P O L I C Y P A P E RD O C U M E N T D E P O L I T I Q U ED O C U M E N T O D E P O L Í T I C A

Argentina: Governance in CrisisPaul Alexander Haslam, FOCAL Senior Analyst

Executive Summary

Although the origins of the crisis were to be found in poor economic policy decisions that led to a chaoticdevaluation, its dramatic denouement in December 2001 and subsequent development over the course of 2002were deeply conditioned by political factors. The Argentine crisis was and remains a crisis of governance in the mostprofound sense. It was neither predetermined nor unpreventable. In this sense it reflected a deep failure of thepolitical class to adequately respond to the circumstances that confronted them. This failure was itself rooted in atangled web of economic, political and socio-cultural incentives that touched every aspect of the Argentine political-economic system.

Understanding the reasons behind the Argentine debacle and why it unfolded in a sad parody of crisis over the courseof most of 2002 is the purpose of this paper. The nature of the crisis requires a systemic approach to the problem andfor this reason the paper will use the concept of governance to identify and examine the factors that contributed toit. This analysis then forms the basis for assessing to what extent the Argentine government has been able to masterthese challenges and lay the basis for self-sustaining economic and political development. It concludes with anassessment of the challenges for the future and recommendations for Canadian foreign policy towards Argentina.

Résumé

Bien que la crise tire ses origines d’une mauvaise politique économique dont les décisions ont mené à unedévaluation chaotique, son dénouement dramatique en décembre 2001 et les développements qui ont suivi en 2002ont été profondément conditionnés par des facteurs politiques. La crise en Argentine était et demeure une crise degouvernance dans le sens le plus profond du terme. Elle n’était ni prédéterminée ni inévitable. Dans ce sens, ellereflète l’échec flagrant de la classe politique à répondre adéquatement aux défis devant lesquels elle s’est trouvée.Cet échec lui-même a pris racine dans un enchevêtrement de motifs économiques, politiques et socioculturels qui onttouché tous les aspects du système politico-économique de l’Argentine.

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Ce document d’analyse tente de comprendre les causes liées à l’intensification de la crise en Argentine et d’expliquerson déroulement, digne d’une triste parodie, pendant la majeure partie de 2002. La nature de cette crise nécessite uneapproche systémique et, pour cette raison, ce document utilise le concept de la gouvernance pour identifier etexaminer les facteurs qui ont alimenté la crise. Cette analyse sert ensuite de base pour évaluer jusqu’à quel point legouvernement argentin a réussi à relever ces défis et pose les jalons d’un développement économique et politiquedurable. Ce document se termine par une évaluation des enjeux qui se présenteront dans l’avenir et par desrecommandations pour la politique étrangère du Canada à l’égard de l’Argentine.

Resumen

Si bien la génesis de la crisis Argentina ha de hallarse en el mal desempeño de las políticas económicas quecondujeron a una caótica devaluación, su dramático desenlace en diciembre de 2001 y desarrollo posterior durante el2002 fueron condicionados por factores políticos. La crisis Argentina fue y sigue siendo una crisis de gobernabilidaden su sentido más amplio. No fue ni anticipada ni inevitable. La crisis reflejó la incapacidad de la clase política deresponder adecuadamente a las coyunturas que se les presentaron. Esta ineptitud a su vez estaba arraigada en unared intrincada de incentivos económicos, políticos y socio-culturales que incidieron en todo el sistema político-económico del país.

El presente trabajo se propone esclarecer las razones que motivaron la crisis Argentina y comprender porque suevolución devino una triste comedia en el transcurso del 2002. La naturaleza de la crisis requiere de un enfoquesistémico del problema. Por tal motivo, en este documento emplearemos el concepto de gobernabilidad paradeterminar y analizar los factores que propiciaron la crisis. Este análisis constituye la base para determinar hasta quepunto el gobierno de la Argentina ha sido capaz de lidiar con estos desafíos y crear las bases para un desarrolloeconómico y político perdurable. Como conclusión se hace un balance de los retos futuros y se ofrecenrecomendaciones sobre como el gobierno canadiense podría encausar su política exterior con respecto a la Argentina.

INTRODUCTION

On January 16, 2003, Argentina concluded almost a yearof negotiations with the International Monetary Fund(IMF) with an agreement to rollover the repayment of itsdebt obligations to the IMF until August 31, 2003.Although a comprehensive agreement offering freshmoney will have to wait until after a new president iselected in May 2003, the agreement was an importantmilestone in putting the Argentine economy backtogether again. It marked a full year and a full circle inArgentina’s fall from grace and painful struggle toreinsert itself into global financial markets.

The house of cards that was the Argentine economy byDecember 2001 finally came tumbling down in the waketwo important decisions: in the last days of November2001 a run on the banks prompted President Fernandode la Rúa and his economy minister Domingo Cavallo toimpose a freeze on bank deposits known as the corralito(or “the playpen”); and on December 5, 2001, theInternational Monetary Fund refused to disburse ascheduled $1.3 billion SDR (Special Drawing Rights)tranche needed to pay debt obligations due in Decemberand support the currency. These decisions put a chain of

events into effect: widespread popular protests againstthe banking restrictions uniting unions, organizedgroups of the unemployed, their supporters and a broadsection of the Argentine middle class; the repression ofthe protests by the federal police resulting in the deathsof several protestors; the resignation of de la Rúa; aseries of four interim presidents culminating with therepudiation of the private debt and the appointment ofPeronist kingpin Eduardo Duhalde as president; thedevaluation; and the descent into a prolonged economicand financial crisis.

However, the events of December 2001 were merely thelast stages of a crisis that had been brewing for severalyears. In comparison with 1998, by 2001 GDP haddeclined by 8.4%, and over the one year betweenSeptember 2001 and 2002, GDP contracted by anadditional 13.4%. Cumulatively, it is expected that therecession and crisis will have cost Argentina a decline of15% GDP over its 1998 levels. But these figures do notadequately express the human tragedy behind what wasalso a social crisis. Unemployment in urban areasincreased from 13.2% in May 1998 to 21.5% in May 2002,declining slightly to 17.5% in October of the same year.

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The population living below the poverty line increasedfrom 24.3% to 54.3 % (in Greater Buenos Aires), and to57.5% (in all urban areas) over the same period. Andpeople living below the indigence line have more thandoubled over the last year to account for 27.5% of thepopulation (INDEC Argentina 2003).

Although the origins of the crisis were to be found inpoor economic policy decisions that led to a chaoticdevaluation, its dramatic denouement in December2001, and subsequent development over the course of2002 were deeply conditioned by political factors. TheArgentine crisis was and remains a crisis of governancein the most profound sense. It was neitherpredetermined nor unpreventable. In this sense itreflected a deep failure of the political class toadequately respond to the circumstances thatconfronted them. This failure was itselfrooted in a tangled web of economic,political and socio-cultural incentivesthat touched every aspect of theArgentine political-economic system.

