflict. The quarrel arose as to how Repsol should be compensated for the loss of its 51% share in YPF. With the mediation of the Mexican oil company, Pemex, Repsol finally accepted less than half of the 10.5 billion dollars it was demanding. "It is worth mentioning that Argentina, helped by the Mexican minority partner of Repsol, was able to impose the best conditions for these two Latin American countries" (Del Cogliano and Prats, 2013).



CONCLUSION: THE ARGENTINE RECOVERY IN PERSPECTIVE

This article looked at the features of the Argentine recovery following the 1999-2001 financial crisis and up through to the present. It reviewed how this recovery is part of the debate on "new developmentalism" and offered a criticism from this perspective based on an examination of its application. Undoubtedly, the crisis in Argentina paved the way for a new macroeconomic framework that pulled the economy out of its crisis and jumpstarted "popular recovery." Kirchner’s commitment to national industry, job creation, social programs and public works helped win the support of the working class in Argentina and the new poor who feared a return to recession.

However, it has also been argued that Argentina is a unique case that should be studied beyond the Kirchner administration. Some have warned of the risk of superimposing Anglo-centric models to study the country. It was found that framing Argentina's recent history in terms of a new model carries with it the risk of concealing some of the continuities and tensions with the neoliberalism of the old era, as other Latin American studies have analyzed, including Azpiazu et al. (1998), Cunha and Ferrari (2009) and Guillén (2011).

In addition, when the recent history of Argentina is framed in the discourse of the new "model," it is susceptible to being attributed to "local" conditions and interpreted as "self-imposed." But this approach would illuminate neither its origin nor its evolution, which reveal evident structural contradictions in a dependent and formerly unstable economy. As such, instead of viewing Kirchnerism as the resurgence of a new model, this work analyzed it as a balancing act between the sovereign capitalist interests of Argentina (large companies) and the demands of global capitalism that semi-peripheral countries face as part of global integration. As novel as this idea might be, it entails all the tensions and reminders inherited from the previous age.

Despite its recovery, Argentina is feeling the pressure of the global financial crisis on the State, including the depreciation of its currency, imbalanced current accounts, increasing inequality and external vulnerability (especially to the reduction of currency reserves and the contraction of the global market). Rising inflation is a threat to the recovery of real wages for labor, which could lead to a conflict with the unions over key economic policies. In addition, real income distribution is a long-term challenge that will not be resolved without a dramatic change in the tax structure. Despite the best of intentions, Kirchner's policies have not addressed the unequal distribution of wealth in the economic structure, as well as other issues, including taxes on earnings of large corporate groups, the redistribution of oil income (not only soy taxes), policies to address structural change (informal sector), universal access to education, food and healthcare for everyone – because everyone needs an alternative welfare system and national recovery.



ACKNOWLEDGEMENTS

I would especially like to thank the jury that evaluated my article. I would also like to thank the CUNY Academy for the Humanities and Sciences and School of Liberal Arts of FIT/SUNY for their generous support. The foundation that provided funding for this academic work came from the William Stewart Award of the CUNY Academy. Any errors are the sole responsibility of the author.



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* City University of New York, Lehman College. E-mail address: mine.doyran@lehman.cuny.edu

1 Both critics and defenders of Kirchner liken him to the administrations of Lula in Brazil, Chávez in Venezuela, Correa in Ecuador, Morales in Bolivia and López Obrador – the frontrunner of Mexico’s presidential elections ( The Economist, 2006; Weisbrot, 2006; Castaneda, 2006).

2 Cunha and Ferrari (2009: 4). For a reflective analysis of "new developmentalism," especially common among Brazilian economists, see Cunha and Ferrari (2009); São Paulo School of Economics (2010); Center for Structuralist Macroeconomic Development, Ten Theses on New Developmentalism.

3 For example, Cohen ascertains that "the second aspect of fiscal policy suggested earlier was a clear pattern of anti-cyclical spending in the face of global economic slowdown. Latin American governments demonstrated their understanding of the Keynesian principle that government spending plays an important role in maintaining aggregate demand" (Cohen, 2013: 947).

4 According to Weisbrot and Sandoval (2007: 5), the crucial time during which exports contributed to growth was "only the first six months of recovery (the first phase), when the economy grew at an annual average rate of only 1.3%." During the first phase, the so-called beginning of recovery, 2002Q1-2002Q3, "exports grew at an annual average rate of 6.7% and accounted for 71.3% of GDP growth." However, after the first six months and during the rest of recovery (2002-2007), the contribution of exports to GDP growth remained marginal, at around 13.6% (Weisbrot and Sandoval, 2007: 5).

5 Even though Bresser-Pereira acknowledged in 2006 that the Argentine success story was "far too recent to enable an objective appraisal," he considered it to be a possible case of the "new developmentalism" that was gaining popularity among the younger generation of Argentine economists, such as Osvaldo Sunkel, Aldo Ferrer, Ricardo French-Davis and Roberto Frenkel (Bresser-Pereira, 2006: 30). However, in 2013, Pereira adapted his position to conventional orthodoxy, ascertaining that Argentina had not met the expectations he set for the "new developmentalism" and was "headed for failure," pointing to "irresponsible" spending in the fiscal realm. "The Argentinian case shows how an initially competent developmentalism may later drift to fiscal and exchange rate populism" (Bresser-Pereira, 2013: 2).

6 Going from deficit to surplus, the 2002 trade balance was "higher than 17 billion dollars and remained over 16 billion in 2003 (and over 12 billion in 2004)" (Damill et al., 2005: 63).

7 In December 2005, Kirchner negotiated an agreement with the holders of bonds that gave rise to the largest debt "haircut" in history, which included a "debt swap worth about 30% of the defaulted debt" (Levitsky and Murillo, 2008: 17).

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