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

[Spiffor]

Originally posted by Saras
here: "Now they'll finally be able to developan economic policy that is adapted to their needs."

Where did I go wrong? The IMF is a dogmatic body which pushes for very similar policies across the world, which are only marginally tailored to each country. Besides, the IMF measures "success" in a way that is very different from the common people.

It is a very good thing that the economic policy is finally back in the hands of democratically elected people. Maybe the economy will now finally benefit the Brazilians

[VetLegion]

Spiffor, the problem is that democracy is not the solution. Does the fact that a democratically elected government is spending too much make the debt go away? Not at all.

Argentina ended in a crisis because government didn't have the strength to cut spending - it would have been political suicide. Did the people want the government to stop spending? Most likely not.

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.

[Spiffor]

OTOH, I'll ask you about these countries (like the Netherlands, or the US under Clinton), which are democratic and yet have balanced budgets. They aren't under the IMF's authority, and yet they balance their budgets, while spending on areas they consider relevant.

IMO, Democracy remains the best solution for economic policies that make sense in the land. Especially in countries that now have better leeway, since they have little debt, and much less corruption than before (which is, indeed, a positive effect of the crises and of the IMF)

[VetLegion]

US doesn't have a balanced budget

[Spiffor]

Originally posted by VetLegion
US doesn't have a balanced budget

Notice the "under Clinton" part

[VetLegion]

BTW., my country also has IMF agreements. They serve as justification for politicians. "We have to do this, IMF told us so". It isn't really true, we don't have to do anything beside making sure that we are able to pay back our loans.

Where we spend our billions is our own problem.

[Colonâ„¢]

Originally posted by Spiffor
OTOH, I'll ask you about these countries (like the Netherlands, or the US under Clinton), which are democratic and yet have balanced budgets. They aren't under the IMF's authority, and yet they balance their budgets, while spending on areas they consider relevant.

IMO, Democracy remains the best solution for economic policies that make sense in the land. Especially in countries that now have better leeway, since they have little debt, and much less corruption than before (which is, indeed, a positive effect of the crises and of the IMF)

In Europe there's the growth and stability pact, and even that hasn't prevented countries like Germany and France from building debt (in the case of France, growing from 35% of GDP in 1990, to 66% in 2005), or encouraged Italy to act vigorously to cut down its pile of it.

[Barnabas]

why are these little former soviet block countries now full of neo con right wingers?

[Spiffor]

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

Because they reject everything that is vaguely reminiscent of the USSR, and they believe that the exact opposite of the USSR has to be done in all circumstances.

Also, Saras is a banker.

[VetLegion]

Why are these little latin american countries eternal economic disaster zones who can't take care of themselves, but it's always someone else's fault?

[Barnabas]

Originally posted by VetLegion
Spiffor, the problem is that democracy is not the solution. Does the fact that a democratically elected government is spending too much make the debt go away? Not at all.

Argentina ended in a crisis because government didn't have the strength to cut spending - it would have been political suicide. Did the people want the government to stop spending? Most likely not.

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.

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.

The government wasnt really expending much, for example the debt was less than 50% of the gdp , but the gdp was inflated by the fake currency parity to the dollar, so once they devaluated their currency, it became more than 100% of the gdp.

And the imf supported the peso dollar parity, giving many loans to Argentina to sustain their currency parity tot he dollar.

Since devaluating, Argentina has not followed imf instructions, Argentina has high budget superavit, cheap peso, has frozen privatized public services (water, electricity) tariffs, and says that they will not pay to the people who didnt accept the restructured debt (those 20.000 m dollars).

IMF of couse like the high budget superavit, but disagrees with the peso being kept artificially low to make exports more competitive and stop imports, because it is harder to pay debts in dollars when the peso is cheap, also says the tariffs should be higher, and that we should make a new deal for the people who didnt enter into the restructuring program.

That is why no deal with the imf has been possible for the past 2 years and the only option was to pay or default,whats surprising is that they payed all at once.

[Spiffor]

The situation is not "eternal". Latin American countries haven't always been disaster zones. There was actually a time where Argentina was very properous. And some countries currently are both economically healthy AND independant from the IMF (Chile for example).

The debt crisis in South America has been fueled by authoritarian/fascistic rulers with an economically interventionist agenda. The regimes were also highly corrupt. Today, democracy is quite firmly in place in South America, and corruption is much less rampant (true, the latter is partly due to the IMF).

[Dinner]

Originally posted by Spiffor
OTOH, I'll ask you about these countries (like the Netherlands, or the US under Clinton), which are democratic and yet have balanced budgets. They aren't under the IMF's authority, and yet they balance their budgets, while spending on areas they consider relevant.

Rich countries like the Netherlands and the US have a lot of assets so even if they elect an irresponsible government (like say the Bush administration and the current Republican controlled Congress) which run up massive debts they will still be able to find private creditors. Eventually even the rich countries can destroy their nation's finances but it takes a hell of a lot more mismanagement to get to that point.

[Barnabas]

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

[VetLegion]

Brachy, the pegging of the Peso to the dollar was Argentine idea, not IMF's!

IMF is a culprit in the crisis insofar as it didn't pull out from supporting the government (which grew ever more indebted) earlier.

The only reason that Argentina has a budget surplus now is because it sank so low during the crisis, that it was able to cut spending everywhere, from paychecks to pensions.

Which is what the IMF was urging it to do before the crisis, but it was politically impossible.