Argentina: economic crisis and development history

Mauricio Macri won the Argentinian presidential elections at the end of 2015 promising to change Argentina’s course, which in Cristina Kirchnner’s second mandate did not show the same levels of growth it did on the first time nor in the previous government, her husband’s, Nestor Kirchnner’s, besides the political atrition she faced with corruption charges and conflicts with many internally important sectors as the media and farming. Macri made a liberal turn in economic policy: reduced subsidies, adjusted tariffs, allowed for exchange rate fluctuation. Prices went up significantly starting in 2016 with pushes by adjustments and currency depreciation, but the government argued there was a strategy for gradual fall in inflation. Public deficit is not big and many provinces are in surplus. However, and here lies the biggest issue, the country has expressively grown its debt and external deficit. Following the rise in interest rates in the USA and the attraction of world capital to the treasuries, this vulnerability in the Argentinian economy has left the country very much exposed to speculative moves. The huge depreciation of the peso this year propelled inflation and eroded the population’s purchase power, which took the economy to a recessive state. The elevation of interest rates to the highest level in the world with the intent of stopping national currency depreciation made credit more expensive and disencouraged growth even more. The IMF opened a line of credit of 50 billion dollars to secure the country’s solvency. That being the case, as it is typical in loans from the fund, Argentina has commited to deepening and speeding up fiscal adjustments.

It is a very different scenario from the 2000’s. when Nestor Kirchnner in 2006 paid the 9,8 billion dollars of debt to the International Monetary Fund, following the move just recently done by Brazil. The commodity boom made possible by the strong expansion of the Chinese economy benefitted the Argentinian economy enormously in this period, as well as raw material exporters around the world and allowed for reserve currency accumulation. The international scenario, not as favorable in the 2010’s, did not position Argentina for that same performance.

But what else was there that, besides considerations of economic nature, made a country not be able to consolidate as a developed economy, even if between the end of the 19th century and the 1930’s it was at the top seven richest countries in the world? As pointed out by the social scientist and Professor of International Economic Policy, Jose Luis Fiori in História, Estratégia e Desenvolvimento (in English: History, Strategy and Development) “As it happened in the United States, in Germany and in Japan, Argentina also went through an extraordinary economic and social transformation between 1870 and 1920. (…) its territory more than tripled; its population multiplied by five; its railroad network went from 500 to 31.100 kilometers; and its GDP grew to an average annual rate of 6% (maybe the biggest in the world in the period), while its per capita income was four times bigger than the Brazilians’ and double that of the North Americans’.” (FIORI, p.101, 2014) The same author, when searching for the answer for that question, underlines, in regards to heteredox and orthodox economists’ positions, that “After 1930, however, its growth gradually came to be more unstable, going through increasingly shorter and more intense cycles. Raul Prebisch attributed this inflexion to international changes and to the way operations were run in the new cyclical center of the world economy, the United States, in addition to the endogenous industrial frailty of the primary exporter economies. Later on, the orthodox and neoliberal economists attributed the blame for the Argentinian change of direction to the populist economic policies of the Juan Domingo Peron government, in spite of Peron only having governed between 1945 and 1955 and between 1973 and 1974.” (FIORI, p. 102, 2014)

Fiori proposes a new thesis to explain the Argentinian failure in consolidating in the 20th century as a world power. It is not centered around the adoption of an orthodox or heterodox economic policy, or populist, as in the conventional explanations, but in the absence or impossibility of an expansive strategy for the accumulation of power. According to the author “(…) The military conquest of the Argentinian west allowed for the continuous economic expansion/occupation of new territories until the end of the 1920’s. That is why one can say that the Argentinian liberal State was born out of a civil war that lasted for half a century and was financed by the success of its primary exporter model. And it was exactly at the end of this expansion that the political crisis responsible for the periodical disorganization of the State and the definitive polarization of the Argentinian society clicked. During the “infamous decade” [the 1930’s] its many governments launched Keynesian economic policies and got to the point of initiating an ambitious program for industrialization, designed by Raul Prebisch himself. That which was lacking, however, was a new expansive strategy and one in the long-term for that matter, and a group capable of transforming the Argentinian economy in an instrument of its own international power accumulation.” (FIORI, p. 102-103, 2014). Fiori also wonders whether outside the Eurasian and North Atlantic space it would be possible for Argentina to insert itself in interstate competition with the main global political players, and states that dependentists and neoliberals think not. Still, even though it doesn’t answer the question, the author suggests that economic policy wasn’t responsible for the peripheric position Argentina was left to in the world after the 1930’s, but the absence of a project of power, of a long-term strategy for international projection to the country. And then, there are two problems: the internal coalition necessary to sustain, throughout time, this project, a political project that often cannot balance an international system structure itself and the “vetoes” of leading powers in the system to the countries that bring about challenges to its rules and hierarchy.


FIORI, José Luis. História, Estratégia e Desenvolvimento. São Paulo: Boitempo, 2014.