Table 1
Main Economic Indicators for Argentina, 19962001
1996
1997
1998
1999
2000
2001
Gross domestic product (bn pesos)
272
292
298
283
284
271
Growth of real GDP per person (%)
4.2
6.3
0.8
-6.5
-0.6
-7.0
Inflation (consumer prices, %)
0.2
0.5
0.9
-1.2
-0.9
-1.1
Inflation (producer prices, %)
3.7
-1.1
-3.3
-4.1
-3.7
-5.6
Unemployment rate, October (%)
17.3
13.7
12.4
13.8
14.7
18.3
Exports of goods (bn US$)
23.8
26.37
26.44
23.3
26.3
26.7
Imports of goods (c.i.f., bn US$)
23.8
30.5
31.4
25.5
25.4
20.3
Current account balance (bn US$)
-6.9
-12.3
-14.6
-12.0
-8.9
-4.4
Monetary base, December (bn pesos)
14.1
15.0
16.4
16.5
15.1
16.9
Net foreign reserves, December
(bn US$)
13.5
16.9
20.8
22.8
21.9
14.8
Peso bank deposits, December (bn)
25.9
32.4
34.4
33.7
31.9
18.6
Dollar bank deposits, December (bn)
28.3
36.9
42.5
47.2
51.9
47.6
Average money market rate, pesos (%)
6.23
6.63
6.81
6.99
8.15
24.90
Average money market rate, US$ (%)
5.91
6.39
6.55
6.07
7.53
12.76
Average lending rate, pesos (%)
10.51
9.24
10.64
11.04
11.09
28.6
Average lending rate, US$ (%)
9.12
7.84
8.95
9.07
9.67
17.5
Federal tax and nontax revenue
(bn pesos)
47.7
55.4
56.7
58.5
56.6
51.1
Fed. spending and revenue sharing
(bn pesos)
52.9
59.6
60.6
65.6
63.2
59.0
Total government spending (bn pesos)
83.2
88.9
92.6
96.7
96.0
94.5
Gross government debt
a
(e.o.p., bn US$)
97
101
109
118
128
141
Country risk premium (e.o.p., %)
4.94
4.61
7.07
5.33
7.73
43.72
Sources: Ministry of Economy, Secretariat of Finance, Undersecretariat of Financing, "Main Macroeconomic
Indicators," www.mecon.gov.ar/download/financiamiento/newinf.xls ; Banco Central de la República Argentina,
Información Monetaria y Financiera Mensual, www.bcra.gov.ar; International Monetary Fund, International
Monetary Statistics; Ministry of Economy, Secretariat of Economic Policy, "Información Económica,"
www2.mecon.gov.ar/infoeco/apendice6.xls (total government spending); and J. P. Morgan Emerging Markets
Would
Bond Index Plus (country risk premium).
Notes: c.i.f. = cost, insurance, and freight; e.o.p. = end of period. Amounts in dollars or pesos are in current units
Argentina's cen-
(nominal amounts for the year in question, not adjusted for inflation). Net foreign reserves are for the central
tral bank make
bank. Curiously, there do not seem to be standardized figures for total government revenue.
a
September.
fewer mistakes
than the Federal
· as
a result, Argentina's exports suf-
ing would result in severe depreciation, so the
Reserve over the
conventional view advised pesofication.5
fered, triggering recession and default.
long run?
The government followed that advice.
According to the conventional view, the
Argentines have already tasted its bitter
way to end the recession was to allow the
fruits, including a rapidly depreciating peso.
peso to float. However, Argentines had many
Knowing why the conventional view was so
of their bank deposits and loans in dollars
wrong is essential to a proper diagnosis for
ending the crisis.6
precisely because they were afraid that float-
3