MercoPress. South Atlantic News Agency

Ms. Krueger and the Argentine collapse.

The Argentine meltdown is the most obvious and recent example of how economic policies failures can be catastrophic said International Monetary Fund's Acting Managing Director Anne Krueger, who estimated that the 2001 crisis could have been softened by bolder reforms in the nineties.

"The effective instrumentation of fiscal, labour and structural reforms could have ensured an economy sufficiently robust and flexible as to confront the shock of the devaluation without the complete economic collapse experienced", added Ms. Krueger during a conference in New York University.

Insisting that the non implementation of structural reforms lead to crisis as those experienced by Argentina and Turkey, Mr. Krueger further on compared the situation with countries such as Chile and Mexico which have effectively been involved in "exceptional efforts to promote macroeconomic sustainable reforms". Last week IMF Assistant Manager Agustin Cartens described Chile as one of the "most solid" countries of the region and anticipated an economic expansion "very close to 5%" in 2004.

The Argentine experience of the nineties clearly resumes the non completion and rejection to confront the necessary structural changes "which would have been an essential element for the success of macroeconomic policies".

Ms. Krueger indicated that the first results of the convertibility program in Argentina (fixed exchange rate) were "promising", but that remarkable behaviour also "masked a structural weakness which was not been faced". Fiscal discipline was undermined by budget over expenditure, high dependency on foreign capital to finance the government's indebtness and an excessive optimism about growth estimates.

"Government must overcome the temptation of doing nothing while economic prospects are brilliant", remarked the IMF official highlighting that the pace of structural reforms almost ceases in the mid nineties and in some cases was even reverted"

"Maybe the greatest weakness was in the labour market, which has been strongly regulated in Argentina", plus the lack of incentives for provincial governments to contain expenditure and expand revenue..

Finally Ms. Krueger stressed that one of the lessons of the emerging markets crisis particularly in the nineties is that fiscal discipline and debt sustainability are essential, besides good governance, corporate honesty, effective and transparent institutions, a legal system that works, recognition and protection of private property and a reliable financial sector.