Today’s favourable international economic climate is no guarantee of a sustainable resurgence for Latin American economies, warned Roberto Lavagna, Argentina’s former minister of economy, in an interview with Emerging Markets.
The ex-civil servant set out to temper euphoria over the commodity export-led boom across much of the region. In the case of Argentina, he pointed out that “when you take into consideration export prices – not terms of trade but prices for Argentine products - you see that they were higher in 1996 and 1997 than they are now.”
“Of course, [high] prices help, but that’s not the whole story – we need to be a bit more cautious.”
Although Lavagna refused to comment directly on the domestic policies of his successor, Felisa Miceli, he suggested that Argentina’s success will depend on what policies authorities choose to adopt: to maximize economic opportunity or simply ride the passing wave of a benign global climate.
Since he left the economy ministry last December, Lavagna – who presided over a period of unprecedented economic growth and who is widely credited with playing a key part in the turnaround - has rarely spoken out on economic measures taken since his departure.
But the 64-year old economist-turned-diplomat told Emerging Markets that although he will chose his words and timing carefully, he still feels a duty to address significant issues. Reading between the lines, it is likely that future public statements by the ex-treasury official will seek to remind Argentine authorities not to rest on their laurels.
Nevertheless, Lavagna highlighted two explicit economic trends across Latin America which he believes Argentina pioneered. “The first is the fundamental importance of maintaining a fiscal surplus and the second is the initiation of the process of cancelling debt with international organizations,” he said.
High fiscal surpluses are important not only from an economic point of view. They also grant governments the flexibility to make their own policies and to have genuine ownership of their own economic decisions, Lavagna pointed out. Argentina repaid its $9.6 billion debt to the IMF in January this year by drawing on its currency reserves. Its neighbour Brazil paid off its $15.5 billion debt, the largest payment ever made by a member country to the IMF, in December.
In a related development, Uruguay said on Thursday it will repay $630 million to the IMF, clearing in advance all its obligations due to the Washington-based lender for 2006, in a sign of the country’s improving economic health. The South American nation, which still owes the fund $1.6 billion in outstanding debt, is working to leave behind the deep economic crisis that began in 2001 as recession struck neighbouring Argentina and Brazil.