Argentina’s Economic Shifts: From Authoritarianism to Neoliberalism

In Argentina, the adjustment policies implemented in the 1990s were a continuation of the changing political and economic model of welfare, a neoliberal model originating in the 1970s. These adjustments sought to amend the State’s role in the economy, identifying failures of state intervention (bureaucracy, high taxes, excessive regulations, etc.). Adjustment programs aimed to align national economies with the demands of the global economy, incorporating technological changes, decentralizing production, and promoting flexible business operations.

Structural adjustments had two main objectives:

• Macroeconomic: Provide resources (money, lending) to stabilize the balance of payments, which was destabilized by external debt payments. Domestically, the goals were to reduce state spending, control inflation, and attract foreign investment to increase revenue for debt repayment.
• Microeconomic: Establish an efficient economy by improving the use of production factors (land, industry, machinery) and optimizing investment and capital utilization.

All economic adjustments made in the 1980s and 1990s were oriented towards foreign debt payments, employing various strategies implemented by different governments.

Authoritarianism and Debt

During the military governments of the 1970s, a paradigm shift occurred, moving away from protectionism and the welfare state towards an open economy promoting massive capital inflow. The state favored large economic groups, providing financial grants for investments, some of which were non-existent or “ghost” projects. This began with Onganía’s government in 1966, which aimed to restore order, solve economic problems, and suppress social conflicts, particularly Peronism. Political and economic actions ran parallel; only a “strong” government could maintain order and ensure necessary investments to complete industrialization and promote economic development amidst recession and inflation. Free-market measures were implemented, along with a centralized authority to guide the market. The economic plan focused on attacking inflation without causing recession and applying financial controls. This innovative plan coordinated measures affecting prices, exchange rates, wages, and agricultural and industrial goals. The main problem was identified as inefficiency in both public and private sectors, necessitating resource redistribution within economic sectors rather than between them.

The Great Transformation

Starting in 1967, the military promised “The Great Transformation” of Argentina’s economy, emphasizing the need for change, better resource utilization, and increased productivity and efficiency. This involved allowing free competition, eliminating excessive tariff protection, and promoting manufactured exports. Efforts were made to restructure state enterprises, streamline public administration, reduce spending and deficits, and implement tax reforms (including income tax increases and public utility rate hikes). Public works investments were also increased. A 40% exchange rate devaluation aimed to stabilize the currency, end speculation, and stimulate investment. Agricultural export taxes were restored, tariffs were reduced, and most foreign exchange market controls were removed, allowing the import of goods. A primary objective of tariff reform was to promote competition in local industry. Agricultural products received special treatment, and imported inputs and capital goods (e.g., machinery) were favored. This new regime marked a significant step towards economic opening. Import trade was mainly regulated by tariffs. The opening and external competition faced criticism from large local industrialists and particularly harmed small and medium enterprises. A new exchange rate system was established, with a financial dollar regulating all financial and commercial transactions and a separate rate for foreign trade operations. This period saw the promotion of neoliberal policies, with public funds directed as loans and subsidies to large economic groups. The General Economic Confederation opposed the “denationalization” of industry and finance, successfully enacting restrictive legislation to hinder foreign investment. These economic measures led to conflicts with the labor movement due to falling real wages, rising unemployment, and the suspension of collective bargaining and protests. This era was marked by a significant increase in external debt (from $7.8 billion in 1976 to $45 billion) and the political and economic failure of the military regime.

Transition and Heterodoxy

In December 1983, Raúl Alfonsín became president. The initial economic policy, managed by Finance Minister Grinspun, was characterized by Keynesian protectionist measures. Specific objectives were proposed (details would follow in further content).