Argentina's Economy Minister Roberto Lavagna Roberto Lavagna (Buenos Aires, 24 March 1942) is an Argentine economist, and was the former Minister of Economy and Production of Argentina until 28 November 2005, when he was replaced with Felisa Miceli, president of Banco de la Nación Argentina. professes a love for reading, art collecting and gardening. But to anyone who's ever sat across from him at a negotiating table he probably seems more like a bloodthirsty blood·thirst·y
1. Eager to shed blood.
2. Characterized by great carnage.
blood pugilist. Since being handed the reigns of Argentina's shaky economy in April 2002, the economist has used his skills as former diplomat to outmaneuver out·ma·neu·ver
tr.v. out·ma·neu·vered, out·ma·neu·ver·ing, out·ma·neu·vers
1. To overcome (an opponent) by artful, clever maneuvering.
2. more than his fair share of heavy-weights, including the International Monetary Fund (IMF IMF
See: International Monetary Fund
See International Monetary Fund (IMF). ). Lavagna spoke with LATIN TRADE Latin Trade is a monthly magazine covering global business in Latin America and the Caribbean. Similar to Forbes and Fortune Magazine in coverage, the magazine was founded in 1993 and now publishes 87,000 copies 1 each month in Spanish, Portuguese, and English. correspondent Joshua Goodman about Argentina's outlook after its historic collapse.
Many creditors believe, given Argentina's strong economic performance, the 3% budget surplus it promised the IMF should be increased. Why isn't Argentina saving more?
The international financial community was very flexible with Argentina in the 1990s and didn't say anything when the average primary fiscal deficit was 2.1%. And now, in the middle of a crisis, we've promised to reach a surplus of 3%, something Argentina hasn't done in decades. For us that's more than a sufficient effort. For those who say it's not enough to pay the debt, I'd respond they should've looked at the situation with the same objectivity before.
Analysts say the debt-restructuring proposal doesn't clear the way for investment and credit, and thus a sustainable recovery, to return. How do you respond?
I'm sorry to be the bearer of bad news, but Wall Street is plain wrong. It's just the latest, negative version of the economy from the same people who predicted Argentina would spiral into hyperinflation Hyperinflation
Extremely rapid or out of control inflation.
There is no precise numerical definition to hyperinflation. This is a situation where price increases are so out of control that the concept of inflation is meaningless. , which it didn't; of that the recovery was just an Indian summer Indian summer
a period of mild, dry weather occurring in U.S. and Canada in late autumn. [Am. Culture: Misc.]
See : Autumn , which it wasn't; or that we're now heading into a leveling off period, which we're not. Look at the facts: Investment has been positive since last year and now growing at an annual rate of 40%. Credit for the first time in August expanded and will continue to do so as banks are very liquid. Surely we'd always like to see more investment, but it's misleading to say the recovery isn't sustainable.
To what do you attribute the lukewarm luke·warm
1. Mildly warm; tepid.
2. Lacking conviction or enthusiasm; indifferent: gave only lukewarm support to the incumbent candidate. reception of the proposal by investors?
I'd say reception has been pretty much as we expected--we knew there'd be a lot of long faces. But it's also true that the only thing shorter than investors'temper is their memory. Look at Russia. Four years after declaring default it has now reached investment grade. Another interesting fact is the country risk on Argentina's performing debt, which went from 2,500 basis points last year to 1,100 today, roughly the same level as Brazil's. One has to always differentiate between stock and flow, the assumed cost of the default and the prospect for the future. That said, it's not our intention to reach an agreement with creditors at any cost just so we can return to the capital markets in short order and begin the debt cycle all over again. It'll probably be three or four years before we return.
How can the government restore the credibility of contract law given the huge rupture that has already taken place?
If there's one fundamental lesson we've all learned from the Argentine crisis, it's that laws without a viable economic model behind them aren't worth anything, and vice versa VICE VERSA. On the contrary; on opposite sides. . Preceding the crisis, Argentina had all kinds of laws on the books to protect investors, obligating the government to maintain a balanced budget Balanced budget
A budget in which the income equals expenditure. See: budget.
A budget in which the expenditures incurred during a given period are matched by revenues. and the fixed exchange rate and prohibiting it from touching deposits. All of this collapsed in December 2001.
The 2004 budget contains a 12% increase, a large portion which is subsidies to sectors of the economy that have traditionally run huge deficits, like the railroad and airline industries. Doesn't this go against the government's goal of spending its resources more efficiently?
First of all, these are emergency measures we took to address an unprecedented social crisis. These aren't subsidies to companies but to people who've suffered a huge cut in their purchasing power Purchasing Power
1. The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing power is important because, all else being equal, inflation decreases the amount of goods or services you'd be able to purchase.
2. . And had we allowed these companies to fail we would've been stuck with an even higher tab in the form of welfare payments.