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Article Artículo

Argentina

Globalization and Trade

IMF

Latin America and the Caribbean

World

Argentina Reaches Paris Club Debt Deal without IMF Intervention; Creditors Come Under Fire

Locked out of international capital markets since its 2001 default, Argentina cleared a major hurdle on Thursday when it reached an agreement with the Paris Club, a grouping of 19 major economies, to resume debt payments and clear outstanding arrears. The Paris Club issued a statement, noting that:

The scheme offers a framework for a sustainable and definitive solution to the question of arrears due by the Argentine Republic to Paris Club creditors, covering a total stock of arrears of USD 9.7 billion, as of 30 April 2014. It provides a flexible structure for clearance of arrears within five years including a minimum of USD 1150 million to be paid by May 2015, the following payment being due in May 2016.

Economy Minister Axel Kicillof, who led the negotiations for the Government of Argentina, told a local radio station that, “Argentina is continuing its path of regularizing and paying off the debt that 40 years of neoliberalism left us,” Reuters reported.

Long thought to be a lynchpin of any possible deal, Argentina secured the settlement without the involvement of the IMF. President Fernández told the press, “It is the first time that a country negotiates without the intervention of the International Monetary Fund (FMI), and without ceding our independence.”

Argentina’s 2001 default followed years of following IMF prescriptions, which only exacerbated the crisis. Argentina broke off relations with the IMF in early 2006, paying back all of its outstanding debt to the Fund in one move. In a statement following the current deal, Eric LeCompte, Executive Director of Jubilee USA, praised the lack of IMF involvement:

“Argentina negotiated an agreement that keeps the IMF out of Argentina... IMF austerity programs have wreaked havoc in both poor and wealthy countries.”

Business News Americas reported that the creditors agreed to exclude the IMF “in return for a larger down payment by Argentina.”

CEPR / May 30, 2014

Article Artículo

Six Things George Will Would Not Have Said If He Had Access to Economic Data

George Will devoted his column today to complaining about Obamanomics, or more specifically the state of the economy during the Obama administration. The article includes a serious of inaccurate or misleading statements which Will presumably made because he doesn't have access to data from his home or office in Washington.

1) Will told readers:

"June begins the sixth year of the anemic recovery from the 18-month recession. Even if what Obama’s administration calls “historically severe” weather — a.k.a., winter — reduced GDP growth by up to 1.4 percentage points, growth of 1.5 percent would still be grotesque."

Actually quarterly data are always erratic and an individual quarter tells people almost nothing about the state of the economy. (The first quarter number was revised downward this morning to show negative growth.) If Will thinks that a 1.5 percent growth rate would be "grotesque" then he would presumably also be appalled by the 1.9 percent growth rate the economy saw in the second quarter of 1986, the sixth year of the Reagan presidency. The best quarterly growth figure we have seen in the last four decades was the 16.5 percent annual growth rate in the second quarter of 1978 in the midst of "Carter-era stagflation."

 

2) Will complained:

"The recovery’s two best growth years (2.5 percent in 2010 and 2.8 percent in 2012) are satisfactory only when compared with 2011 and 2013 (1.8 percent and 1.9 percent, respectively)."

The recovery has indeed been anemic, but this is due to the fact that this recession was qualitatively different from prior recessions, with the exception of the 2001 downturn. It was caused by the collapse of a housing bubble. If Will had access to data he would know that house prices rose by more than 70 percent above their trend level at the peak of the bubble in 2006. This led to record levels of construction. The wealth effect from $8 trillion in bubble generated equity led to a consumption boom with the savings rate falling to record lows.

When the bubble burst there was no easy way to replace the lost demand from the collapse in residential construction and consumption. Folks who have managed to take an intro econ class know that there are only five components of aggregate demand. In addition to residential construction and consumption, we have non-residential investment, government spending, and net exports. An economic collapse will not generally provide the basis for a boom in non-residential investment. Will's Republican allies in Congress (along with many Democrats) have acted to make sure there was no big increase in government spending.

This only leaves net exports. A major rise in net exports would require a sharp decline in the dollar, which would make U.S. goods and services more competitive in the world economy. However powerful interests like Walmart, which have low-cost supply chains in the developing world, have no interest in seeing the dollar fall in value relative to other currencies, which would undermine their competitive advantage.

Anyhow, given the nature of the downturn, the weakness of the recovery was predictable and predicted. The economy was also slow to recover from 2001 recession, which was caused by the collapse of the stock bubble. It did not start generating jobs again until the fall of 2003 being pulled forward by the growth of the housing bubble.

Dean Baker / May 29, 2014

Article Artículo

Latin America and the Caribbean

Sanctions

Venezuela

World

Ahead of House Vote, Members of Congress Warn Sanctions Could Undermine Dialogue in Venezuela
Ahead of a House vote to pass sanctions against Venezuelan officials today, 14 members of Congress sent a letter [PDF] to Secretary Kerry yesterday urging against sanctions, warning that they could undermine the dialogue process between the Venezuelan government and the opposition. Instead, the members - who include John Conyers (D-MI) and Hank Johnson (D-GA) - suggested that the U.S. should exchange ambassadors with Venezuela. The sanctions bill passed the House this afternoon with the support

CEPR / May 28, 2014

Article Artículo

AAPI

Economic Growth

Workers

#AAPI Workers the Least Likely to Be in Private Sector #Unions

Since it's Asian American and Pacific Islander (AAPI) Heritage Month, CEPR decided to take a look at some Census data about AAPI workers. Last week, we talked about low-wage AAPI workers and how an increase in the minimum wage could affect them.

Another interesting story is that of labor unions and AAPI workers. Along with Latinos, AAPIs are the fastest growing sector of the overall workforce as well as unions. The most recent data reveals that 1 in 9 AAPI workers is unionized, which is significantly lower than the rate for whites and blacks, and slightly higher than that of Latino workers.

CEPR and Nicole Woo / May 28, 2014