Back from the brink. (Trade Talk).

In April 2002 when Roberto Lavagna became Argentina's sixth Economy Minister in little over 12-months, the country was in social, political and economic turmoil. Even as the gross domestic product plunged 10.9% in 2002, Lavagna and other members of the economic team kept the country from financial chaos. Now the peso is stable, the economy is growing again and the government's first quarter primary surplus is up nearly 60%. LATIN TRADE contributor Patricia Nazario spoke with Lavagna about the war in Iraq, free trade and other challenges facing the new administration scheduled to take power in late May 2003.

How will the war in Iraq affect Argentina's economic recovery?

The only thing I can say is that in the very short term, due to the fact that Argentina is a net exporter of oil, the effect will not be a negative one like in the case of Uruguay or Chile, which are net importers of oil.

It is extremely important to open markets, especially in agriculture.

Are the Southern Common Market (Mercosur)--Argentina, Brazil, Paraguay, Uruguay and associate members Bolivia and Chile--and Washington's Free Trade Area of the Americas (FTAA) compatible?

Yes. Mercosur is perhaps Argentina's most important project. You can create free trade in the world using building blocks and Mercosur is one of these building blocks. The end result will certainly be larger [than each individual trade bloc], than just the Free Trade Area of the Americas.

What role will free trade play in Argentina's economic recovery?

It's essential. It is extremely important to open markets, especially in agriculture. Agriculture continues to be the most-protectionist and most-subsidized sector in the economy at the world level. The European Union in first place, Japan also, and in second place, the United States is still very, very protectionist in this area. It's essential not just for Argentina, but also for the entire developing world, to achieve changes in these policies.

Tourism has become Argentina's second leading export after oil. How important is tourism as a source of jobs and resource for the country's economic recovery?

It's very important since tourism is labor intensive. Also, it's important in terms of spreading the benefits of recovery all over the country and not just in the city of Buenos Aires.

Argentina has signed 19 agreements with the International Monetary Fund since it joined the organization in 1956. Fifteen have failed. What makes this latest accord different and how will Argentina repay international lenders?

The [economic] growth rate is around 4% and the goal for the entire year will be a little more than 4%. Growth will permit Argentina to start a discussion about fulfilling commitments with creditors. Without growth, of course, it will be completely impossible.

The last few transitions to new governments were volatile: hyperinflation in 1989; depression in 1999; social, political and economic chaos in 2001. How would you characterize the challenges facing the new administration?

This one could be the best transition of the last four. GOP is growing, inflation is low, the budget has a primary surplus, monetary policies are under control, and the exchange rate is extremely stable. Employment is starting to recover. It's starting from a very low level, but it's starting to recover. I think that could be an extremely positive base for the new administration.