Re: Argentina and free trade

["Federico Todeschini" <todeschinisat@xxxxxxxxxxxxxx>]

Leonardo:

I know Argentinas debty measures are not that bad, and that dollarization
wont help at all. What i dont think that any of the conventional solutions
will help.

Federico
----- Original Message -----
From: "Leonardo Vera" <lvera@xxxxxxxxx>
To: "J. Barkley Rosser, Jr." <rosserjb@xxxxxxx>
Cc: <pkt@xxxxxxxxxxxxxxxx>
Sent: Friday, December 14, 2001 2:04 AM
Subject: Re: Argentina and free trade


> I think the Argentina problem can be better evaluated looking at the
> solvency constraint and the monetary regime. Argentina will end up the
year
> with a federal fiscal deficit no bigger than 3% of GDP, a primary fiscal
> surplus, and debt/GDP ratio of 45%. Such figures are not bad. The bad
> aspect of the solvency constraint is the real interest rate-growth
> deviation. Argentina problem is lack of growth (more than 40 months of
> recession). Here is where the monetary regime does not help. You have no
> monetary policy and you can not use the exchange rate. To make things
> worse, Cavallo has been forced into an austerity plan that pretends to
> reduce the fiscal deficit to cero which will surely deepen the recesion.
As
> Paul has mention dollarization will not solve the BOP problem (it will not
> help growth either). So, it is clear that the convertibility and the
> currency board system have to be evaluated. Then the discussion needs to
> focus on the best transition to a new exchange rate regime minimizing the
> balance sheets effects on the financial system.
>
> Best, Leonardo Vera
>
> At 10:48 a.m. 13/12/01 -0500, you wrote:
> >Federico,
> >     If Argentina were to eliminate the currency
> >board and devalue the peso (or let it float),
> >do you seriously suggest that the utilities
> >would continue to price in dollars?  I
> >seriously doubt it.  The problem of dollar-
> >denominated debt in Argentina is, however,
> >a very serious problem that will only be gotten
> >around by some kind of default, already in
> >progress, I gather.
> >Barkley Rosser
> >----- Original Message -----
> >From: "Federico Todeschini" <todeschinisat@xxxxxxxxxxxxxx>
> >To: "J. Barkley Rosser, Jr." <rosserjb@xxxxxxx>
> >Sent: Thursday, December 13, 2001 9:29 AM
> >Subject: Re: Argentina and free trade
> >
> >
> >> Brakley Rosser: What i mean with the public utilities pegged to the
> >dollar,
> >> is this: When Argentina began the process of privatization of the State
> >> Enterprises, the new enterprises fixed their prices in dollars. So a
> >> devaluation will leave this prices unmodified, and this will be worse
for
> >> the competitivity of the country
> >>
> >> Federico
> >>
> >> ----- Original Message -----
> >> From: "J. Barkley Rosser, Jr." <rosserjb@xxxxxxx>
> >> To: "Federico Todeschini" <todeschinisat@xxxxxxxxxxxxxx>
> >> Cc: "Post Keynesian Thought" <pkt@xxxxxxxxxxxxxxxx>
> >> Sent: Wednesday, December 12, 2001 8:23 PM
> >> Subject: Re: Argentina and free trade
> >>
> >>
> >> > Federico,
> >> >       I do not know what you mean by your
> >> > statement about public utiilties in Argentina
> >> > being pegged to the dollar.
> >> >      What we see in Argentina is a kind of
> >> > unpleasant lockin effect.  Because of the
> >> > currency board, many debts and other elements
> >> > of the Argentine economy are now irrevocably
> >> > dollarized.  That means that a devaluation NOW
> >> > will cause all kinds of problems, including a
> >> > default that is effectively happening anyway.
> >> > But, that is not an argument for either pegging
> >> > to the dollar, a dollar currency board upfront, or
> >> > general dollarization.   It is simply an argument
> >> > that says that since Argentina has got a currency
> >> > board, devaluation cannot help as much as it
> >> > would if Argentina did not have a currency board.
> >> > I could not agree more.
> >> > Barkley Rosser
> >> > ----- Original Message -----
> >> > From: "Federico Todeschini" <todeschinisat@xxxxxxxxxxxxxx>
> >> > To: <pkt@xxxxxxxxxxxxxxxx>
> >> > Sent: Wednesday, December 12, 2001 11:54 AM
> >> > Subject: Re: Argentina and free trade
> >> >
> >> >
> >> > > I dont think the argument about devaluation is good enough for
> >> Argentina.
> >> > > Our Public Utilities are also pegged with the dollar (USA
inflation),
> >> and
> >> > > they are a very important part of the Argentina problem, and it
cant
> >be
> >> > > solved just with a devaluation.
> >> > >
> >> > > ----- Original Message -----
> >> > > From: "pdavidso" <pdavidso@xxxxxxx>
> >> > > To: "J. Barkley Rosser, Jr." <rosserjb@xxxxxxx>
> >> > > Cc: <pkt@xxxxxxxxxxxxxxxx>
> >> > > Sent: Tuesday, December 11, 2001 12:20 PM
> >> > > Subject: Re: Argentina and free trade
> >> > >
> >> > >
> >> > > > >===== Original Message From "J. Barkley Rosser, Jr."
> >> <rosserjb@xxxxxxx>
> >> > > =====
> >> > > > >     Henry Liu puts forth Argentina as an
> >> > > > >example that somehow shows the problems
> >> > > > >of free trade.  Hardly.  Argentina's problems
> >> > > > >clearly arise from its pegging of the peso to
> >> > > > >the US dollar at an overvalued rate.  This is
> >> > > > >a macroeconomic problem, not a microeconomic
> >> > > > >one due to free trade as such.  If it had devalued
> >> > > > >when its main trading partner, Brazil, did, I doubt
> >> > > > >it would be in the recession it is in now.
> >> > > > >Barkley Rosser
> >> > > >
> >> > > > And it also  suggests why dollarization does not solve balance of
> >> > payments
> >> > > > problems when a nation trades with other nations linked to the
euro,
> >> yen
> >> > > or
> >> > > > freely floating against the dollar.
> >> > > >
> >> > > > paul
> >> > > >
> >> > > > Paul Davidson
> >> > > > Editor, Journal of Post Keynesian Economics
> >> > > > University of Tennessee
> >> > > > SMC 523
> >> > > > Knoxville, Tennessee 37996-0550
> >> > > > phone # (865)974-4221; fax #(561)737-8262;
> >> > > > email pdavidson@xxxxxxx
> >> > > >
> >> > > >
> >> > >
> >> > >
> >> >
> >> >
> >>
> >>
> >
> >
> >
>
> _____________________________
> Leonardo  Vera
> Universidad Central de Venezuela
> FACES, Escuela de Economía
> Caracas, 1050
> Venezuela.
>