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900 | <s>[INST] With elections looming, Argentine politicians are complaining [/INST] that social expenditures are too low, and they are promising increases. </s> |
901 | <s>[INST] Do they acknowledge that such [/INST] increases put stability at risk and restrict growth? </s> |
902 | <s>[INST] They hope voters will not make a [/INST] link between more social spending, government deficits and an unstable economy. </s> |
903 | <s>[INST] The support Mr. Cavallo gets from [/INST] the IMF is a Faustian bargain for all Argentines. </s> |
904 | <s>[INST] The IMF is a missile [/INST] in Mr. Cavallo's arsenal for his internal battles. </s> |
905 | <s>[INST] But as far as other Argentines are [/INST] concerned, that missile is pointed at them, and the label reads: more taxes. </s> |
906 | <s>[INST] --- Mr. Krause is vice dean of [/INST] the Post-graduate school of Economics and Business Administration (Eseade) in Buenos Aires. </s> |
907 | <s>[INST] ___ Document 281 of 500 The Americas: Why some Latinos prosper, and [/INST] others don't Author: Henderson, David R Publication info: Wall Street Journal , Eastern edition [New York, N.Y] 29 Mar 1996: A11. </s> |
908 | <s>[INST] accountid=28034 Abstract: David R. Henderson says that citizens of [/INST] several Latin American nations have recently gained substantial economic freedom, with economic growth as the reward. </s> |
909 | <s>[INST] Full text: In 1776, Adam Smith wrote in "The Wealth of [/INST] Nations" that Britain's colonies in America, despite having fewer natural resources than Spain's and Portugal's colonies, were more prosperous. </s> |
910 | <s>[INST] He attributed the difference [/INST] to greater economic freedom in Britain's colonies. </s> |
911 | <s>[INST] Taxes on the British colonies were far [/INST] lower than the taxes imposed by the Spanish and Portuguese governments. </s> |
912 | <s>[INST] Although the governments imposing the restrictions are now the citizens' own governments, [/INST] economic freedom is still substantially greater in Canada and the U.S. than in Latin America, and so is per capita income. </s> |
913 | <s>[INST] Nevertheless, what has changed for the better is that some [/INST] Latin American peoples have gained substantial economic freedom in the past 20 years, with economic growth as the reward. </s> |
914 | <s>[INST] In Argentina, economic freedom has also increased substantially in two [/INST] main ways -- the government is spending less on goods and services, and marginal tax rates have been lowered. </s> |
915 | <s>[INST] The Argentine government's consumption spending -- which does not include recently [/INST] growing transfer payments -- has fallen to only 5.1% of gross domestic product today from 12.6% of GDP in 1975. </s> |
916 | <s>[INST] Argentina's top tax rate, at 62% in 1984 [/INST] for income more than $96,000, is now down to 30% for income more than $120,000. </s> |
917 | <s>[INST] Between 1990 and 1994, when the major increase in [/INST] economic freedom occurred, Argentina's real per capita GDP grew by an average of 4.8% a year. </s> |
918 | <s>[INST] Along with the good news [/INST] on Latin America is some bad news. </s> |
919 | <s>[INST] Whereas in 1974, the top marginal tax rate was 20% on [/INST] incomes more than $270,000, the top tax rate is now 30%, and it kicks in at an income of only $40,000. </s> |
920 | <s>[INST] Venezuela's government also has hammered the economy [/INST] with inflation averaging 40% a year for the past five years. </s> |
921 | <s>[INST] Even worse, the inflation rate has fluctuated [/INST] wildly from year to year, making long-term contracts difficult to enter. </s> |
922 | <s>[INST] (The ability to make long-term [/INST] contracts is a crucial part of economic freedom. </s> |
923 | <s>[INST] ) Add in strict price controls and you can [/INST] see why, between 1985 and 1994, Venezuela's real GDP per capita grew only 0.2% a year. </s> |
924 | <s>[INST] With over half of South America's population, Brazil [/INST] has had little economic freedom for the past 20 years, with economic growth to match. </s> |
925 | <s>[INST] Annual money-supply growth, "only" in double digits in the [/INST] 1970s, hit triple digits in the 1980s and averaged more than 1,000% between 1992 and 1994. </s> |
