Copyright
© 2004 International Monetary Fund
Production: IMF Multimedia Services Division
Figures: Jorge A. Salazar
Typesetting: Alicia Etchebarne-Bourdin
Cataloging-in-Publication Data
The IMF and Argentina, 1991–2001 / [prepared by a team headed by Shinji Takagi] — [Washington, D.C.] : International Monetary Fund, Independent Evaluation Office, 2004.
p. cm. — [Evaluation report]
Includes bibliographical references.
ISBN 9781589063808
1. International Monetary Fund — Argentina. 2. Argentina — Economic policy. 3. Crisis management — Argentina. I. Takagi, Shinji, 1953– II. Evaluation report (International Monetary Fund. Independent Evaluation Office).
HC125.I53 2004
Price: US$25.00
Please send orders to:
International Monetary Fund, Publication Services
700 19th Street, N.W., Washington, D.C. 20431, U.S.A.
Tel.: (202) 623-7430 Telefax: (202) 623-7201
E-mail: publications@imf.org
Internet: http://www.imf.org
Contents
Preface
Abbreviations and Acronyms
The IMF and Argentina, 1991–2001
Executive Summary
1 Introduction
Overview of Economic Developments, 1991–2001
Factors Contributing to the Crisis
2 Surveillance and Program Design, 1991–2000
Exchange Rate Policy
Fiscal Policy
Structural Reforms in Macro-Critical Areas
The Manner of Engagement with Argentina
3 Crisis Management, 2000–01
Second Review and Augmentation, January 2001
Completion of Third Review, May 2001
Fourth Review and Augmentation, September 2001
Noncompletion of Fifth Review, December 2001
The Decision-Making Process
4 Lessons from the Argentine Crisis
Major Findings
Lessons for the IMF
Recommendations
Boxes
1.1. The IMF and Argentina, 1991–2001
1.2. Was the Convertibility Regime Viable?
1.3. The Politics of the Convertibility Regime
2.1. Economic Characteristics of Hard Peg Economies
2.2. Measuring the Equilibrium Real Exchange Rate
3.1. Framework and Implementation of Private Sector Involvement
3.2. Financial Instruments Used During the Crisis
3.3. Measures Announced or Taken During 2001 Without Prior Consultation With the IMF
4.1. How and When Could an Alternative Approach Have Been Attempted?
4.2. Experience with Catalytic Finance
Figures
1.1. Inflation
1.2. Capital Flows
1.3. Real Quarterly GDP Growth
1.4. Interest Rate Spreads over U.S. Treasuries
2.1. Monthly Real Effective Exchange Rate
2.2. Trade and Current Account Balances
2.3. Comparison of Fiscal Targets and Actuals
2.4. Projected Overall Fiscal Balances and Their Outturns
2.5. Public Sector Debt Targets and Actuals
2.6. Public Sector Debt and General Government Overall Balances
2.7. Real GDP Growth and Unemployment
3.1. IMF and Private Sector (Consensus) Forecasts for Key Program Variables
3.2. Bank Deposits, January 3, 2000–December 31, 2001
3.3. Evolution of Fiscal Deficit Targets and Outcomes
3.4. International Reserves, January 3, 2000–December 31, 2001
Tables
1.1. Key Economic Indicators
3.1. Program Projections and Targets for 2001
3.2. Fiscal Performance Under the Stand-By Arrangement in 2001
Appendixes
1 The IMF’s Financing Arrangements with Argentina, 1991–2002
2 Argentina and the IMF Prior to 1991
3 A Retrospective on Argentina’s Fiscal Policy, 1991–2001
4 Selected Program Conditionality, 1991–2001
5 Economic Characteristics of Major Emerging Market Economies
6 Debt Sustainability Analysis
7 A Preliminary Analysis of the 2001 Mega-Swap
8 Financial Instruments Used by Argentina During the Crisis
9 Timeline of Selected Events, 1991–2002
10 List of Interviewees
Appendix Figures
A5.1. General Government Fiscal Balance in Crisis Countries
A6.1. External Debt Sustainability
A6.2. Public Debt Sustainability
A7.1. Exchange Options
Appendix Tables
A3.1. Public Sector Balance, 1961–2000
A3.2. Consolidated Public Sector
A3.3. Adjusted Fiscal Balance
A3.4. Social Security Balance
A3.5. Federal and Provincial Fiscal Accounts
A5.1. Indicators of Economic Structure in Selected Emerging Market Economies
A7.1. An Overview of the Mega-Swap
A7.2. Details of Old and New Bonds
Bibliography
Statement by the Managing Director, IMF Staff Response, IEO Comments on Management/Staff Response, Statement by the Governor for Argentina, and Summing Up of IMF Executive Board Discussion by the Chairman
Statement by the Managing Director
IMF Staff Response
IEO Comments on Management/Staff Response
Statement to Executive Board Members from the Governor for Argentina, His Excellency Roberto Lavagna
Summing Up of IMF Executive Board Discussion by the Chairman
The following symbols have been used throughout this report:
– between years or months (e.g. 2003–04 or January–June) to indicate the years or months covered, including the beginning and ending years or months;
/ between years (e.g. 2003/04) to indicate a fiscal (financial) year.
