Néstor Kirchner
Argentina was competitive globally due to the high exchange rate of the country, which made exports relatively cheap. Being a large producer of soy and the fact that the price of soy was relatively high contributed to an enormous amount of foreign currency in the economy, as China became a key consumer of the Argentine soy.
A New Plan
- Kirchner implemented a plan to improve the collection of taxes, hold more reserves for social welfare, and to push for the importing of goods. While doing this, the government also tried to control spending in other aspects of the country so the debt would not once again skyrocket.
- The result of these programs and controlled expenditures gradually allowed the peso to regain its value, recovering to a 3-1 rate vs. the American dollar.
- As this happened, tourism started to return to Argentina, and the exports of agricultural goods grew.
Better Times
An enormous trade surplus resulted, and the government had to intercede into the process in order to keep the peso from gaining further value. Had this occurred, the tax collection plan would have been ruined. Had the tax scheme been ruined, further reindustrialization would have been dispirited.
Argentina’s GDP has grown each year, jumping 8.8% in 2003, 9.0% in 2004, and 9.1% in 2005, and possibilities of 7.5% for 2006. Worker’s wages have not totally caught up to this growth, but are moving up along with prices.
A 12% inflation rate in 2005 was considerably lower than that of other economic crises, but it had still provoked the government to "cool down" some sectors of the economy, restrict benefits for exporters, and put pressure on companies in order to even out prices. Unemployment was reduced substantially in 2005, but the distribution of income has not yet been leveled out.
Table of National Accounts
This table depicts the numbers and percentages for the Argentine economy under President Kirchner, as well as the expected numbers for 2006 & 2007.
Projected GDP Growth
This graph reinforces the numbers from the National Accounts table, showing how the GDP is going to grow over the next couple of years.
Payments of the IVA(Impuesto al Valor Agregado)
This graph shows the Aggregate Value Tax, which is a tax all Argentine citizens have to pay on all goods they purchase. There are ways to get around this tax and during the recession, people took advantage of those methods, therefore keeping more money for themselves. In recent years this percentage has been decreasing, showing that the people of Argentina are putting more trust back into their government and are willing to pay the tax.
2005 Mega-swap
In June 2005 Néstor Kirchner and his then economy minister Roberto Lavagna, implemented what is to date the world’s largest Sovereign Debt Bond Mega-Swap operation with the support of the IMF and the US.
This involved swapping a maze of 152 different bond issues totaling almost $100 billion in US dollars aggregated over the past three decades, for three new streamlined Sovereign Bonds with maturity periods of 30, 35 and 42 years, which, in turn, implied writing off approximately 60% of those Bonds’ nominal values. The unrealistic terms at which this Mega-Swap was done deteriorated Argentina’s position and, so far, the Government has not been able to show that the performance of this new Debt Bond issue is sustainable. The main effect of this Mega-Swap was to worsen and carry forward Argentina’s Public Debt problem making future Financial Public Debt Crises inevitable with the ensuing risk of unleashing financial meltdowns even worse than the one Argentina suffered in 2001 and 2002.
Kirchner-Lavagna Mega-Swap incorporated around $54 billion in US dollars of revamped interest and capital artificially generated during the last months of the catastrophic Fernando de la Rúa Administration in June 2001. Both former government officers have been indicted for fraud, negligence and conflict of interest because of their actions on this matter.
Introduction | Dictatorship | Raúl Alfonsín | Carlos Menem | Fernando de la Rúa
