Kirchner Rescued Argentina's Economy, Helped Unite South
America

By Mark Weisbrot

The Guardian Unlimited (UK)

October 27, 2010.

http://www.guardian.co.uk/commentisfree/cifamerica/2010/oct/27/nestor-kirchner-argentina-imf

The sudden death of Néstor Kirchner today 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 U.S. Great Depression in terms of unemployment, which
peaked at more than 21 percent, and lost output (about 20
percent 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
percent 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 in that attempted coup there a few weeks ago.
Unfortunately they did not succeed in overturning last
year's military coup in Honduras, where U.S. backing of the
coup government proved decisive. But Argentina, together
with UNASUR, still refuses to allow Honduras back into the
OAS, despite heavy lobbying from Washington.

Kirchner also earned respect from human rights organizations
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 Fernández, Néstor 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 favor in Washington and in
international business circles, history will record him not
only as a great president but an independence hero of Latin
America.

Mark Weisbrot is co-director of the Center for Economic and
Policy Research, in Washington, D.C. He is also president of
Just Foreign Policy.

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University.

[Mark Weisbrot is co-director of the Center for Economic and
Policy Research, in Washington, D.C. He is also president of
Just Foreign Policy.]

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