Understanding the reasons behind theArgentine debacle, and why it unfoldedin a sad parody of crisis over the courseof most of 2002 is the purpose of thispaper. The nature of the crisis requires asystemic approach to the problem andfor this reason, the paper will use theconcept of governance to identify andexamine the factors that contributed toit. This analysis then forms the basis forassessing to what extent the Argentinegovernment has been able to master these challengesand lay the basis for self-sustaining economic andpolitical development. It concludes with an assessmentof the challenges for the future and recommendationsfor Canadian foreign policy towards Argentina.

FAILURE OF GOVERNANCE

One way to think about governance is to ask how thesystem of formal and informal structures, rules,regulations and institutions that make up a modernstate create incentives that influence (but do notdetermine) the political and economic behaviour ofindividuals and organizations. When this systemgenerates perverse and anti-social incentives badgovernance results. When this system works good

governance and political-economic stability is thereward.

The trouble with the governance approach is that thereis almost an infinite number of formal and informalinstitutions in any given society – including culturalnorms. This paper will restrict itself to considering alimited number of key institutional structures thatinfluenced the way Argentine political and economicactors reacted to the impending economic crisis and itsdevelopment throughout 2002 and 2003:

• the exchange rate regime;• the international context;• presidentialism and divided government;• federalism and• the rule of law.

The incentives generated by theseinstitutional structures in Argentinaworked together in such a way as tomake good governance difficult. Theroad to devaluation and crisis was notinevitable, but the country’s politicaland economic structures workedagainst policy innovations, politicalcooperation and the assumptionof responsibility needed to staveoff disaster.

ECONOMIC INSTITUTIONS AND THEROAD TO DEVALUATION

There is considerable debate over therole played by the currency board

known as the convertibility regime in the collapse of theArgentine economy and financial system. While someanalysts continue to claim that it was almost the solerestraint on the alleged fiscal irresponsibility of theArgentine government, the balance of professionalopinion tends to agree that after 1999 (if not before) anunwavering commitment to the convertibility regime, incombination with an unfavourable external context,made it difficult for Argentina to escape a vicious cycleof recession, deficit and increasing economicvulnerability.

The Convertibility Regime

The convertibility law, adopted in April 1991, was thebrainchild of then economy minister Domingo Cavallo.

Its dramatic denouement inDecember 2001, and

subsequent developmentover the course of 2002were deeply conditionedby political factors. The

Argentine crisis was andremains a crisis of

governance in the mostprofound sense.

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Convertibility sought to stabilize an economy that wasemerging out of the 1989 hyperinflationary crisis bytying a new currency, the Argentine peso, to the USdollar at a one-to-one ratio. It was backed by thepromise that the Central Bank (BCRA) would hold onedollar in reserves for every peso in circulation. Changingthe law or devaluing the currency required a majority inthe Congress.

The law was a hit: within a few months the inflationrate decreased significantly. Solving the inflationproblem propelled the economy into a period ofrelatively high growth. Although the convertibility lawwas based on sound monetarist fundamentals, its realsuccess was due to its effect on expectations. Theinflexibility of the law and the extreme difficulty ofchanging it seemed to render both devaluation andfiscal irresponsibility (printing more money) a thing ofthe past. In combination with Argentina’s “star” statusas a rapid and committed market reformer and therescheduling of its debt under the Brady Plan,convertibility helped loosen international and localcredit at reasonable interest rates.

But, convertibility and the liberal reforms (tariffreductions, privatization and deregulation) thataccompanied it gave the economy only a temporary fix.By the end of 1998 the economy was beginning to entera downward spiral. The causes of the recession remaincontentious and analysts have cited several factors thatcame together in a vicious cycle of increasing deficitsand declining confidence that proved impossible tobreak (Fanelli 2002; Fischer 2001; Jonas 2002).

An unfavourable external environment caused bydeclining terms of trade for Argentina’s exports, falloutfrom the Russian crisis (August 1998) and Braziliandevaluation (January 1999), rising interest rates, as wellas the overvaluation of the peso due to convertibility,undermined growth and the government’s ability tobalance its budget. Overvaluation in particular lockedArgentina into an import-intensive model of

development as cheap imports flooded the domesticeconomy and exports stagnated after 1997. The balanceof trade in goods and services was negative for almostthe entire convertibility period.

Without net growth in exports to balance increasinggovernment spending in the mid-1990s, the negativebalance in the current account made Argentinaparticularly dependent on capital inflows in the formof portfolio investment, foreign direct investment, andforeign loans to balance its accounts. Indeed, one ofconvertibility’s great contributions was its beneficialeffect on investor confidence and foreign capital inflows.Ironically, this was also to prove its Achilles’ heel. Whenthe economy entered recession in 1999 it found itself ina vicious cycle of declining confidence and investment,falling exports, shrinking tax revenue (value added taxeswere dependent on growth), increasing debt serviceobligations and deteriorating balance of payments.

However, the federal government did stabilize thenreduce public spending per capita after 1997 (with theprovinces following suit in 2000) even as the need forsuch spending increased, but these reductions wereoffset by an increasing debt service burden and therapidly contracting economy. At the same time,collection of the growth sensitive value-added tax (IVA)that accounted for 59% of tax receipts in 1996, collapsed,although it was partially compensated by a valiantattempt to increase income tax collection. Despite aseries of austerity budgets, the government’s inability tobalance its accounts (especially at the provincial level)prompted a surge in borrowing after 1998 and increaseddebt service obligations, which accounted for 25% of thefederal budget in 2001. In this respect, the oft-citedcharge that fiscal profligacy brought Argentina to thebrink of collapse is only partially accurate. Rather, it wastrue that spending could not be cut as quickly as theeconomy was contracting.

Perhaps most importantly, the commitment toconvertibility restricted the range of policy options

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with which to confront this crisis. The government wasprevented from devaluing (as a way of compensating forthe external shock and making the economy moreinternationally competitive) or initiating a fiscal stimulusto restart the economy. Pablo Gerchunoff and JuanCarlos Torre (1996) observed that these policy constraintshad magnified the recessive impact of the 1994 Mexicandevaluation in Argentina. With much more tragicconsequences, a similar experience was repeated in1998-2001.

Status-quo Incentives

Despite the evidence that, at worst, convertibility by1999 was a central cause of the recession (due to theovervaluation of the currency), and at best, did not allowthe policy flexibility needed to adequately respond tothe crisis, there was no serious attempt to abandon it.Over the course of a decade, convertibility had generatedstrong psychological, political and economic incentivesthat favoured the status quo.