“Billion” means a thousand million.
Minor discrepancies between constituent figures and totals are due to rounding.
Some of the documents cited and referenced in this report were not available to the public at the time of publication of this report. Under the current policy on public access to the IMF’s archives, some of these documents will become available five years after their issuance. They may be referenced as EBS/YY/NN and SM/YY/NN, where EBS and SM indicate the series and YY indicates the year of issue. Certain other documents are to become available ten or twenty years after their issuance depending on the series.
Preface
This report evaluates the role of the IMF in Argentina during 1991–2001, focusing particularly on the period of crisis management from 2000 until early 2002. It was prepared by a team headed by Shinji Takagi and including Benjamin Cohen, Isabelle Mateos y Lago, Misa Takebe, and Ricardo Martin. It also benefited from substantive contributions from Nouriel Roubini and Miguel Broda. The report was approved by Montek S. Ahluwalia, then Director of the Independent Evaluation Office (IEO). Research assistance and logistical support in Argentina from Nicolas Arregui; administrative support by Annette Canizares, Arun Bhatnagar, Maria Gutierrez, and Florence Conteh; and editorial work by Ian McDonald and Esha Ray are gratefully acknowledged.
In keeping with standard IEO procedures, parties whose actions and decisions were evaluated, including IMF staff and previous Argentine authorities, were given a chance to comment on a draft of the report, but the final judgments are the responsibility of the IEO alone. The final version of the report was submitted to IMF management for comments, and also circulated simultaneously to Executive Directors. The report, with management and staff comments and the IEO response, was discussed by the Executive Board on July 26, 2004. The report is being published as discussed by the Board, along with a statement to the Executive Board by the Governor of the IMF for Argentina and the Chairman’s Summing Up of the Board discussion.
The IEO was created in 2001 to provide objective and independent evaluations on issues relevant to the IMF. It operates independently of IMF management, and at arms’ length from the IMF Executive Board.
Abbreviations and Acronyms
| CBA | Currency board arrangement |
| CET | Common external tariff |
| DSA | Debt sustainability analysis |
| EFF | Extended Fund Facility (IMF) |
| FAD | Fiscal Affairs Department (IMF) |
| FIN | Finance Department (IMF) |
| G-7 | Group of Seven countries |
| G-10 | Group of Ten countries |
| ICM | International Capital Markets Department (IMF) |
| IDB | Inter-American Development Bank |
| IEO | Independent Evaluation Office (IMF) |
| IFI | International financial institution |
| IMF | International Monetary Fund |
| IMFC | International Monetary and Financial Committee (IMF) |
| LIBOR | London interbank offered rate |
| LOI | Letter of intent (IMF) |
| MAE | Monetary and Exchange Affairs Department (IMF)1 |
| MERCOSUR | Mercado Común del Sur |
| NDA | Net domestic assets |
| NFPS | Nonfinancial public sector |
| NIR | Net international reserves |
| NPV | Net present value |
| PAYG | Pay-as-you-go |
| PBG | Policy-based guarantee (World Bank) |
| PDR | Policy Development and Review Department (IMF) |
| PSI | Private sector involvement |
| REER | Real effective exchange rate |
| RES | Research Department (IMF) |
| SBA | Stand-By Arrangement (IMF) |
| SDR | Special drawing right (IMF) |
| SRF | Supplemental Reserve Facility (IMF) |
| TRE | Treasurer’s Department (IMF)2 |
| VAT | Value-added tax |
| WEO | World Economic Outlook (IMF) |
| WHD | Western Hemisphere Department (IMF) |
1 Effective May 1, 2003, name was changed to Monetary and Financial Systems Department.
2 Effective May 1, 2003, name was changed to Finance Department.