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A historic hinge after the swap
Noticias Argentinas
June 28, 2010

The Argentine head of state is at the G-20 Summit in Canada to put out her anti-crisis recipe. The next goal of the Kirchner administration is to return to the voluntary credit market. It would be an important step that a normal country would face in its evolution.

By Gabriel Profiti, NA

Canada, where Cristina Kirchner went to put out her anti-crisis recipe, could be a model to follow for this "post-swap" Argentina that wants to translate its natural and human potential into development, as the host of the G-20 Summit did.

It's that these nations are characterized by their similarities: they began the process of industrialization while they were exporting natural resources and importing capital assets; they are scarcely populated and received significant flows of European immigration; and since World War II they have had similar GDPs per capita.

In those similarities which are also the case for Australia Eduardo Duhalde normally based his prediction that Argentina is condemned to succeed, but there are other views about the reasons for the bifurcation of their paths and the stagnation of our country.

As was revealed in this column, on the Economic Logic website, two Argentines came to the conclusion that the case of Canada was determined by the association with a larger and more complementary economy, like the United States, which is countered by an absolutely different neighborhood in the Argentine case.

Argentina -- Germ n Gonz lez and Carolina Viego argue- didn't have the same advantage that Canada had and fell into a trap that made it all the more dependent on its primary products without being able to have normal development towards industrialization.

It would be innocent to attribute Argentina's failure totally to this variable. The successive interruptions in democratic order, the international alignments and even the pacific vocation of the country with the exception of the Malvinas case also played a role.

For Fernando Petrella, career diplomat who became Vice Minister of Foreign Affairs under Carlos Menem, Argentina lived through "three moments of extremely profound crisis" in the 20th century, which forged its present distance from splendor.

"The first crisis was Argentina's neutrality during World War II; the second was the military dictatorship of the 1970s, which ended with the Malvinas war; the third was the default that damaged Argentina and whose effects have not been overcome," Petrella said.

New stage

According to the website Index Mundi, which compiles official data from different countries, in 2009 Canada had a GDP per capital of US$38,700 (Argentina's was US$12,500), unemployment was at 6.2%, the population below the poverty line was 10.8% after the international crisis, and inflation reached 2.4%.

Cristina Kirchner came to Canada with the chance to show improved figures for Argentina, with respect to what it had in 2003, when her husband took office, but at the same time those statistics are much worse than its host's, unreliable and leaving many pending issues.

The next goal of her government is to return to the voluntary credit markets. It would be an important step for a normal country to face in its evolution. This week there was an important step with the acceptable level of adhesion to the swap of debt remaining in default.

The economic team is now seeking to end the lawsuits filed by the vulture funds and move ahead with the renegotiation of the debt with the Paris Club to take away the stigma of the default.

In principle it is planned that this renegotiation not include a review of the economy by the IMF, as the bylaws of that group of nations establishes, but there are voices in the government that are speaking of a certain flexibility on those Kirchnerist dogmas.

Despite this, one can't use the retort that was put forth that this multilateral organization is not the same as before, because the recipes that it is proposing now to Europe are identical to the ones they it recommended to Argentina before the default and constitute the axis of the K-critique.

After the swap there were mixed signals. Two risk agencies Moody's and Fitch looked at raising Argentina's rating, according to a report in Buenos Aires Economico, which would improve the business climate in the country, but the rebellion of the Casa Rosada continues pitting some orthodox and influential sectors against it.

Under the headline "Time to throw Argentina out of the G-20", economist Arturo Porzecanski said that it will certainly not be discussed in Toronto but the impossibility of Argentina remaining in that group should be on the agenda.

The professor at American University and ex-chief economist for emerging markets at ABN Amro, argued that the country is not one of the 30 top economies of the world, it's the only member that is in default and also the only one that refuses to submit its economy to the supervision of the IMF. Porzecanski didn't say a single word as to why these three things have happened.

What is certain is that different from the start of the last century, the neighborhood is not the same. Moody's itself just gave out a very favorable report on the performance of the region in the crisis, without alluding directly to Argentina.

Meanwhile, some neighbors such as Brazil, Uruguay or Chile are excited to make projections about when they could reach developed status, something unthinkable at the start of the previous decade.

Argentina is closer than it was a century ago, but now the context is different and perhaps Canada will show the way.

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