Money leaving Argentina trebled in 2008 compared to the previous year and was 23% higher to the great capital flight of the second half of 2001 and first half of 2002 which totalled 18.7 billion US dollars and triggered the collapse of the banking system and melting of the economy, according to a report in La Nacion.
The 23 billion US dollar 2008 capital flight was confirmed by the Argentine Central Bank fourth quarter balance and published in its web site. The foreign currency deficit in the last quarter was 6.5 billion US dollars, up 15% from the previous quarter, totalling the 23.1 billion which is three times the 8.8 billion US dollars flight of 2007. Actually the big scare started in the second half of 2007 when the first signals of the global credit crunch and international disequilibrium begun impacting on Argentina. It was at this time also that former President Nestor Kirchner named political cronies to the Statistics Institute and started toying with inflation indexes, which further worsened the business and investment climate. The tendency became particularly intense in the second quarter of last year when the peak of the confrontation between the Kirchner administration and the camp protesting export taxes on grains and oilseeds. That quarter 8.37 billion US dollars left Argentina and although the figure was down to 5.8 billion the following quarter, the haemorrhage continued as the political scenario deteriorated and the "tail wind" era which had helped with windfall earnings and growth during the last five years rapidly eroded. In the last quarter of 2008 the Argentine government decision to take over the private pension funds also influenced. However, according to La Nacion, the good news is that last year contrary to 2001/2002 the impact was far less, particularly since the windfall prices which prevailed until last August, helped mitigate the capital flight with a hefty trade surplus and marginal cost to international reserves. At the time the Argentine Central Bank also appealed to a loan from the Basle International Settlements Bank so that losses would not show up immediately and not worsen the situation. But the bad news is that the Argentine economy can't sustain such a situation much longer in the current circumstances. The 30% fall in commodity prices exported by Argentina will cut the trade surplus to less than half that of last year which is estimated in 13 billion US dollars, somewhere in the range of 7 billion. This is crucial for Argentina since the country remains cut off from international money markets.