Monday, November 1, 2010

Néstor Kirchner: Argentina's independence hero

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

Néstor Kirchner: Argentina's independence hero

The death of Argentina's former president is a sad loss. His bold defiance
of the IMF paved the way for South America's progress

By Mark Weisbrot
The Guardian/UK: 27 October, 2010

The sudden death of Néstor Kirchner 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 both to powerful moneyed
interests and to most of the economics profession, which was insisting that
his policies would lead to disaster. They were proved wrong, and Kirchner
right.

Argentina's recession from 1998-2002 was, indeed, comparable to the
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 2001 and January 2002, the country
underwent a massive devaluation, a world-historical record sovereign default
on $95bn 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 major challenge came from the International Monetary Fund (IMF). The IMF
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 IMF 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 its 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 IMF rather than accept its conditions. This was an
extraordinarily gutsy move - no middle-income country had ever defaulted to
the IMF; 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 IMF 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 US influence, especially over the recently
independent countries of South America.

Kirchner also 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 alter its trajectory
dramatically.

This united bloc 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
takeover in Honduras, where US backing for the coup government proved
decisive. 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 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 Fernández, Néstor Kirchner made an enormous contribution in helping
to move Argentina and the region in a progressive direction. These efforts
have not generally won him much favour in Washington and in international
business circles, but history will record him not only as a great president
but also as an independence hero of Latin America.

. Editor's note: An editing error led to the misspelling of the South
American trading bloc, Mercosur, although it had been correct in the
author's original; this was amended at 12:20 EST [17:20 BST] on 28 October
2010. A further correction was made where Argentina's devaluation was stated
as having occurred in December 2002 and January 2003; in fact, it was
December 2001 and January 2002. This was amended at 12:50 EST [17:50 BST]

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