Post on 11-Jan-2016
transcript
1
ARGENTINA: CRISIS AND RECOVERY
Mario I. Blejer
2
Monthly Gross Domestic Productseasonally adjusted (Jan 98 = 100)
98,3Dec 00
82.2Nov 02
94,6Jul 99
99,0Dec 99
102,3Jun 98
75.0
80.0
85.0
90.0
95.0
100.0
105.0
Jan
-98
Ma
r-9
8
Ma
y-9
8
Jul-9
8
Se
p-9
8
No
v-9
8
Jan
-99
Ma
r-9
9
Ma
y-9
9
Jul-9
9
Se
p-9
9
No
v-9
9
Jan
-00
Ma
r-0
0
Ma
y-0
0
Jul-0
0
Se
p-0
0
No
v-0
0
Jan
-01
Ma
r-0
1
Ma
y-0
1
Jul-0
1
Se
p-0
1
No
v-0
1
Jan
-02
Ma
r-0
2
Ma
y-0
2
Jul-0
2
Se
p-0
2
No
v-0
2
Source: CEA-UCEMA en base a datos del INDEC.
3
Monthly Gross Domestic Productseasonally adjusted (Jan 98 = 100)
98,3Dec 00
82.2Nov 02
94,6Jul 99
99,0Dec 99
102,3Jun 98
75.0
80.0
85.0
90.0
95.0
100.0
105.0
Jan
-98
Ma
r-9
8
Ma
y-9
8
Jul-9
8
Se
p-9
8
No
v-9
8
Jan
-99
Ma
r-9
9
Ma
y-9
9
Jul-9
9
Se
p-9
9
No
v-9
9
Jan
-00
Ma
r-0
0
Ma
y-0
0
Jul-0
0
Se
p-0
0
No
v-0
0
Jan
-01
Ma
r-0
1
Ma
y-0
1
Jul-0
1
Se
p-0
1
No
v-0
1
Jan
-02
Ma
r-0
2
Ma
y-0
2
Jul-0
2
Se
p-0
2
No
v-0
2
Source: CEA-UCEMA en base a datos del INDEC.
WHAT CAUSED THE CRISIS?
4
Monthly Gross Domestic Productseasonally adjusted (Jan 98 = 100)
98,3Dec 00
82.2Nov 02
94,6Jul 99
99,0Dec 99
102,3Jun 98
75.0
80.0
85.0
90.0
95.0
100.0
105.0
Jan
-98
Ma
r-9
8
Ma
y-9
8
Jul-9
8
Se
p-9
8
No
v-9
8
Jan
-99
Ma
r-9
9
Ma
y-9
9
Jul-9
9
Se
p-9
9
No
v-9
9
Jan
-00
Ma
r-0
0
Ma
y-0
0
Jul-0
0
Se
p-0
0
No
v-0
0
Jan
-01
Ma
r-0
1
Ma
y-0
1
Jul-0
1
Se
p-0
1
No
v-0
1
Jan
-02
Ma
r-0
2
Ma
y-0
2
Jul-0
2
Se
p-0
2
No
v-0
2
Source: CEA-UCEMA en base a datos del INDEC.
HOW THE RECOVERY WAS MANAGED
5
Real GDP (base 1993)
-20%
-15%
-10%
-5%
0%
5%
10%
15%
I-98
III-98
I-99
III-99
I-00
III-00
I-01
III-01
I-02
III-02
I-03
III-03
I-04
III-04
I-05
230
240
250
260
270
280
290
300
var. a/aPBI real
6
CAUSES OF THE CRISIS
THREE APPROACHES:
1. The loss of competitiveness of the Argentine economy
2. The “Sudden Stop” argument
3. Macroeconomic policy inconsistencies
7
Loss of Competitiveness under the Fixed (Convertibility) Exchange Rate Regime
Tradables/non tradables (WPI/CPI)
Convertibility average101
224220
148
70
90
110
130
150
170
190
210
230
250
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
Ene
-02
Mar
-02
May
-02
Jul-
02
Sep
-02
Nov
-02
Ene
-03
ind
ex 2
001=
100
8
-10.000
-5.000
0
5.000
10.000
15.000
20.000
196
9
197
0
19
71
19
72
19
73
19
74
19
75
19
76
19
77
19
78
19
79
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
million of USD
The Trade Account (in current prices)
9
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
IV 9
4
IV 9
5
IV 9
6
IV 9
7
IV 9
8
IV.
