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The possibility of placing a bond with the banks reflects an act of desperation
El Liberal
December 06, 2009

Evolution. The recovery of the economy expected in 2010 will be slow. In the middle is the urgent need in the government for financing.

Economist Claudio Loser is one of the few known Argentines abroad for this experience and capacity to handle complex situations and roles in organizations where his opinion has a high value in the world economic and financial arena.

This week he gave an interview to EL LIBERAL from his office in Washington, D.C. The economist, with a degree from Cuyo University, lives there when he is not hosting some conference in some other part of the world.

From his perspective, the Argentine economic situation "is serious" while it still has not arrived at becoming "critical." However, the fact that a crisis has still not happened doesn't mean that there are not complex situations to resolve. What follows is the dialogue that this newspaper held with the economist.

How do you see the Argentine economic situation currently and the series of consumer stimulus that the government launched? (universal assistance for children and a "bonus" for retirees) Could it increase inflationary pressure?

While the social objective of the new spending is acceptable from the social point of view, the fundamental question is if Argentina can allow it. Its fiscal sitation has deteriorated, and there are very serious needs in the area of social and economic infrastructure. In those conditions there would be a better channeling of spending in that direction and not in terms of a distributive policy, not to mention the populist policies that this government follows.

The state doesn't rule out placing bonds with the banks in order to finance itself. How could this action be interpreted?

Due to the almost total lack of foreign financing, this possibility reflects an act of desperation by the government, which has already used the margins due to the confiscation of pension funds.

Do you believe that the Argentine economy will be able to jobs lost this year in 2010?

No. The expected recovery in 2010 is very slow and there are many uncertainties among local and foreign investors around expecting a strong recovery.

Do you think that the reopening of the debt swap for the "holdouts" and the announcement on paying the Paris Club will restore confidence of investors in the country? Why?

If it is negotiated in good faith and seeking a non-unilateral solution the prospects are good. However, Argentina wants to choose who to pay and that will carry a big risk that those who don't accept will continue using the international legal route to block any new financing. As for the negotiation with the Paris Club, Argentina has to remember that the individuals there represent countries as sovereign as Argentina, and they don't want their taxpayers and voters to subsidize a country to pay its debts.

How do you view the extension of the economic emergency measures in the country? Do you think that there is more of a political end than an economic one, or the inverse?

The country's situation is series but not yet critical. It's important to continue supporting activity, but inside the mentioned areas of the first question. What is more likely is that the Argentine government is seeking a political, not economic, solution.

PROFILE

 Graduate of Cuyo University, Argentina, with a Masters in Humanities (Master of Arts) and a PhD both from the University of Chicago.

 Senior Fellow at the Inter-American Dialogue, headquarted in Washington made up of opinion leaders and think tanks on western hemisphere issues.

 Ex-director for the western hemisphere for the International Monetary Fund (IMF) that is made up of the 34 countries of the Americas.

 Professor of Economics and International Finance at the University of Cuyo and The American University in Washington DC.

 Advisory to Grupo Andino in Lima, Per .

 Columnist for CNN.

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