Panel discusses solutions to crisis in Argentina
By LIZ KAHLING
News Writer
The recent political and economic crisis in Argentina brought together a panel of professors, scholars, and professionals to discuss "A Tale of Pesos and Presidents," Tuesday at the Hesburgh Center.
Having achieved stability in the 1990s after years of hyperinflation and political scandal, the consensus two years ago was that politics had become "boring" and that Argentina was on the road to normal politics, said panelist Gretchen Helmke, a government professor.
"It seems now that abnormality has returned with a vengeance," Helmke said.
Only two years into office, President Fernando de La Rua was forced to resign Dec. 20 after rioting and pot-banging erupted in the streets of Buenos Aires. Helmke described the six months prior to his resignation as a "slow motion freefall," with de La Rua losing much of his support. In the three weeks following his resignation, three interim presidents stood until President Eduardo Duhalde was finally appointed by the congress on Jan. 2, vowing to leave the "immoral" economic model that de La Rua followed.
A currency board in 1991 pegged the Argentine peso one-for-one with the dollar to end the chronic problem of hyperinflation and price volatility, said panelist Jaime Ros, an economics professor. Prices stabilized and positive GDP growths were experienced until the Russian economic crisis in 1998, beginning a four-year recession in Argentina. Ros said that overvaluation of the peso and a growing external debt were the two major contributors to what went wrong.
While acknowledging that economic policy is a factor, Sciarano concluded that there is a fundamental sociological issue that is more responsible than political or economical.
"Everyone knew that the currency board required fiscal discipline," he said. "Why did they run fiscal deficit? Why would a country this rich with so many intelligent people act in this manner?"
Louis Sciarano, a Notre Dame alum working in international banking consulting, said the country is in a time warp in which thought processes have not changed. Few attempts were made to eliminate the 4 percent fiscal deficit run every year since 1991. Sciarano said that Aregentina should be wary of banks, investors and creditors withdrawing any capital still remaining, giving little possibility of financial faith returning to Argentina markets.
According to the panelists, the currency board should have floated the exchange rate once inflation was brought down despite the negative macroeconomic policies that contributed to the crisis.
All News Stories for Wednesday, January 30, 2002