The convertibility regime inspired an almost religiousadherence from the majority of Argentines who viewedit as saving the country from the scourge ofhyperinflation. It had become a popular symbol of a newArgentina, reformed, modernized and disciplined. But,fear of hyperinflation was the strongest sentiment in itsfavour. As a result, there was little political support for

change and the regime was defended until the very endby President Fernando de la Rúa, Minister of EconomyDomingo Cavallo and former president Carlos Menem(who argued for official dollarization of the economy).Those political leaders opposed to convertibility seemedto be voices in the wilderness: former president RaúlAlfonsín and Eduardo Duhalde during his failed 1999presidential bid.

Notwithstanding the psychological attractiveness of theconvertibility regime, it had other arguments in itsfavour. Most importantly, convertibility was an effectiveway of managing the existing debt and deficit. Debtoverburdening had become a defining feature of theArgentine economy since 1983, when the private debtof the country’s largest firms was assumed by the state.Convertibility meant that the government effectivelyraised domestic tax revenue in US dollars, making thedebt much more manageable (Schvarzer 2000, 139-143).The state, firms and individuals found easy access tocredit in US dollars driving up the overall indebtednessin the economy, but allowing a significant economicexpansion in the mid-1990s. Indebtedness createda strong political-economic constituency amongpowerful local conglomerates and the generalpopulation in favour of maintaining convertibility –as devaluation would cause debts to skyrocket.Convertibility allowed Argentines to think they werericher than they really were.

The International Context

In addition, the confidence convertibility promoted inthe international and investor community encouragedthe inflow of both foreign direct and portfolioinvestment that helped to equilibrate the balance ofpayments - despite the fact that after 1997 convertibilityitself was partially to blame for persistent deficits.Ironically, when the economy went into recession,Argentina’s dependence on foreign capital inflowsincreased (both in terms of debt and foreign investment)as a means of financing the exploding deficit. Anychange to convertibility was perceived locally as“changing the rules of the game” and thereforeundermining investor confidence in the economy. Everhopeful of recuperating new foreign capital inflows (andfinally balancing the country’s accounts), convertibilitygenerated strong status-quo incentives.

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The IMF also played an important role in supportingthe convertibility regime by providing Argentina withfinancial support far exceeding itsquota of Special Drawing Rights. As lateas September 15, 2001, when theeconomy was already contractingrapidly and less than 3 months beforeArgentina would begin its dizzyingdescent into devaluation and economicchaos, IMF spokesman Thomas Dawsondefended the then new IMF financingdeal and its role in supporting theconvertibility regime – mostly becauseof the risks of devaluation (Dawson2002). By the late 1990s it was alsoclear that devaluation (thanks to thesize of the debt) would also bring adebt default in its wake, widespreadbankruptcies, and Argentina’s isolationfrom international financial markets. Inthis context both the government andthe IMF saw cost-cutting as the leastrisky strategy. Balancing the budgetwas supposed to restoring theconfidence of international investorsand return Argentina to a growth path (Jonas 2002). Thestrategy put hope in convertibility’s confidence effect,while ignoring the currency board’s perverseconsequences (effect on the trade balance) and thedifficult external context.

By 2001, getting off convertibility would have required acarefully controlled devaluation plan, including a debtrescheduling deal supported by the IMF. There is littleevidence that such an option was considered, or eventhat convertibility was viewed as a key part of theproblem by top IMF officials who continued to assertthat Argentina’s economic problems were primarily dueto incomplete liberalization and excessive governmentspending (Fischer 2001). Fernando de la Rúa, even if he

had wished to do so, did not have either the domestic orinternational political support necessary to change the

currency regime or drastically cutspending and had little choice butto limp from one IMF financing deal toanother. By mid-2001 it was clear thata default was on the horizon, and thatthe IMF and the government’s faith ina “confidence” effect was severelymisplaced. The failure to develop analternative plan to address theburgeoning crisis made devaluationinevitable by December 2001.

POLITICAL INSTITUTIONS ANDGOVERNANCE

Notwithstanding the economicincentives generated by convertibility,the institutional structure of theArgentine state also mitigated againstpolicymakers taking the economic andpolitical decisions necessary to forestallthe crisis. Institutions contributed topoor governance by creating incentives

that undermined political cooperation, rewardedpolitical opportunism and patronage, and weakenedpolitical responsibility.

Presidentialism and Divided Government

The Argentine presidential system tends to a variety ofstructural problems that undermine good governanceand cooperation between the parties (Linz 1994).Principal among these is the problem of legislativedeadlock when the presidency and Congress arecontrolled by different parties; the tradition of “hyper-presidentialism”; and the effect of electoral incentiveson the behaviour of legislators.

Divided government and legislative deadlock have beenpersistent problems in Argentina’s new democracy, butwere especially problematic for non-Peronist presidents.During Fernando de la Rúa’s abbreviated government,the Alianza did not have an absolute majority (morethan 50%) in either the Chamber of Deputies or theSenate. In October 2001 it lost its plurality in the lowerhouse to the PJ, leaving President de la Rúa withoutcontrol of either chamber and unable to govern. Incontrast, the Peronists under Menem enjoyed anabsolute majority in the Senate during 1989-1999,

By 2001, getting offconvertibility would have

required a carefullycontrolled devaluationplan, including a debt

rescheduling dealsupported by the IMF.There is little evidence

that such an option wasconsidered, or even that

convertibility wasviewed as a key part of

the problem by topIMF officials.

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and when taken in conjunction with their conservativeallies, the Unión del Centro Democrático (UceDe), anabsolute majority in the Chamber of Deputies as well formuch of the same period.

Fernando de la Rúa’s inability to maintain the Alianzacoalition and articulate a convincing political vision wasa personal failure on his part, but the structure of theArgentine electoral system also generated fragmentaryincentives within parties and alliances. Once it was clearduring the first year of his term that de la Rúa would beunable to improve the economy, and would be forcedinto increasingly unpopular adjustment measures, otherparties (and individuals within theAlianza) realized that being associatedwith the government would harm theirchances of being reelected in the mid-term elections. The flood of defectionsfrom the UCR in April-May 2001, andthe increasing unwillingness of theopposition to support de la Rúa in agovernment of national unity, may thusbe read as electoral manoeuvres in theface of the mid-term elections ofOctober 2001.

The difficulty of working with Congress,even when controlled by the sameparty as the presidency, has encouragedthe development of what Guillermo O’Donnell hasreferred to as “hyper-presidentialism” (O’Donnell 1994).Since Menem, presidential unilateralism and discretionhas increased substantially (Llanos 2001; Peruzzotti2001). The use of executive decree powers hasmarginalized the role of the congress in formulating,scrutinizing and passing legislation and underminedtrust between the executive and the legislature. Inaddition the line-order (or partial veto) and regulatoryfunction of the executive is also widely used to modifylegislation passed by Congress. According to Mark Jonesand Sebastián Saiegh, the tradition that has developedin Argentina is one in which the executive formulatesand drafts major policy initiatives and the Congressplays the role of “blunt veto player.”