926 | <s>[INST] Along with high money-supply [/INST] growth, sure enough, came high variable inflation. </s> |
927 | <s>[INST] Nor was any Brazilian allowed legally [/INST] to protect himself by holding foreign currency -- domestically or abroad. </s> |
928 | <s>[INST] Government spending on goods and services, already [/INST] at 10.6% of GDP in 1975, was up to 16.5% in 1993. </s> |
929 | <s>[INST] By constitutional decree, oil production, [/INST] mining, electricity and telecommunications have been government-owned and operated. </s> |
930 | <s>[INST] Brazil's real per capita GDP fell an average of 0.6 percent [/INST] annually between 1980 and 1990, and grew annually by an average of only 0.8 percent between 1985 and 1994. </s> |
931 | <s>[INST] Happily, Brazil's Real plan, begun in July [/INST] 1994, has slashed inflation -- 1995's rate was down to 23.2%. </s> |
932 | <s>[INST] Also, reforms will allow the [/INST] sale of state-owned mining and electricity enterprises. </s> |
933 | <s>[INST] This should give Brazil some much [/INST] needed economic freedom -- and growth -- in the future. </s> |
934 | <s>[INST] In "Economic Freedom of the World, 1975-1995," economists James [/INST] Gwartney, Robert Lawson and Walter Block show a strong direct connection between economic freedom and economic well-being. </s> |
935 | <s>[INST] Using 17 measures grouped into [/INST] four categories, they rate economic freedom in 103 countries. </s> |
936 | <s>[INST] The four categories are money and [/INST] inflation, government operations and regulations, takings, and restrictions on international exchange. </s> |
937 | <s>[INST] Monetary freedom is high when a government achieves low [/INST] and steady inflation and allows its citizens to hold foreign currencies and foreign bank accounts. </s> |
938 | <s>[INST] When the government consumes a small fraction of GDP, runs few enterprises, does not impose price [/INST] controls, does not block new firms from entering industries, allows access to a nondiscriminatory court system, and does not regulate interest rates, the country rates high on the government operations scale. </s> |
939 | <s>[INST] Governments do well on takings by keeping transfer payments low [/INST] as a percent of GDP, by setting low marginal tax rates, and by not conscripting people into the military. </s> |
940 | <s>[INST] They do well on international exchange by imposing low or [/INST] zero tariffs, avoiding artificial exchange rates that give rise to black markets, and not regulating capital transactions with foreigners. </s> |
941 | <s>[INST] Gwartney, Lawson and Block show that for a one-point increase in [/INST] economic freedom, on a scale of zero to 10, a country can raise its growth rate by one percentage point. </s> |
942 | <s>[INST] A growth rate of 2.5% a year, [/INST] for example, makes GDP 28% higher at the end of 10 years. </s> |
943 | <s>[INST] Increase that growth rate to [/INST] 3.5% a year, and GDP would increase by 41%. </s> |
944 | <s>[INST] Mr. Gwartney's rating confirms the dramatic difference between [/INST] Canada and the U.S. on the one hand and Latin America on the other. </s> |
945 | <s>[INST] The U.S., with a score of 7.6, [/INST] has the fourth-freest economy in the world, and Canada (6.9) has the ninth. </s> |
946 | <s>[INST] In Latin America, Argentina (6.3) [/INST] and Chile (5.8) are among the freest economies. </s> |
947 | <s>[INST] Chile has higher growth because its government freed the [/INST] economy earlier; as recently as 1990, Chile's rating was 5.7 compared with only 3.8 for Argentina. </s> |
948 | <s>[INST] Imagine the high marks Argentina might have if it's [/INST] able to maintain its dollar-linked convertibility plan and reverse the recent growth in transfer payments. </s> |
949 | <s>[INST] Meanwhile, Venezuela (4.5) and [/INST] Brazil (3.3) are among the least free. </s> |
950 | <s>[INST] Pathologically interesting is Venezuela's economy [/INST] which, in 1975, was the fifth-freest in the world. </s> |
951 | <s>[INST] By 1995, it tied with [/INST] India and Kenya for 63rd, just ahead of Bangladesh. </s> |
952 | <s>[INST] Notably missing from Gwartney's measure of [/INST] economic freedom is how well property rights are enforced. </s> |
