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1,100 | <s>[INST] But these costs are likely to be [/INST] much cheaper than the costs Korea, let alone Indonesia, suffers already. </s> |
1,101 | <s>[INST] In the last Latin crisis, [/INST] we had a real-world experiment with the two approaches. </s> |
1,102 | <s>[INST] Argentina stood with its exchange [/INST] rate, using international aid to stem bank runs. </s> |
1,103 | <s>[INST] The Mexican approach has become a model for the [/INST] IMF, and more significantly the Clinton-Rubin-Summers Treasury -- for reasons not apparent in the real-world results. </s> |
1,104 | <s>[INST] Full text: The first clue to solving [/INST] the crisis in Asia is to recognize that it's a monetary crisis. </s> |
1,105 | <s>[INST] Expelling crony capitalism and rescheduling loans and privatizing state [/INST] companies are all of course good things, but the immediate problem is to stabilize exchange rates. </s> |
1,106 | <s>[INST] An Asian economy starts to sink, the International Monetary [/INST] Fund starts to bail, the local currency -- baht, rupiah, won -- hits a record low. </s> |
1,107 | <s>[INST] And headline writers world-wide rummage daily for fresh verbs [/INST] to describe Asian currencies continuing to tumble, dive, spiral, plummet and plunge to new record lows. </s> |
1,108 | <s>[INST] The plunging currencies devastate wages and global buying power [/INST] of industrious Asian citizens, halve the income of exporting industries and double the liability to foreign banks. </s> |
1,109 | <s>[INST] So all of South Korea is worth [/INST] half of what it was a few months ago, and Indonesia a quarter. </s> |
1,110 | <s>[INST] It makes no sense except [/INST] in terms of a self-feeding downward spiral. </s> |
1,111 | <s>[INST] Devaluations and bailout loans are [/INST] not the only approaches to exchange rate problems. </s> |
1,112 | <s>[INST] The other approach is to use whatever resources are available [/INST] to stop devaluation, or more precisely to deal with the consequences of the policies necessary to do this. </s> |
1,113 | <s>[INST] Devaluation of won or baht or [/INST] whatever can be stopped by restricting the supply of them. </s> |
1,114 | <s>[INST] That is, instead of sterilizing currency inflows and [/INST] outflows, the central bank should let redemptions of its currency reduce its supply. </s> |
1,115 | <s>[INST] Doing this will of course increase internal [/INST] interest rates, slow the internal economy and endanger tottering banking systems. </s> |
1,116 | <s>[INST] But these costs are likely to be [/INST] much cheaper than the costs Korea, let alone Indonesia, suffers already. </s> |
1,117 | <s>[INST] In the last Latin crisis, [/INST] we had a real-world experiment with the two approaches. </s> |
1,118 | <s>[INST] Argentina stood with its exchange [/INST] rate, using international aid to stem bank runs. </s> |
1,119 | <s>[INST] The Mexican approach has become a model for the [/INST] IMF, and more significantly the Clinton-Rubin-Summers Treasury -- for reasons not apparent in the real-world results. </s> |
1,120 | <s>[INST] What is apparent by now is that in weathering the [/INST] crisis, Argentina with its stable peso greatly outperformed Mexico with its devaluation, as the chart nearby shows. </s> |
1,121 | <s>[INST] Over the past three years, Argentina's gross [/INST] domestic product grew in dollar terms by a total of 14%. </s> |
1,122 | <s>[INST] Mexico still has not recovered from the [/INST] initial plunge, with its 1997 dollar GDP still 4% below 1994. </s> |
1,123 | <s>[INST] In the year following the 1994 dive of the [/INST] peso, Mexicans suffered peso inflation of 52%, and a GDP drop, in dollar terms, of 31.8%. </s> |
1,124 | <s>[INST] Argentines, as their nation went through the comparable stretch of [/INST] recovery, had annual inflation running less than 2%, and Argentina's GDP, in 1995, shrank less than 1%. </s> |
1,125 | <s>[INST] For Mexico, even the supposed [/INST] export advantage of devaluation was inflated away. </s> |
1,126 | <s>[INST] The Mexican peso hovered around 7.8 to [/INST] the dollar through most of 1997, a 129% devaluation from 3.4 in 1994. </s> |
1,127 | <s>[INST] Between December 1994 and [/INST] November 1997, Mexico's price index rose 122%. </s> |
1,128 | <s>[INST] In defending Argentina's peso, the job of Finance Minister Domingo Cavallo was made [/INST] somewhat easier because he and President Carlos Menem had already set up a currency board, in 1991, to end years of high inflation. </s> |
1,129 | <s>[INST] A currency board is an arrangement that [/INST] leaves the government no latitude to fiddle with the exchange rate. </s> |
1,130 | <s>[INST] Instead, the government fixes its money -- say, [/INST] the peso -- to some other currency, usually, as in Argentina, the dollar. </s> |
1,131 | <s>[INST] The deal is that all pesos must [/INST] be fully backed by dollar reserves, and the peso must be freely convertible. </s> |
