Argentina — Poster-Child Gone Bad?
Do you think debt default is the only solution to Argentina’s current crisis?
December 14, 2001
Argentina is on the verge of having to default on its loans — or, to put it more bluntly — declare national bankruptcy. But what happened to this country, which used to be the poster-child for good behavior among emerging market economies? And what, if any, lessons does Argentina’s experience offer to other countries? Our new Read My Lips takes a look.
What’s the basic problem?
“Argentina is a country without credit. It’s time to face reality.”
(Argentine President Fernando de la Rúa)
How do things look from abroad?
“Watching Argentina default on its government debt is like watching a car crash in slow motion.”
(David Wessel, Wall Street Journal columnist)
Whose fault is it?
“They’ve been off and on in trouble for 70 years or more. They don’t have any export industry to speak of at all. And they like it that way. Nobody forced them to be what they are.”
(U.S. Treasury Secretary Paul O’Neill, on Argentina)
What are the causes?
“It is as if the country, like a rebel teenager, always needs to be on the brink of crisis before reason prevails.”
(Argentina’s Minister of Economy Domingo Cavallo, on his country’s economic crisis)
What can be done?
“The first people that we have to trust in Argentina are the Argentines.”
(Domingo Cavallo, Argentine Economy Minister, on Argentina’s economic problems)
Is it that easy?
“I was being patriotic by not removing my savings earlier. And now I see what a fool I was to put any trust at all in these corrupt politicians.”
(Retired Argentinian, on Mr. Cavallo’s decision to restrict bank withdrawals)
Is only the economy to blame?
“The truth is that Argentina’s crisis is as much political as it is economic.”
(Rosendo Fraga, political analyst in Buenos Aires)
What needs to happen on the political front?
“It’s time to transform our political system. The people are demanding that we do it immediately. We have to reduce the cost of politics.”
(Argentine President Fernando De la Rua, on Argentina’s attempt to cut the cost of government)
What does the current government propose?
“It is very important that we Argentines band together in this battle that we are winning, the battle to leave the prospect of default behind us.”
(Argentine Economy Minister Domingo Cavallo)
Does the opposition agree?
“We are going to defend our people. The country will not be able to cope with another [austerity] adjustment. We can’t just be worried about interest rates and debt.”
(Adolfo Rodriguez Saa, Peronist Governor of San Luis province)
And what do the people think?
“We are a country that has been damned by bad leaders. The only legacy they have left us is a disaster for the common man.”
(Rodolfo Giletta, retired lawyer in Argentina)
Can outsiders help?
“In my 10 years at the IMF, the decision to extend further support to Argentina in August was the worst mistake the Fund made.”
(Michael Mussa, former IMF chief economist)
Did the bailout really help the Argentine people?
“If you want to help poor people, don’t say you’re going to do it through an IMF bailout, when the principal beneficiaries are foreign investors.”
(Adam Lerrick, Carnegie Mellon University economist, on Argentina’s economic crisis)
What is the current need?
“Life is about survival now, putting food on the table. There are no more dreams in Argentina.”
(Argentine psychologist, on the consequences of the economic crisis)
Will the United States help?
“We’re working to find a way to create a sustainable Argentina — not just one that continues to consume the money of the plumbers and the carpenters in the United States who make $50,000 a year and wonder what in the world we’re doing with their money.”
(U.S. Treasurer Paul O’Neill, on IMF negotiations with Argentina)
What are the implications for others?
“Japan now faces the choice: Either restructure its economy or become the Argentina of the 21st century — a spent power.”
(Analyst at J.P. Morgan in Tokyo)
December 14, 2001