953 | <s>[INST] Costa Rica, where squatters "rights" have trumped private property [/INST] rights, would certainly not have such a high rating (6.7) if enforcement were included in their measure. </s> |
954 | <s>[INST] The good news -- and the bad -- carries a lesson [/INST] for all Latin Americans and for all willing learners on planet Earth: In all thy getting, get economic freedom. </s> |
955 | <s>[INST] --- Mr. Henderson, a research fellow with [/INST] the Hoover Institution, is editor of "The Fortune Encyclopedia of Economics". </s> |
956 | <s>[INST] ___ Document 303 of 500 Argentines separate politics, economy Author: [/INST] Friedland, Jonathan Publication info: Wall Street Journal , Eastern edition [New York, N.Y] 18 Mar 1996: A15. </s> |
957 | <s>[INST] accountid=28034 Abstract: When Argentines heard in Aug 1995 that Economy Minister [/INST] Domingo Cavallo, the architect of a successful economic-reform program, might resign, markets swooned and bank depositors moved their money abroad. </s> |
958 | <s>[INST] Argentina is again buzzing about the fate of Cavallo, [/INST] who denied he is resigning the week of Mar 11, 1996 after two weeks of political setbacks. </s> |
959 | <s>[INST] But this time, markets have barely blinked, [/INST] indicating perceptions of Argentina's future are no longer tied to his presence. </s> |
960 | <s>[INST] Full text: AuthorAffiliation Staff Reporter of The Wall Street Journal Mr. Cavallo [/INST] denied last week that he is resigning, after a tempestuous cabinet meeting capped two weeks of setbacks to his political strength and prestige. </s> |
961 | <s>[INST] During that period, two government officials allied [/INST] to Mr. Cavallo were fired and could face indictment on corruption charges. </s> |
962 | <s>[INST] The first, Argentine post office [/INST] chief Haroldo Grisanti, was sacked by President Carlos Menem. </s> |
963 | <s>[INST] He could face charges [/INST] for fraudulent administration, an allegation he denies. </s> |
964 | <s>[INST] The second, tax agency head Hugo Gaggero, was dismissed by [/INST] Mr. Cavallo himself in connection with a probe into allegations that employees of International Business Machines Corp. </s> |
965 | <s>[INST] paid kickbacks to win a $249 [/INST] million contract at state-owned Banco de la Nacion Argentina. </s> |
966 | <s>[INST] Mr. Gaggero, a Banco Nacion executive [/INST] when the contract was signed, also faces indictment for fraudulent administration. </s> |
967 | <s>[INST] Mr. Menem stripped the economy minister [/INST] of responsibility for communications policy, including setting telecommunications tariffs. </s> |
968 | <s>[INST] Finally, Mr. Menem publicly criticized Mr. Cavallo after the minister opposed [/INST] a presidential plan to set up a commission of union leaders, businessmen and government officials to address Argentina's severe unemployment. </s> |
969 | <s>[INST] Mr. Cavallo worries that the panel, from which [/INST] he is excluded, will empower unions, hurt the creation of jobs and scare foreign investors. </s> |
970 | <s>[INST] Although Mr. Menem still insists on the [/INST] commission, he met with Mr. Cavallo Saturday in a bid for a truce. </s> |
971 | <s>[INST] On Friday, the Merval stock [/INST] index closed off 4.65 points, or less than 1%. </s> |
972 | <s>[INST] But analysts say the trend has more [/INST] to do with turbulence in U.S. markets than with local political infighting. </s> |
973 | <s>[INST] "Over the course of the year, fewer people have [/INST] come to believe that the country's continued economic stability depends on Cavallo's presence," says pollster Graciela Romer. </s> |
974 | <s>[INST] That's partly because Mr. Menem has given [/INST] his cabinet chief, Eduardo Bauza, a more prominent role in guiding economic policy. </s> |
975 | <s>[INST] His emotional clashes with Mr. Menem's cabinet have grown "tiresome," says Janet Krengel, economist at [/INST] Kleinwort Benson Securities Ltd. BUENOS AIRES -- When Argentines heard in August that Economy Minister Domingo Cavallo might resign, markets swooned and bank depositors moved their money abroad. </s> |