The structural problems of divided government areexacerbated by a winner-take-all political culture amongthe parties and the fact that political obstructionism(rather than cooperation) pays dividends. The prematurecollapse of Raúl Alfonsín’s 1983-1989 UCR governmentwas facilitated by PJ opposition in the Congress and

talking up the hyperinflationary crisis in mid-1989(Canitrot 1994, 86). In 2001, the PJ’s refusal to cooperatewith the Alianza in a government of national unity led tode la Rúa’s fall. These are worrying lessons because thecrisis and failure of governance has already led twice inthe last twelve years to the premature transfer of power– both times to the Peronists, even though the PJ wasone of the reasons for the failure in the first place.

Federalism and Ungovernabilty

But it is not just the likelihood of divided governmentthat makes governance difficult – as this tendency is

present in most Latin Americanpresidential systems. What setsArgentina apart is the interaction ofthese structural incentives for conflictwith its highly decentralized federation.Mariano Tommasi, Sebastián Saieghand Pablo Sanguinetti identify someperverse incentives in Argentinefederalism that undermine goodgovernance. Because of the politicalimportance of the provinces in theCongress, federal-provincial negotiationis potentially at the heart of everypolicy debate. This increases thelikelihood of special deals between theexecutive and groups of provincial

governors. It also means that defending the parochialinterests of the provincial governors often takesprecedence over the national good. While the mostimportant issues are dealt with in federal-provincialdeals, implementation is difficult and inconsistentleading to opportunism and cheating by both thenational and provincial governments (Tommasi et al.2001, 173-183).

Provincial governors are the real power nodes of theArgentine political system. Governors are integrateddownwards to the local mass base of party militantsthrough a series of organizational levels that areultimately based on patronage politics. In the case of thePJ, it is governors (or provincial party bosses when theparty is not in power) who are able to mobilize,discipline, and finance the mass base of the party(Levitsky 2001, 48-50). The overwhelming importance ofpublic sector employment in most provinces is asymptom of these patronage networks. This is alsoexplains why many governors were unwilling to balancetheir provincial accounts.

The crisis and failure ofgovernance has already led

twice in the last twelveyears to the premature

transfer of power – bothtimes to the Peronists, even

though the PJ was one ofthe reasons for the failure

in the first place.

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But the influence of the governors is also integratedupwards into the national congress through provincialsenators and deputies. Governors and provincial partybosses, rather than the national party executive have thelast say in which members of their own party can run asdeputies and senators (Levitsky 2001, 63-64). Sincedeputies and senators are elected by proportionalrepresentation based on their ranking on closed partylists, they owe their careers to governors and provincialparty bosses more than to the people they represent orthe national party leadership. Thus, in Argentina it iscommon for blocs of deputies to vote according to thewishes of their governor. In this respect, the provinceshave a virtual veto in Congress, and president-governordeals are the key to governance.

The perverse incentives generated byArgentine federalism are also manifestin the financial relationship betweenthe federal government and theprovinces. Unlike Canadian fiscalfederalism in which fairlystraightforward equalization formulasand earmarked transfers (or tax points)determine the distribution of federaltax revenues to the provinces, theArgentine system is so complicatedand discretionary that it has beendescribed as a “labyrinth” (Jones et al.2000, 152). The federal government’sfailure to regularize Argentine fiscal federalism and reignin provincial deficits was one of the factors that directlycontributed to the collapse of the convertibility regimethanks to the pervasive use of quasi-currencies (federaland provincial bonds used as currency) to pay publicsector bills. By late 2001 the proliferation of quasi-currencies not backed by the central bank (as required bythe convertibility law) had effectively undermined themonetary base of the Argentine peso.

But the failure to regularize fiscal federalism reflects thecentral importance of discretionary transfers in theArgentine system, both in terms of buying the supportof provincial governors and maintaining patronage-based electoral machines (Manzetti 2002, 14-16). Withinthis system, there are few incentives for either governorsto be fiscally prudent, or for the federal government toaggressively reign in provincial excesses.

The Rule of Law

Historically, Argentina has been known for thepoliticization of its institutions – including the judiciary.This has been a consequence of the naked and extendedconflict between highly antagonistic political forces(Peronists and anti-Peronists) over the last fifty years.Each force hoped to use the state apparatus to advanceits own interests and frustrate those of its enemies, thusresulting in the politicization of many key bureaucraticappointments. This has lead on the one hand to a stateapparatus which has not been able to match the level oftechnical competence and professionalism found inother Latin American countries of similar developmentlevels (such as Chile) and on the other, the politicallyopportunistic rule of law.

The classic example is the politicizationof the Supreme Court. In 1990, PresidentCarlos Menem expanded the SupremeCourt from five members to nine. Thisenabled him to appoint a Court thatwas sympathetic to his political agenda.Menem sought to ensure that appealsto the Supreme Court against his wide-ranging neoliberal reform programmewould not prosper. Menem’spoliticization of the Supreme Courtundermined what some observershad identified as an increasinglyindependent judicial branch since the

return to democracy in 1983 (Peruzzotti 2001, 149-150).In this respect, the Constitution, rather than being adocument which sets agreed limits on the politicalgame, is still part of the game. Thus, the politicizationof the judiciary has meant that the Constitution isnot interpreted consistently over time, but is ratherjust another pawn in the more relevant game ofpower politics.

Luigi Manzetti has identified other serious problemswith the rule of law during the tenure of Carlos Menemin Argentina, which included widespread corruption,the lack of qualifications in judicial appointments,the capture of the Supreme Court by the executive,and the use of executive “bullying” to produce rulingsthat met with the approval of the executive (Manzetti2002, 12-14).

The politicization of thejudiciary has meant that

the Constitution is notinterpreted consistentlyover time, but is rather

just another pawn in themore relevant game

of power politics.

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The road to devaluation and crisis was paved with badincentives. After the economy entered a negative growthpath, convertibility continued to generate strongincentives in favour of the status quo. In this context, thepolitical will needed to break the vicious cycle ofrecession was considerable. However, the institutionalincentives identified above worked to frustrate thepolitical innovation and risk-taking necessary to avert acrisis. The PJ preferred letting de la Rúa fall thancooperating in a government of national unity.The problem of divided government, the nature ofArgentine federalism and the politicization of theSupreme Court undermined his ability to govern.Perhaps most importantly, there were too manyincentives that rewarded politicalopportunism by both governors andlegislators alike and which discouragedpaying the political costs of eitherfiscal restraint or devaluation.

