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Carlos Menem's economy: the fixed dollar, that cursed handicap for playing golf with hyper-unemployment

2021-02-14T16:28:11.637Z


Argentina grew at Chinese rates, had an export boom and inflation plummeted. But there were excluded, the world changed and Menem drowned in 1 to 1 Carlos Menem died, the president who marked the 90's with fire Carlos Menem died: the memory and messages of politics on social networks


Ezequiel Burgo

02/14/2021 1:12 PM

  • Clarín.com

  • Economy

Updated 02/14/2021 1:22 PM

“With good reason Menem could play golf.

I had the dollar still ”.

The phrase was heard from the mouth of Mauricio Macri.

He said it on one of his dark days at La Rosada when the exchange rate gave one of those traumatic flashes.

It is known that few things have been more decisive for an Argentine president in the last half century than the volatility of the dollar.

Then come that recognition from peer to peer.

It is that Menem, by holding the exchange kite, not only generated tranquility in the middle class and in part of the businessmen.

Also in himself.

"He slept peacefully because he focused on the humours of the people," wrote Pablo Gerchunoff and Gonzalo de León in the essay about that period 'The popular market economy'.

It would be unfair to simplify an analysis of Menem's economy in an aspect such as the exchange rate regime.

With the exception of the Tequila period, in 1995, perhaps episode I of financial globalization after the fall of the Berlin Wall, Argentina registered growth at Chinese rates at that stage.

Productivity and per capita income grew in a way that had not happened in decades.

Daniel Heymann, macroeconomist and professor at the UBA, found in a study that the decade in which

exports

increased the most in Argentina since the record was in the 1990s.

Even more than when it was said that the pampas were the granary of Manchester capitalism, before the Depression of 30.

Technological change

(investment) hand in hand with direct sowing and

demand from Brazil

, a product of the stabilization of the Argentine economy , they pushed the cart.

For Menem, exchange rate stability arrived on the hour.

It was only six months before the legislative elections of 1991 when the Minister of Economy, Domingo Cavallo, who had replaced Erman González, fell with the formula for Coca Cola: one peso one dollar.

Menem had had two attempts before with Néstor Rapanelli and González to anchor expectations as economists say.

But the thing did not work out.

The first failed due to accelerated monetary expansion inconsistent with fiscal policy and income policy;

the second, due to a monetary contraction that was made possible by a previous compulsory exchange of time deposits for bonds.

With the convertibility, Menem won the 1991 elections.

Macro stability highlighted the tasks that you had already accomplished.

Between 1989 and 1991, Menem made rapid progress in

privatization

,

labor reform,

and

trade opening

.

Suddenly it was as if the Argentine economy went from being a color film.

Menem turned to 'politics' to maximize the chances of success of his model.

He negotiated with the unions and workers so that they obtained participation in the privatizations.

Also with the governors.

Nestor Kirchner, governor of Santa Cruz, told Menem

"the best president of democracy" after having privatized YPF

.

If Menem had reached paradise, his Minister of Economy had not.

Cavallo focused on what Gerchunoff-de León calls “the politically abstract question of the sustainability of his plan”, more specifically “the initial exchange rate had been lower than the one to which he had aspired”.

I mean, the dollar was beginning to lag.

It was the time when the Techint group proposed making convertibility more flexible.

For Menem that regime was untouchable.

For the economists on Cavallo's team, unsustainable.

But a government is made not only of decisions that are made but also of those that are postponed.

In Argentina the 1 to 1 became costly to break and the creature took on a life of its own.

Convertibility was born at the foot of

favorable global financial conditions

.

When these began to be tested, the model showed limitations.

First there was the devaluation of the Mexican peso, then that of the Asian currencies and, finally, that of the real.

The

IMF

, which granted two extended facility loans as Martín Guzman seeks today, criticized the fixed exchange rate regime, free capital mobility and fiscal waste in the provinces.

Menem inaugurated an era.

Presidents began to talk about the

economy

, as would their successors.

-

I understand economics.

Also of economic philosophy, but I am not a technician.

A technician is a fundamental collaborator: that is the case of Minister Cavallo, who has a luxury team and is fulfilling a really exceptional task in terms of economics from my leadership.

Cavallo carries on his shoulders the responsibility of sustaining this economic plan designed by this President of the Nation in 1989.

Menem's triumph in 1995 coincided with a

record unemployment rate

in the country of 18.6%.

He won with the promise that unemployment would be attacked in its second stage.

-

Everything that is in these stores is obtained in Buenos Aires

, he said walking through

Davos

in his second term.

Menem was already a mark of global capitalism and the success of the Washington consensus.

But the shops on Alvear Street weren't those on the Promenade.

And those of the Conurbano were the peace of the cemeteries.

Menem lost the 1997 elections when the economy was growing.

It showed that with price stability poverty also increases.

Convertibility was a reference for the presidents and economists who came later.

For Fernando de la Rúa, the solution to the 1999-2001 recession was to 'make the 1 to 1 more flexible' with structural reforms.

Nestor Kirchner, already in post-convertibility, said he was in favor of a high and competitive dollar.

Mauricio Macri, of a free dollar and not to delay it.

Menem faced the inmates of his party in 1999, judicial problems, international scandals and the desperate cries of the new poor.

But it was always clear to him that there was something that would not keep him awake: the dollar.

He was able to play

golf

.

Source: clarin

All business articles on 2021-02-14

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