Kirchner
rescued Argentina's economy, helped unite South
America
The
unexpected death of Argentina's former president Nestor
Kirchner has robbed the country and the region of an able leader. In
this tribute, Mark Weisbrot highlights Kirchner's presidential
achievements, especially in standing up to the IMF and powerful moneyed
interests.
THE
sudden death of Nestor Kirchner on 27 October is a great loss not only
to Argentina but to the region and the
world. Kirchner took office as president in May 2003, when Argentina was in the initial stages
of its recovery from a terrible recession. His role in rescuing Argentina's economy is comparable to that of Franklin
D Roosevelt in the Great Depression of the United States. Like Roosevelt, Kirchner had to stand up not only to powerful
moneyed interests but also to most of the economics profession, which
was insisting that his policies would lead to disaster. They proved
wrong, and Kirchner was right.
Argentina's
recession from 1998-2002 was indeed comparable to the US Great Depression
in terms of unemployment, which peaked at more than 21%, and lost output
(about 20% of GDP). The majority of Argentines, who had until then enjoyed
living standards among the highest in Latin America, were pushed below the poverty line. In December
of 2002 and January 2003, the country underwent a massive devaluation,
a world-historical record sovereign default on $95 billion of debt,
and a collapse of the financial system.
Although
some of the heterodox policies that ultimately ensured Argentina's
rapid recovery were begun in the year before Kirchner took office, he
had to follow them through some tough challenges to make Argentina the fastest-growing economy
in the region.
One
big challenge came from the International Monetary Fund (IMF). The Fund
had been instrumental in bringing about the collapse - by supporting,
among other bad policies, an overvalued exchange rate with ever-increasing
indebtedness at rising interest rates. But when Argentina's
economy inevitably collapsed the Fund offered no help, just a series
of conditions that would impede the economy's recovery. The IMF was
trying to get a better deal for the foreign creditor. Kirchner rightly
refused the Fund's conditions, and the IMF refused to roll over Argentina's debt.
In
September of 2003 the battle came to a head when Kirchner temporarily
defaulted to the Fund rather than accept its conditions. It was an extraordinarily
gutsy move - no middle-income country had ever defaulted to the Fund,
only a handful of failed or pariah states like Iraq or Congo. That's because the IMF was
seen as having the power to cut off even trade credits to a country
that defaulted to them. No one knew for sure what would happen. But
the Fund backed down and rolled over the loans.
Argentina
went on to grow at an average of more than 8% annually through 2008,
pulling more than 11 million people in a country of 40 million out of
poverty. The policies of the Kirchner government, including the central
bank targeting of a stable and competitive real exchange rate, and taking
a hard line against the defaulted creditors, were not popular in Washington
or among the business press. But they worked.
Kirchner's
successful face-off with the IMF came at a time when the Fund was rapidly
losing influence in the world, after its failures in the Asian economic
crisis that preceded Argentina's collapse. It showed the
world that a country could defy the IMF and live to tell about it, and
contributed to the ensuing loss of IMF influence in Latin America and middle-income countries generally. Since
the IMF was at the time the most important avenue of Washington's
influence in low- and middle-income countries, this also contributed
to the demise of United States
influence, and especially in the recently-won independence of South
America.
And
Kirchner played a major role in consolidating this independence, working
with the other left governments including Brazil,
Venezuela, Ecuador,
and Bolivia.
Through institutions such as UNASUR (the Union of South American Nations),
MERCOSUR (the South American trading bloc), and numerous commercial
agreements, South America was able
to dramatically alter its trajectory. They successfully backed Bolivia's
government against an extra-parliamentary challenge from the right in
2008, and most recently stood behind Ecuador
during the attempted coup there in September. Unfortunately they did
not succeed in overturning last year's military coup in Honduras, where US backing of the
coup government proved decisive. But Argentina,
together with UNASUR, still refuses to allow Honduras
back into the Organisation of American States (OAS), despite heavy lobbying
from Washington.
Kirchner
also earned respect from human rights organisations for his willingness
to prosecute and extradite some of the military officers accused of
crimes against humanity during the 1976-1983 dictatorship - reversing
the policies of previous governments. Together with his wife, current
president Cristina Fernandez, Nestor Kirchner has made an enormous contribution
in helping to move Argentina and the region in a progressive
direction. Although these efforts have not generally won him much favour
in Washington and in international
business circles, history will record him not only as a great president
but as an independence hero of Latin America.
Mark
Weisbrot is co-director of the Center for Economic and Policy Research
in Washington, DC. He is also president of Just Foreign Policy. This
article first appeared on the website of the Guardian <www.guardian.co.uk>.
*Third
World Resurgence No. 242/243, October-November 2010, pp 50-51
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