AFTER DEVALUATION: EDUARDODUHALDE AND THE STRUGGLE FORSTABILITY

In the course of the two-week periodbetween de la Rúa’s resignation andthe first days of the Eduardo Duhaldeadministration, two important eventsoccurred that would be fundamental ininfluencing the future development ofthe crisis. Interim President AdolfoRodríguez-Sáa declared a wildlypopular default on Argentina’s debt(excluding that owed to multilateralfinancial institutions) on December 23, 2001. And onJanuary 4, 2002, newly appointed by Congress, PresidentEduardo Duhalde declared the end of Argentina’s 1:1currency peg to the US dollar known as the convertibilityregime. These two decisions resulted in a massive loss offaith in the Argentine currency and financial system. TheArgentine peso entered a free-fall from parity with thegreenback to approximately 25¢ by mid-April 2002 whenit began to stabilize at that value. The pressure on thepeso threatened to further discombobulate the domesticbanking system as savers sought to defend theirdeposits by converting them into dollars or sendingthem abroad - necessitating the maintenance andstrengthening of the banking restrictions originallyimposed by de la Rúa. The banking restrictions and thefreeze on credit further deepened the economic crisis.

The development of the Argentine crisis from earlyJanuary 2002 onwards was thus characterized by severalchallenges: managing the corralito with a view toeventually unfreezing the banking system; restoringrelations with the IMF and the international financialcommunity; and negotiating a political exit from thecrisis. The slow progress made by the Duhaldegovernment as it struggled with these challenges overthe course of 2002 underlined the extent to which thecrisis was political and institutional – a crisis ofgovernance. The same perverse institutional incentivesthat had led to poor governance and the collapse of theArgentine economy under de la Rúa frustrated Duhalde’sattempt to overcome the crisis and will continue to

influence Argentina’s development intothe foreseeable future.

The Corralito – A Political Problem?

Following the default and devaluation,the government of Eduardo Duhaldewas faced with a number of importanttasks needed to stabilize the economyincluding the gradual lifting of thebanking restrictions (corralito), whichhad frozen savings in order to prevent arun on the banks. When Duhaldedecreed the conversion, or pesification,of both dollar denominated debts (at a1:1 ratio) and deposits (at a 1:1.4 ratio) topesos, both savers and lenders foundthemselves paying a heavy price for themismanagement of the economy.

From a practical point of view dollar deposits had to beconverted to pesos (and eventually into long-termbonds) in order to ensure the viability of the bankingsector which was under extreme financial pressure dueto the pesification of its dollar denominated loans andincreased levels of loan default during the recession andcrisis. From a moral and constitutional point of view,many considered that their property rights had beenviolated by the pesification of dollar denominateddeposits. Maintaining the government’s policy on thecorralito turned out to be a political problem influencedby problems of governance.

On the one hand, the government faced considerableleakage from under the corralito as a result of rulingsmade by lower court judges authorizing individuals

The road to devaluationand crisis was paved withbad incentives. After the

economy entered anegative growth path,

convertibility continued togenerate strong incentivesin favour of the status quo.In this context, the political

will needed to break thevicious cycle of recession

was considerable.

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access to their banking accounts. Evidence began tomount that some judges were freeing up accounts as aresult of receiving bribes. However, a more seriousproblem for the government throughout April-Octoberwas the concern that the Supreme Court would ruleagainst the pesification of dollar deposits. A SupremeCourt ruling against the government would have beendevastating and threatened the entire economicstabilization effort.

As one of its early initiatives, the Duhalde governmenthad begun the impeachment (with the cooperation ofthe Radicals) of the members of the Supreme Courtbased on their politicized and pro-Menem rulings.Menem had appointed most of the Supreme Courtjudges during his decade in the presidency. A run ofrulings against the government sparked fears that theSupreme Court was systematicallyopposing the Duhalde governmentbecause of the impeachment process.As a result, Duhalde backtracked on hisoriginal decision and sought to throwout an impeachment process that hehimself had begun.

Duhalde believed that he could buy thecooperation of the Supreme Court bystaying the charges against itsmembers. Duhalde managed to securethe support of the major Peronistgovernors and powerbrokers who directed theircongressional representatives to vote against pursuingthe impeachment. The Radical Party and Alternativa poruna República de Iguales (ARI), which supported theimpeachment process refused to give the Peronists thequorum necessary to hold the vote for almost the entiremonth of September, but eventually relented fearingthat they would bear the blame of the institutionalstalemate. In early October however, Duhalde obtainedthe quorum necessary to win the vote – and theimpeachment was shelved.

Regardless of the practical necessity of safeguarding thepesification of deposits and the integrity of the corralito,the affair reveals both the extent to which the rule oflaw was highly imperfect and politicized to begin withand the extent to which the executive was willing to usethe political pressure in order to influence the rulings ofthe Supreme Court.

Meeting IMF Conditions

Once President-for-a-week Adolfo Rodriguez-Sáa haddeclared a default on Argentina’s privately held debt,one of the most pressing tasks for the Duhaldeadministration was to negotiate Argentina’s readmissioninto the global financial community. Without an IMFdeal, Argentina was cut off from global private capitalmarkets and multilateral lending.

The conditions required by the IMF in advance of signinga deal included strict compliance of the federal-provincial fiscal pact (committed provinces to a 60%reduction of their deficit), the removal of quasi-monies(bonds issued by provincial governments to pay theirwage bills) from circulation, the repeal of the economicsubversion law (under which foreign bank executiveswere being investigated for aiding capital flight) and the

bankruptcy law (which was viewed asbeing too debtor friendly), lifting thecorralito, and devising a “monetaryanchor” for the peso.

In practical terms, meeting the IMFdemands required a federal-provincialagreement in which the governors bothagreed to implement IMF conditions intheir jurisdictions, and control the blocsof Deputies and Senators correspondingto each governor. Duhalde had found itdifficult to impose discipline on the

Peronist congressional representatives without firstsecuring the agreement of the governors. There werethree federal-provincial agreements that were thecornerstones for meeting the conditions set out bythe IMF: February 27, April 24 and November 18. TheFebruary 27 meeting set the initial targets for reducingprovincial deficits and a commitment to pass a newrevenue sharing law, but also pesified provincial debtat favourable rates (effectively forcing the federalgovernment to assume the costs of devaluation) if theprovinces met their deficit targets. However, it was theApril 24 meeting that marked a significant turning pointin the management of the crisis.

Until that meeting, it was not clear that either theprovinces or Duhalde were truly committed toimplementing the IMF mandated adjustment policiesdesigned by Economy Minister Jorge Remes Lenicov.Duhalde was a classic Peronist caudillo, opposed to the

A run of rulings against thegovernment sparked fears

that the Supreme Courtwas systematically

opposing the Duhaldegovernment because of the

impeachment process.