99
IV.
00
IV 0
1
-35.000
-30.000
-25.000
-20.000
-15.000
-10.000
-5.000
0
5.000
10.000
15.000
Capital Flows and Economic Activity Capital Flows and Economic Activity (Accumulated 4 quarters - U$Sm. GDP Cyclical Component)(Accumulated 4 quarters - U$Sm. GDP Cyclical Component)
Capital Flows Private Sector
GDP Growth Russian Crisis
10
Fiscal DeficitsArgentina 1975-2001
-14
-12
-10
-8
-6
-4
-2
0
2
Convertibility Period
11
The Use of Privatization Receipts to Reduce the Deficit
-7
-6
-5
-4
-3
-2
-1
0
1
2
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
Total Deficit
PrivatizationRevenue
12
Interest Payments/GDP
0
5
10
15
20
1993 1994 1995 1996 1997 1998 1999 2000 2001
13
Primary Expenditures as % of GDP(cumulative 12 months)
17,0%
17,5%
18,0%
18,5%
19,0%
19,5%
Dic
-97
Ma
r-9
8
Ju
n-9
8
Se
p-9
8
Dic
-98
Ma
r-9
9
Ju
n-9
9
Se
p-9
9
Dic
-99
Ma
r-0
0
Ju
n-0
0
Se
p-0
0
Dic
-00
Ma
r-0
1
Ju
n-0
1
Se
p-0
1
Dic
-01
Ma
r-0
2
Ju
n-0
2
Se
p-0
2
Dic
-02
14
Primary Expenditures as % of GDP(cumulative 12 months)
17,0%
17,5%
18,0%
18,5%
19,0%
19,5%D
ic-9
7
Ma
r-9
8
Ju
n-9
8
Se
p-9
8
Dic
-98
Ma
r-9
9
Ju
n-9
9
Se
p-9
9
Dic
-99
Ma
r-0
0
Ju
n-0
0
Se
p-0
0
Dic
-00
Ma
r-0
1
Ju
n-0
1
Se
p-0
1
Dic
-01
Ma
r-0
2
Ju
n-0
2
Se
p-0
2
Dic
-02
15
First Symptom: The Banking Crisis
While the problems of convertibility and the
consequent exchange rate uncertainty
played a role, the banking crisis was
largely caused by the government
“abuse” of the banking sector, given its
inability to to adjust the budget deficit
16
50
55
60
65
70
75
80
Sep 00 Dec 00 Mar 01 Jun 01 Ago 01 Nov 01 Feb 02 Apr 02 Jul 02
"
“Corralito”
Devaluation
Private Sector Deposits (in bn Arg. Private Sector Deposits (in bn Arg. Pesos)Pesos)
17
The main cause for the banking crisis was the fear was that banks would be rendered insolvent by government policy and that deposits would be confiscated.
An important reason behind this fear was the fact that private sector assets were being displaced by public sector assets in bank’s balance sheets.
18
0%
20%
40%
60%
80%
100%
Dec-99 May-00 Oct-00 Mar-01 Aug-01 Jan-02 Jun-02
Public Sector Private Sector
Private Sector assets have been displaced by Public Sector assets in
bank’s balance sheets
$ 76 MM
$ 43 MM
19
The increasing banking exposure to the public sector was accompanied by
1. a rapid decrease in deposits and
2. a sharp increase in country risk
20
Exposición del Sistema Financiero al Riesgo del Sector Público
71
151
104
216
80
100
60
100
140
180
220
dic-98 jun-99 dic-99 jun-00 dic-00 jun-01 dic-01
70
80
90
100
110
Indice EMBI Argentina
Crédito al Sector Público / Patrimonio Neto (en %)
Depósitos Sector Privado - Base dic2000 = 100 (2º eje)
EMBI Index
Public Sector Loans / Net Worth (%) Private Deposists - Index Dec 00 = 100 (2nd axis)
21
• November 2001:withdrawal restrictions on bank deposits (“corralito”).
• December 2001: Riots and the De la Rua and Cavallo government falls.
• First two weeks of January 2002: --currency board is abandoned and the currency devalued --bank assets and liabilities are pesified asymmetrically - i.e. at different rates
22
The Tradeoffs and the Dilemma for the Central Bank
Having regained the LOLR function the CB could provide the liquidity needed to finance the bank run. Pesos would fly to the exchange market – risk of hyperdevaluation and hyperinflation.
