Brazil and Argentina pay all their debt to the IMF, in cash

[Barnabas]

I was born in Tarija but live in Buenos Aries by the way, someone asked in the first page.

[Dinner]

Originally posted by Brachy-Pride

Argentina ended in a riot because the peso was pegged to the dollar, and Argentina didnt really have a 12.000 per capita nominal dollars economy, the currency was ridiculous.
That was eventually bound to collapse, and it finally happened when Brazil (who had followed Argentina´s example) and also had its currency pegged to the dollar devaluated its currency, making the exports of Argentina not competitive, and making most argentine factories move to Brazil.

You do realize that the reason both the Argentine and Brazilian governments kept a high peg was because of their huge national debts, right? International banks didn't want to give them loans in local currencies and instead required them to be repaid in "hard currencies" such as the US dollar. That meant the central governments couldn't repay debts simply by printing more money so they tried to keep the local currencies high so as to maintain their abilities to service there national debts.

The problem is fundimentally their national economies weren't doing well enough to justify those high currency valuations where as the US economy was doing great and the dollar kept going up. Since Argentina and Brazil wouldn't cut their national spending or raise taxes eventually they could no longer maintain the peg to the dollar and they were forced to default.

The entire crisis was directly the result of those countries' governments spending to damn much. The only reason they had a recession followed by economic recovery in 4-5 years was because of the IMF. Without IMF financing they would have been completely without credit and they would have been forced to cut spending far more savagely then what the IMF required them to do.

[Dinner]

Originally posted by Brachy-Pride
Argentina from the last decades of the XIX century till the 1970´s had a very good economy with a european standard of life, it is only in the last 25 years (where they had the military dicatatorship, hyper inflation in the late 80´s, and the crisis of 2001) that for example Spain, Greece and Portugal passed Argentine.

Argentina nowadays has almost the same gdp per capita of 1975 (4700 dollars) 25 lost years

Try the late 1800's until about 1950. Argentina's government then ****ed itself up with their own nationalist ****fest. That just goes to show how fragile economies are and how quickly poor policy decisions can screw things up in a very lasting way.

[VetLegion]

Interestingly enough, Argentina never did default on the money it owed the IMF. To everyone else, yes, but to IMF not. They serviced that debt for the whole time of the crisis.

[Barnabas]

It was Argentina´s idea, but the imf in the late 90´s showed Argentina as one of its best pupils and as an example for other countries to follow, that was when the conomy was growing 7% per year, when everything went downhil they said, we got nothing to do with this.

Dont forget the economy has been growing at 8,5% for three years, a trick of the government is to say, the budget will grow 3%, to make the budget according to those numbers knowing that in fact it will grow more, and later keep the "surprise" extra money for the budget superavit.

[Dinner]

Originally posted by VetLegion
Interestingly enough, Argentina never did default on the money it owed the IMF. To everyone else, yes, but to IMF not. They serviced that debt for the whole time of the crisis.

That's because the IMF only comes in after a default has occured or when one is just moments from occuring. The IMF insists on a series of reforms (cuts in spending and market regulation improvements designed to get the economy growing again in the medium to long term) which restore the nation's ability to actually repay the debt. They don't default on the IMF because the IMF dribbles out money over several years and ties the next dispersement to the recipent country actually completing reforms which improve its ability to repay the loans.

This limits the recipent's ability to default on the IMF's loans and forces them to make the unpopular cuts which restore the nation's ability to repay.

[Q Classic]

Originally posted by Oerdin
More likely the "strings" the IMF insisted on (meaning the economic reforms) fixed their account deficits so that they were no longer about to default on their national debt. The IMF loans and the unpopular cuts that go with them help to solve the underlaying issues which caused these countries to have a liquidity crisis in the first place.

Many of the reforms were needed, yes, particularly in the banking and corporate sectors; however, others, such as the austerity measures, were not.

I'm oversimplifying the problem, I know, but the biggest factor in the Korean problem was that because of the financial turmoil in SEAsia, many of the larger Korean companies began defaulting on their loans as their capital began fleeing from Korea as well. The government, for some reason, began bailing what few it could out, and before long there was a cluster****.

Once the immediate loan (US$90 billion) was made and all things temporarily smoothed over, Korea was easily--and quickly--able to repay that debt (less than a year), and removed nearly all of the conditions the IMF requested. Many of them were brought back in adapted form, but it wasn't the IMF's presence that helped the economy regrow; it wasn't until after its departure did they recover.

In the years since, Korea's increased and diversified its foreign holdings by an enormous amount, which should theoretically insulate it from any such catastrophy in the future.

[chequita guevara]

Originally posted by VetLegion
It took a default, shortages, riots and overnight impoverishment of great number of people for Argentina to be able to collect more revenue than it was spending and to begin repaying the debts.

You act like doing what the IMF wanted wouldn't have resulted in massive improvrishment. Nearly every country which has followed the dictates of the IMF has seen its living standard collapse for the vast majority of its people.

Argentina should have told the IMF to go stuff itself in the 80s after the generals were overthrown and told them to collect their debts from the dictators who took them out.

[Barnabas]

to oerdin, by the way

it is true that peron screwed up argentinas political life in the 50´s and condemned argentine to political chaos for decades, but Argentina like every country after ww2, grew at good rates pretty much every year till the oil crisis in the 70´s.

-----

from wiki, on imf entry

"Argentina, which had been considered by the IMF to be a model country in its compliance to policy proposals by the Bretton Woods institutions, experienced a catastrophic economic crisis in 2001, generally believed to have been caused by IMF-induced budget restrictions — which undercut the government's ability to sustain national infrastructure even in crucial areas such as health, education, and security — and privatization of strategically vital national resources. The crisis added to widespread hatred of this institution in Argentina and other South American countries, with many blaming the IMF for the region's economic problems [2]. The current — as of 2005 — trend towards moderate left-wing governments in the region and a growing concern with the development of a regional economic policy largely independent of big business pressures has been ascribed to this crisis."

[VetLegion]

As I said, it's always someone else's fault.

[VetLegion]

Originally posted by chegitz guevara


You act like doing what the IMF wanted wouldn't have resulted in massive improvrishment. Nearly every country which has followed the dictates of the IMF has seen its living standard collapse for the vast majority of its people.

Did you see the movie The Corporation?

There's a striking image of how somewhere (in Bolivia?) "the IMF forced" privatisation of water supply and this escalated so far that the people were forbidden to collect rainfall

Ten people had to die in clashes with the police before this deal was withdrawn.

Now you tell me, is that the fault of local political elites and their backers or the IMF?

I say the first.

Argentina should have told the IMF to go stuff itself in the 80s after the generals were overthrown and told them to collect their debts from the dictators who took them out.

If I remember correctly, one of the first things the Commies did when they got to power in Russia was to repay the foreign debt?

[Saras]

Originally posted by Brachy-Pride
why are these little former soviet block countries now full of neo con right wingers?

That's a first me a neocon

[Saras]

IMF rocks. Without it Lithuania would be a poor double B minus basketcase.
IMF

[VetLegion]

What did IMF do for Lithuania?

[DinoDoc]

Originally posted by Saras
That's a first me a neocon

Neo-con means whatever a lefty doesn't like.