Crashing the carrousel

calesitaLatin American economists frequently use theory as an excuse of poor performance. International factors like the deteriorating terms of trade, the dependency or the Washington prescriptions were posed as the reasons behind the failures instead of domestic policies. ¿What’s happening now? The neighborhood seems to be in good shape for improving social conditions and enduring external shocks. The region has enjoyed unimaginable high commodity prices and liquidity allows financing almost any project. Sound fiscal and monetary policies further improve the picture. ¿Why does a storm threaten over “las pampas”? First, the “titanic” exit of the convertibility regime was partially “solved” without any international support. This native solution left the country totally isolated from the financial World. The leverage of the firms and government are at bottom levels. Holdouts, CP ad ICSID claims cannot be feasible arranged without a big hand. Second, distributional conflicts create destructive tensions. Middle class was proud of its Gini coefficients in the 40’s, 50’s, 60’s and 70’s. The current convergence to the regional standards does not fulfill their expectations. Third, political coordination requires of a peronist party clear leadership. Peron envisioned an “unbeatable” and “vertical” short term machine. The rules of succession are not as clear as in parliamentary or monarchy systems. Native solution, social preferences and political stalemate joined in an explosive cocktail. Let us pray for a soft carrousel landing…

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