OR
23
The CB could restrain the rediscount facility and let banks deal with the deposit run. May prevent hyperinflation, at the risk of the total collapse of the banking sector.
24
The Strategy Followed
1. Default on the Sovereign Debt
2. Provide liquidity support to banks to prevent massive bank closures.
3. Develop sterilization instruments at the Central Bank --the LEBAC-- to mop up liquidity and to compete with the U$S.
4. Utilize part of CB reserves to intervene in the foreign exchange market to slow the pace of depreciation and to avoid chaotic conditions.
25
On the Fiscal Side
• Cut significantly fiscal expenditures, mainly through the non-adjustment of wages in the face of 40% inflation.
• Increase Export Taxes on Agricultural and Natural Resources
26
• Monetary and Fiscal Measures, plus regaining competitiveness, helped to achieve twin balance in the Fiscal and External Accounts.
• External (and crucial factor): Major improvement in terms of trade
27
MIB
marioblejer@blejer.com
Soybean Prices - Index
January 2001 – March 2011
50
70
90
110
130
150
170
190
210
230
en
e-0
1a
br-0
1ju
l-01
oct-0
1e
ne
-02
ab
r-02
jul-0
2o
ct-02
en
e-0
3a
br-0
3ju
l-03
oct-0
3e
ne
-04
ab
r-04
jul-0
4o
ct-04
en
e-0
5a
br-0
5ju
l-05
oct-0
5e
ne
-06
ab
r-06
jul-0
6o
ct-06
en
e-0
7a
br-0
7ju
l-07
oct-0
7e
ne
-08
ab
r-08
jul-0
8o
ct-08
en
e-0
9a
br-0
9ju
l-09
oct-0
9e
ne
-10
ab
r-10
jul-1
0o
ct-10
en
e-1
1
130%
28
Initially deposit withdrawals continued
Private Sector Deposits - Year 2002
-2609
-4335 -4378 -4526
-998
160
-235 -340
-823 -810-1274 -1230
-5000
-4000
-3000
-2000
-1000
0
1000
Feb Mar Abr May Jun JulIn million of pesos
Deposits minus preventive measures Preventive measures
29
However, the trend reversed after four months
Private Sector Deposits - Year 2002
-2609
-4335 -4378 -4526
-998
160
-235 -340
-823 -810-1274 -1230
-5000
-4000
-3000
-2000
-1000
0
1000
Feb Mar Abr May Jun JulIn million of pesos
Deposits minus preventive measures Preventive measures
30
Private Sector Deposits(in billion pesos)
40
45
50
55
60
65
70
75
80
01-Oct-01 27-Nov-01 23-Jan-02 21-Mar-02 17-May-02 13-Jul-02 18-Oct-02 04-Nov-02 31-Dec-02
Devaluation
Withdrawal
Restrictions
"Corralito"
Recovery
Reprogramming
Pesification
31
International ReservesIn U$S millions
32Fuente:Indec
Total GDPQuarterly – Seasonally Adjusted
220
230
240
250
260
270
280
290
300
I98 II98 III98 IV98 I99 II99 III99 IV99 I00 II00 III00 IV00 I01 II01 III01 IV01 I02 II02 III02 IV02 I03 II03 III03 IV03
33Fuente: Universidad Di Tella
Labor Demand
20
40
60
80
100
120
J an-00 J ul-00 J an-01 J ul-01 J an-02 J ul-02 J an-03
34Fuente: Universidad Di Tella
Consumers and Business CONFIDENCE
25.0
30.0
35.0
40.0
45.0
50.0
55.0
Dic '99 Mar '00 J un '00 Sep '00 Dic '00 Mar '01 J un '01 Sep '01 Dic '01 Mar '02 J un '02 Sep '02 Dic '02 Mar '03 J un '03
CONSUMERS
BUSINESS
35
• In 2005 the Debt in Default was Exchanged for new debt with an average 75% haircut.
36
Real GDP (base 1993)
DebtExchange
37
• A second exchange took place 5 years later.
• There is today around 10% holdouts
• The Debt to the IMF was fully repaid
• Debt with the Paris Club is being negotiated
.
38
COMPARATIVE DEBTCOMPARATIVE DEBTARGENTINA and RUSSIA ARGENTINA and RUSSIA (then)(then) AND EUROPE AND EUROPE (now)(now)
39
THANK YOU!