976 | <s>[INST] Argentina is again buzzing about the fate of Mr. [/INST] Cavallo, architect of an economic-reform program that killed hyperinflation and set off four years of robust growth. </s> |
977 | <s>[INST] But this time, markets have barely blinked, indicating [/INST] that perceptions of Argentina's future are no longer tied to whether he stays or goes. </s> |
978 | <s>[INST] ___ Document 315 of 500 Argentina's economy still lacks gusto despite forecasts [/INST] of a strong rebound Author: Friedland, Jonathan Publication info: Wall Street Journal , Eastern edition [New York, N.Y] 07 Mar 1996: A16. </s> |
979 | <s>[INST] accountid=28034 Abstract: Argentina's confident prediction of a return [/INST] to strong economic growth in 1996 after a difficult 1995 is starting to ring hollow. </s> |
980 | <s>[INST] While deposits that fled the banking system in [/INST] 1995 have come back, there is little hard evidence yet of economic recovery. </s> |
981 | <s>[INST] Unemployment is high, consumers remain jittery [/INST] and demand for new products and services is restrained. </s> |
982 | <s>[INST] Full text: BUENOS AIRES -- Argentina's confident prediction of [/INST] a return to strong economic growth this year after a difficult 1995 is starting to ring hollow. </s> |
983 | <s>[INST] While deposits that fled the banking system last year [/INST] on fears of a devaluation have come back, there's little hard evidence yet of economic recovery. </s> |
984 | <s>[INST] Unemployment is high, consumers remain jittery over [/INST] further layoffs and demand for new products and services is restrained. </s> |
985 | <s>[INST] "There are pockets of better news, but overall [/INST] the economy is still declining," said Ernest Brown, a Morgan Stanley & Co. economist. </s> |
986 | <s>[INST] He believes Argentina's gross domestic product will [/INST] grow about 1% this year, compared with a decline of 2.5% in 1995. </s> |
987 | <s>[INST] But that's not what Economy Minister Domingo [/INST] Cavallo will be telling investors and bankers in New York in meetings today. </s> |
988 | <s>[INST] He hopes to convince them that his target of [/INST] 5% growth is achievable and that a bet on a strong recovery is still a good one. </s> |
989 | <s>[INST] Mr. Cavallo says strong growth in deposits to over $50 billion will [/INST] soon boost local bank lending for the first time since Mexico's December 1994 currency devaluation set off a regional crisis of confidence. </s> |
990 | <s>[INST] He sees a resulting fall in interest [/INST] rates, improved credit demand and a revival in both consumption and investment. </s> |
991 | <s>[INST] That's the scenario international investors expected when they pushed Argentina's Merval [/INST] stock index up nearly 40% and fueled a rally in Argentine Brady bonds between mid-November and the end of January. </s> |
992 | <s>[INST] Lately, though, the lack [/INST] of good news has made them skittish. </s> |
993 | <s>[INST] In February, the price of Argentine Bradys fell 9% and the Merval lost [/INST] 12% in the face of rising U.S. bond yields and waning confidence in Argentina's ability to push through a tax and spending reform package. </s> |
994 | <s>[INST] That package, which would allow President Carlos Menem's government to cut spending [/INST] and alter tax rates without consulting Congress, is key to Argentina's pledge to the International Monetary Fund to balance its budget this year. </s> |
995 | <s>[INST] The package passed the lower house in [/INST] early February, but has since been knocked back for modification by Argentina's senate. </s> |
996 | <s>[INST] Economists say that the longer it takes to rekindle [/INST] economic activity, the deeper the spending cuts Mr. Menem will have to make to meet IMF requirements. </s> |
997 | <s>[INST] That's because the Argentine treasury [/INST] is heavily dependent on sales, rather than income tax. </s> |
998 | <s>[INST] "If growth doesn't pick up soon in Argentina, they'll [/INST] be in big trouble on the fiscal side," said Jeffrey Taylor, a Bear Stearns Cos. </s> |
999 | <s>[INST] ___ Document 322 of 500 Argentine governor with notorious past is [/INST] returned to office Author: Friedland, Jonathan Publication info: Wall Street Journal , Eastern edition [New York, N.Y] 28 Feb 1996: A1. </s> |
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