11

Menem model of open neoliberalism, and many of hispolicy decisions reflected his populist credentials.Duhalde’s pesification of the debt, permissivebankruptcy law, and income support plan for families,reflected an willingness to defy the IMF. Early indicationssuggested that he was unconvinced of the need to dealwith the IMF and was prepared to “go it alone.”Following the resignation of Remes Lenicov in mid-April,Duhalde organized a meeting with the governors atwhich he hoped to secure their support for a radical shifttowards an inward-looking traditional Peronist recipe. Inthis respect, Duhalde’s policy vacillations seemed toreflect a genuine lack of commitment to carrying outthe adjustment plan and reaching a deal with the IMF(Solá 2002).

However, in that meeting the provincialgovernors underlined that such a shiftwas unacceptable. It was from thispoint onwards that the need to reinsertArgentina into the world financialsystem became a real priority for thegovernment. As a result, the provincescommitted themselves to support thegovernment in the Congress and dowhat was necessary to secure a dealwith the IMF. For these reasons, thenew economy minister appointed byDuhalde, Roberto Lavagna, was anorthodox economist with no ties tothe Peronists.

Over the course of the summer of 2002 many of theeconomic demands made by the IMF were met, some bydesign, and others as the recession bottomed out andArgentina’s economic outlook began to improve. TheIMF’s refusal to conclude a deal, especially as theArgentine economy began to improve and thegovernment enacted a successful voluntary bond swapthat improved the outlook for the banking sector (byconverting deposits into long term bonds) and tooksteps to lift the corralito, looked increasingly capricious.The IMF policy towards Argentina contrasted with therapid conclusion of major deals with Uruguay and Brazilin July. These deals reflected an attempt to justify theIMFs hard-line approach by isolating the Argentineproblem and reducing the effect of financial contagionin the Southern Cone.

Since September 2001, the IMF had increasingly resortedto justifying its reluctance to sign a deal with the

Duhalde government by citing the lack of politicalconsensus in the country. With the campaigns of thepresidential pre-candidates in full swing, several of thefrontrunners were advocating renouncing a significantpart of the debt and taking a hard-line towards anymore concessions to the IMF. At the same time theCongress continued to frustrate IMF mandated (andexecutive approved) policy initiatives and was effectivelyparalysed for the entire month of September by a debateabout whether or not to impeach the members of theSupreme Court.

In this context, on November 18th, President EduardoDuhalde and twenty of the twenty-four provincialgovernors signed an agreement defining a new electoralcalendar and meeting several of the persistent demands

of the IMF – including the need formore political consensus. The twelvepoint Political, Economic and SocialAccord agreed to by the governorsincluded commitments to passlegislation in the national Congress(protecting creditors and technocratsworking to restructure the bankingsystem), approve the government’sbudget and maintain exchange ratestability. With this federal-provincialagreement, Argentina seemed to havemet the last of the IMF’s principalconditions.

However, by the time the IMF announced an agreementwith Argentina on January 16, 2003 it was not clear thatArgentina had succeeded in meeting its targets to thesatisfaction of the IMF. Since making a show of the“political consensus” in the November 18 federal-provincial meeting, Argentina began to put pressure onthe IMF by making the claim that it would not imperil itsrecovery by drawing on its reserves in order to makedebt repayments due to the Fund, thus threatening todefault with the international organization. Combinedwith pressure from the G-7 under the leadership of Spainand the United States’ interest in resolving the issue theIMF capitulated with a short-term debt rollover despitethe reservations of its board of directors.

Negotiating a Political Exit

The famous quote about Rome burning while theEmperor Nero played his fiddle could apply with equalforce to Argentina and its political class. The most

Duhalde’s policyvacillations seemed to

reflect a genuine lack ofcommitment to carryingout the adjustment plan

and reaching a dealwith the IMF.

12

striking element in the political response to the crisissince January 2002 has been the way in whichresponding to the demands of the IMF and articulatinga coherent strategy to deal with the crisis hasconsistently fallen victim to political bickering withinthe governing party.

Since Eduardo Duhalde assumed the presidency, one ofhis principal problems has been containing the struggleto replace him in the run-up to the presidential electionsoriginally scheduled for September 2003. Faced with thedecimation of the UCR following the collapse of de laRúa’s government, the Peronists seemed virtuallyassured of victory and its internal leadership race aboutpassing the presidential sash from Duhalde to his PJsuccessor. After Duhalde announced in early July that hewould accelerate the electiontimetable to April 2003, the race toreplace him kicked off in earnest.

The struggle set Eduardo Duhalde andhis favoured candidate against hispolitical foe, former president CarlosMenem. Duhalde had been frustratedby public opinion polls thatconsistently put Menem in the top twoor three among both Peronist pre-candidates, and against presidentialcandidates from other parties. This wasdespite the questionableconstitutionality of his reelection bid(according to the 1994 Constitution heshould have to wait until the end of de la Rúa’sconstitutionally mandated term before being eligible),and the fact that he has been under investigation forillegal arms sales, illicit enrichment, and facilitating acover-up of the 1994 terrorist bombing of the JewishCommunity Centre (AMIA) in Buenos Aries. In contrast,Duhalde’s early favourite, José Manuel de la Sota, polleda distant fourth and was unable to generate forwardmomentum.

The willingness of PJ leaders to play divisive powerpolitics at a time when a common front was mostneeded speaks to the persistence of the win-at-all-costspolitical culture of the party. But an even more seriousproblem has been the manipulation of the legalframework governing the elections, which has been littlemore than an unadulterated attack on the rule of law.Duhalde forced open party primaries through Congress

because he thought that while Menem might beselected by party members in a closed primary, he wasunlikely to be selected by the population at large. WhenMenem continued to top the public opinion polls whilede la Sota stagnated Duhalde sought to first postponethe primaries, then cancel them. Duhalde then floatedthe idea of a “lemas” law (so-called after the Uruguayanlegislation of the same name) in which all PJ pre-candidates would complete directly in the presidentialelections and the one winning the most votes wouldcollect all the votes attributed to candidates runningunder the PJ banner.

Recognizing that the lemas law would lack popularlegitimacy (it was too beneficial to the PJ at the expenseof the other parties), Duhalde used his dominant

position in the top organ of the PJ, theNational Congress, to force through theadoption of a “neo-lemas” option inwhich all PJ pre-candidates wouldcompete directly in the presidentialelections with independent partyorganizations, but without summingthe votes of those belonging to thesame party. He also convinced thefederal judge in charge of electoral lawto reverse her earlier rulings requiringthe Peronists to hold internal primaries.By changing the rules of the game,Duhalde ensured that Carlos Menemwill not be able to rely on the PJelectoral machine to support his

presidential bid, and that his own favoured candidate,Néstor Kirchner, governor of Santa Cruz, has a goodchance of advancing to the second round of thepresidential elections with the backing of the BuenosAires provincial PJ machine.

