IDENTIFYING THE MOST BINDING CONSTRAINTS TO GROWTH AND COMPETITIVENESS IN ARGENTINA
is a potentially binding constraint, as Taylor (1998) has shown that FDI, together with international corporate bond equity issuance, have become the predominant forms of international financing since the 1990s. Taylor (1998) documents how Argentina’s financial autarky between 1910 and 1990 has been one of the largest hindrances to economic growth for this country. This autarky was caused by “unwilling foreign creditors in the 1910s and 1920s, capital controls in the 1930s and 1940s, capital price distortions in the 1950s and 1960s, and wayward monetary policies in the 1970s and 1980s.” Taylor claims that the financial liberalization in Argentina in the 1990s, together with the financial globalization of that decade, would have helped Argentina escape from this autarky trap. However, since 2002, a backlash against Argentina’s financial liberalization has occurred, with the reintroduction of capital controls, the still unsettled debt with private and sovereign creditors (some $20 billion in nonrestructured debt with private bondholders and $6 billion in outstanding debt with Paris Club members remains unsettled), and other market unfriendly interventions in financial and goods markets.
FIGURE 2.6 Argentina’s Participation in FDI Flows to the World and to Latin America, 1997–2005 (percent) 2.5
35
Argentina/LAC Argentina/world
30
2.0
25 1.5 20 1.0 10 0.5 0.0
5 1997
1998
1999
2000
Source: IERAL-Fundación Mediterránea based on Mecon.
2001
2002
2003
2004
2005
0
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