Duhalde and his party have shown little respect for fairrules, impartially applied, which confer legitimacy. Theneo-lemas law is explicitly designed to produce a victoryfor not only the PJ, but for Duhalde’s faction within it.Ironically this, together with the federal-provincialagreements he has secured, may be Duhalde’s greatestcontribution to managing the crisis. As former governorof Buenos Aires province and Argentina’s most powerfulPeronist caudillo, only he was capable of brokering dealsand using the pressure-politics needed to bring the PJinto line. Although he has run roughshod over the rule oflaw, the politics of “dirty hands” were needed both to

Although he has runroughshod over the rule oflaw, the politics of “dirtyhands” were needed both

to achieve federal-provincial cooperation, and

bring discipline to thebattle for the Peronist

presidential nomination.

13

achieve federal-provincial cooperation, and bringdiscipline to the battle for the Peronist presidentialnomination. Although Duhalde’s political methods makea constitutionalist squirm, it is hard to disagree with hisgoals. His personal commitment to crushing Menem’sreelection chances was vitally important in reducing thepossibility that the presidency fall to a man who shouldhave been excluded from consideration by the impartialoperation of the rule of law. In a context where that wasnot possible, Duhalde’s brand of power politics may beconsidered a second-best option. But where Duhalde hasfailed is in laying the basis for deep institutional reform.

The Challenge of Institutional Reform

Duhalde’s preoccupation with the political power gamefor much of 2002-2003 should not obscure the advancesthat were made since the economy entered a free-fall inDecember 2001. Since that time, theeconomy has begun to show signs ofreactivation and unemployment figureshave started to decline for the firsttime since early 1999.

Despite the horrendous cost of defaultand devaluation which will be borne byArgentina for years to come, oncetaken, floating the peso will initiate arestructuring of the economy more inline with Argentina’s traditionalcomparative advantages – andencourage the rebirth of export-oriented agricultural and naturalresource-based industries. Theadvances made in income tax collection should begin tobear fruit as the economy begins to grow and value-added tax receipts increase. In the near future, Argentinashould be able to run a primary surplus. As it currentlystands, however, the change in exchange-rate regime isthe only major accomplishment – if it can be called that- of the de la Rúa-Duhalde transition. Just as too muchfaith was originally put in the miraculous effect ofconvertibility, there is a danger that getting off paritywith the greenback will be the limit to institutionalreform in Argentina. It would be a tragedy if so muchsuffering did not translate into an ambitious agenda ofpolitical and institutional reform – as it would condemnArgentina to repeat some of the mistakes of its past.

One of the most promising efforts to contemplate thedeep reforms needed to solve the crisis of governance in

Argentina has been through the Argentine DialogueTable. The Argentine Dialogue was a cooperative projectof the United Nations Development Program (UNDP)and the Catholic Church. It was given a mandate byEduardo Duhalde on January 14, 2002 to initiate adialogue between “workers, businessmen, NGOs, and thestate itself” on how to overcome the grave social crisisafflicting the country. Duhalde also publicly declaredthat its findings would inform an ambitious agenda ofconstitutional reform. An editorial in La Nación in earlyFebruary 2002 referred to it as “the only contemporarynews that invites one to look to the future with hope”(La Nación, 03/02/02).

The Argentine Dialogue recommended wide-ranginginstitutional reform: reforming the political system toimprove representation and responsibility; judicial

reform to improve the independenceand quality of the rule of law;improving the federal-provincialrelationship; a program to reconstructan efficient and technically competentstate apparatus; and tax reform toimprove fairness and collection. Itsproposals included a timetable andidentified the authorities responsiblefor designing and implementing thereforms (Argentine Dialogue 2002). TheArgentine Dialogue shows theconsiderable creativity and intellectualcapital of Argentines in identifyingsolutions to the problems that led tothe crisis.

Hoping to attract the commitment and signatures ofpublic figures, it was instead met with a cold shoulder.Only a few politicians ventured to sign it. In addition,Duhalde’s constitutional reform agenda found itselfsubordinated to the more immediate concerns of how toensure that Carlos Menem did not win the Peronistpresidential nomination and meet the specific economicand political demands of the IMF. By early 2003 all majorreform efforts had been abandoned, and in the run-up tothe April 27 presidential elections, old-style powerpolitics dominated the political agenda.

CANADIAN POLICY OPTIONS FOR POST-CRISISARGENTINA

Canadian Investments in Argentina. The crisis hasalready damaged Canada’s image in Argentina. The

Just as too much faith wasoriginally put in themiraculous effect of

convertibility, there is adanger that getting off

parity with the greenbackwill be the limit to

institutional reformin Argentina.

14

decision of the Bank of Nova Scotia to not re-capitalizeits Argentine subsidiary Banco Quilmes and withdrawfrom the Argentine market, leaving its employees unpaidand account holders in risk of losing their deposits hasbeen the single most negative effect on popularperceptions about Canada for twenty years.Notwithstanding the legitimate business reasons behindScotiabank’s decision, it has left Canada lookinguncommitted and opportunistic. The large number ofCanadian investments in the natural resource extractionindustry in Argentina (oil and gas, and mining), a sectorthat has historically been particularly vulnerable tonationalist backlash, suggests that it is important howCanada is perceived in Argentina. Promoting andpublicizing good corporate social responsibility by bothremaining and new Canadian investors may go somedistance to repairing the damage done by Scotiabank.

The Free Trade Agreement of theAmericas. Canada has been avociferous advocate of the Free TradeAgreement of the Americas (FTAA) andthe Summit of the Americas processsince the Québec Summit of 2001. Acomprehensive free trade agreementwhich liberalized the agricultural sectorand ended agricultural subsidies wouldbe a huge boon to the Argentineeconomy which remains highlycompetitive in many agriculturalproducts. Argentina is scheduled tohold the next Summit of the Americas in 2005.

The International Monetary Fund and Argentina. Canadacan exert leadership through its membership in theGroup of 7 and its representatives on the IMF Board ofDirectors. In these forums Canada needs to press forboth Argentina’s full reintegration in to the internationalfinancial system and support efforts by the governmentto address key structural and governance issues. Canadashould support short-term debt rollovers with a viewtowards concluding a comprehensive IMF agreementwith the new government that will take power inMay 2003.

Political Reform. Political and institutional reform musthappen in Argentina in order for the country to start ona path of stability and good governance. This challengeneeds to be met from within, and there is little thatCanada or the IMF can do to influence successful reform.

Canada could promote political and institutional reformthrough financial assistance targeted at respected civilsociety organizations (CSOs) and through bilateraltechnical cooperation agreements. Supporting the workof organizations such as the Argentine Dialogue shouldbe a priority.

Canada’s long experience with some technical issues inour own evolving fiscal federalism could also proveuseful to Argentina. The use of a simple equalizationformula that responds to the changing fiscal needs ofthe provinces instead of discretionary transfers, the needto work towards reducing vertical fiscal imbalance (lackof correspondence between provincial expenditure andtax revenue) and developing provincial taxation capacitywould go a long way to improving fiscal federalism. Thesensitive nature of these issues means that Canada

should invite Argentine politicians andtechnocrats to participate in technicalworkshops on fiscal federalism, or tosend Canadian experts to Argentinathrough bilateral technical cooperationagreements. Such programmes mustplace the emphasis at the provinciallevel, where political resistance toreform remains strong.

LOOKING FORWARD

The failure of governance in Argentinais the failure to build an institutionalenvironment capable of channelling the

considerable intellectual talent of its people towards thecommon good. Poor governance lay behind the crisis andthe way in which it was managed. Will the failure ofgovernance continue to dictate Argentina’s future?

On April 27, 2003 the first round of the presidentialelections to replace Eduardo Duhalde will be held. Theprocess of setting the rules for the election has beencharacterized by many of the dysfunctions identified inthis paper: possibly unconstitutional rule changes tofavour Duhalde’s candidate; executive pressure on thejudiciary to support the executive’s interpretation of thelaw; federal-provincial agreements in order to advancerule changes through Congress; and naked powerpolitics played by opposing factions within the PJ. In theend Duhalde seems to have been able to impose his willon the Peronist party.

The failure of governancein Argentina is the failureto build an institutionalenvironment capable of

channeling theconsiderable intellectual

talent of its people towardsthe common good.

15

The elections themselves do not promise great change,as only two scenarios are probable. Duhalde’s chosensuccessor, Néstor Kirchner could triumph, guaranteeingcontinuity in power for the Duhaldista faction, but atleast securing good conditions for governability. Or anoutsider may win (even a PJ outsider such as AdolfoRodríguez Sáa) who has new ideas, but without thecongressional and provincial support to implementthem. In that second scenario, the failure of governancecould become a recurrent problem.

One of the saddest outcomes of the Argentine crisis hasbeen the subordination of long-term structural reformefforts to short-term considerations of political survival.With the conclusion of the presidential elections, andnegotiations for a long-term deal with the IMF, at leastthis problem may change for the better. However, theability of the traditional political class to implementreforms that strike at the very privileges and networksof power that have benefited them for decades remainsextremely problematic. In this context, it is paramountthat as the economy stabilizes, the agenda of deepstructural reform is not forgotten and that thegroundbreaking work of civil-society organizations suchas the Argentine Dialogue remain in the public debate.Constructing institutions that generate the incentivesthat encourage responsible political and economicdecisions by individuals and organizations remains thechallenge to be met in Argentina.

Paul Alexander Haslam is a Senior Analyst at FOCAL,covering the Southern Cone countries. He received hisPh.D. from Queen’s University and frequently gives guestlectures at international conferences and seminars.

Further Reading

Argentina. Dirección Nacional de CuentasInternacionales. “Estimaciones Trimestrales del Balancede Pagos.” Buenos Aires: Government of Argentina, 2002.[www.mecon.gov.ar/cuentas/internacionales/]

Argentina. Instítuto Nacional de Estadística y Censos(INDEC). [www.indec.mecon.ar]

Argentina. Secretaría de Política Económica. "FinanzasPúblicas." Buenos Aires: Government of Argentina, 2002.[www2.mecon.gov.ar/infoeco/].

Argentine Dialogue and United Nations DevelopmentProgram. “Bases para las reformas.” Buenos Aries: UNDP,February 2003.[www.undp.org.ar/scripts/zope.pcgi/PNUD/dialogo-argentino]

Canitrot, Adolfo. “Crisis and Transformation of theArgentine State (1978-1992).” In Democracy, Markets, andStructural Reform in Latin America, ed. William C. Smithet al., 75-102. Miami: North South Center, 1994.

Dawson, Thomas C. “IMF Loan Agreement Good forArgentina.” The Los Angeles Times. 15 September, 2001.

“Un deber argentino: recuperar la esperanza.” La Nación(Buenos Aires). 3 February 2002.

Fanelli, José María. “Crecimiento, inestabilidad y crisis dela convertibilidad en Argentina.” Revista de la CEPAL 77(August 2002): 25-45.

Fischer, Stanley. “Argentina Needs to Continue Fiscal andStructural Reforms, Fischer Advises.” IMF Survey 30, no. 13(2 July, 2001): 213-215.

Gerchunoff, Pablo, and Juan Carlos Torre. “La políticade liberlización económica en la administración deMenem.” Desarrollo Económico 36, no. 143 (October-December 1996): 733-762.

Jonas, Jiri. “Argentina: the Anatomy of a Crisis.”[www.czechweb.net/JJonas/2/214.htm]

Jones, Mark P., Sebastian Saiegh, Pablo Spiller, andMariano Tommasi. “Professional Politicians – AmateurLegislators: The Argentine Congress in the 20th Century.”Tübingen, Germany: Annual Conference of theInternational Society of New Institutional Economics,22-24 September, 2000.

Levitsky, Steven. “An ‘Organised Disorganisation’:Informal Organisation and the Persistence of Local PartyStructures in Argentine Peronism.” Journal of LatinAmerican Studies 33, no. 1 (February 2001): 29-66.

Linz, Juan J. "Presidential or Parliamentary Democracy:Does It Make a Difference?" In The Failure of PresidentialDemocracy, eds. Juan J. Linz and Arturo Valenzuela, 3-87.Baltimore: The Johns Hopkins University Press, 1994.

Llanos, Mariana. “Understanding Presidential Power inArgentina: A Study of the Policy of Privatisation in the1990.” Journal of Latin American Studies 33, no. 1(February 2001): 67-99.

Manzetti, Luigi, “The Argentine Implosion.” The North-South Agenda Papers 59 (November 2002).[www.miami.edu/nsc/publications/Papers&Reports/ArgentineImplosion.html]

O’Donnell, Guillermo. “Delegative Democracy.” Journalof Democracy 5, no. 1 (1994): 53-69.

Peruzzotti, Enrique. “The Nature of the New ArgentineDemocracy. The Delegative Democracy ArgumentRevisited.” Journal of Latin American Studies 33, no. 1(February 2001): 133-155.

Solá, Joaquín Morales. “El Presidente, rescatado delabismo.” La Nación (Buenos Aires). 25 April 2002.

Schvarzer, Jorge. Implantación de un modelo económico:la experiencia argentina entre 1975 y el 2000. BuenosAires: A-Z editora S.A., 2000.

Tommasi, Mariano, Sebastián Saiegh, and PabloSanguinetti. “Fiscal Federalism in Argentina: Policies,Politics, and Institutional Reform.” Economia(Spring 2001): 147-201.

February 2003

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