1,132 | <s>[INST] This makes for a system in which [/INST] the peso money supply must fall when pesos are redeemed for dollars. </s> |
1,133 | <s>[INST] The market sends clear signals, and businessmen have [/INST] some clue of the terms on which they can expect to do business. </s> |
1,134 | <s>[INST] Even Mexicans, at least since 1996, [/INST] have come to see some virtue to aspects of this approach. </s> |
1,135 | <s>[INST] Mexico has fared better in recent times, as the government [/INST] has stopped trying to offset, or sterilize, the forces of supply and demand in the foreign exchange market. </s> |
1,136 | <s>[INST] For Asians, watching their currencies vanish with IMF [/INST] blessings into the abyss, the Argentina solution may be simpler than it now seems. </s> |
1,137 | <s>[INST] For an example close to [/INST] home, they can look to Hong Kong. </s> |
1,138 | <s>[INST] The former Crown Colony already operates a currency [/INST] board, set up back in 1983 to stop a run on the Hong Kong dollar. </s> |
1,139 | <s>[INST] This has served well, setting the tone for years [/INST] of growth and more recently helping Hong Kong defend its currency while most around it fell. </s> |
1,140 | <s>[INST] Economist Steve Hanke, who advised Argentina on linking its peso to the dollar, suggests that the plunge [/INST] in Asian currency values actually lends itself right now to setting up currency boards, should South Korea, or Indonesia, or any of the other plungers and spiralers choose to go that way. </s> |
1,141 | <s>[INST] With the value of the monetary base halved or worse [/INST] after all these devaluations, it takes less in reserves to set up a solid link to the dollar. </s> |
1,142 | <s>[INST] For the IMF to put its bailing billions toward this goal [/INST] would actually help plug the leaks that have so far made a lot of the bureaucratic aid pretty pointless. </s> |
1,143 | <s>[INST] Whether Asia's stricken economies go with currency boards or simply trust [/INST] their central banks to pick a rate of exchange and defend it, is a question of local political tactics. </s> |
1,144 | <s>[INST] The first step is to pick an exchange [/INST] rate to defend, preferably one above the ridiculous levels to which these currencies have plunged. </s> |
1,145 | <s>[INST] Step two is to suffer through interest rates high enough to [/INST] make good the defense -- though in all likelihood lower than interest rates would be if a devaluation inflation takes hold. </s> |
1,146 | <s>[INST] In this, the IMF could actually be a help, as [/INST] it was in Argentina, and the U.S. Treasury could provide moral support instead of advice of dubious relevance. </s> |
1,147 | <s>[INST] They will not begin so long as these currencies go [/INST] on "floating," while what they're really doing is sinking, and dragging down with them otherwise viable economies. </s> |
1,148 | <s>[INST] ___ Document 260 of 500 Yesterday's Diplomats Are Today's Entrepreneurs in [/INST] Argentina Author: By Jonathan Friedland Publication info: Wall Street Journal , Eastern edition [New York, N.Y] 08 Jan 1998: A5. </s> |
1,149 | <s>[INST] accountid=28034 Abstract: James Cheek, who left Buenos Aires in December 1996, [/INST] and his predecessor, Terence Todman, both represent groups bidding today on a 30-year concession to run 33 of Argentina's airports. </s> |
1,150 | <s>[INST] In the run-up to the bid, they [/INST] have been busy lobbying U.S. and Argentine officials, including President Carlos Menem. </s> |
1,151 | <s>[INST] Last year, Mr. Cheek also [/INST] lobbied here on behalf of AMR Corp. </s> |
1,152 | <s>[INST] , parent of American Airlines, before [/INST] its purchase of a stake in former state-owned carrier Aerolineas Argentinas. </s> |
1,153 | <s>[INST] Last month, it was Mr. Todman who explained to Argentine [/INST] politicians and media owners a $605 million deal by a U.S. investor-backed local buyout firm called Exxel Group. </s> |
1,154 | <s>[INST] Mr. Todman is a director of Exxel, which bought two companies that, in [/INST] the past, have been linked to Alfredo Yabran, a local businessman accused by former economy minister Domingo Cavallo of being an organized-crime boss. </s> |
1,155 | <s>[INST] Mr. Yabran, who denies any wrongdoing and [/INST] hasn't been convicted of any crimes, is suing Mr. Cavallo, alleging libel. </s> |
1,156 | <s>[INST] Separately, Mr. Cheek has taken on advisory [/INST] work for another company that previously was linked to Mr. Yabran. </s> |
1,157 | <s>[INST] The company, printer Ciccone Calcografica SA, is part of a group bidding [/INST] on the $600 million-plus contract to computerize registries of all Argentine residents and visitors and to print and distribute identity cards. </s> |
1,158 | <s>[INST] Mr. Cheek, who during his stint here pushed for beefed-up border controls to combat transnational [/INST] crimes such as drug trafficking and terrorism and was a frequent critic of Mr. Yabran, says he helped Ciccone last year on matters unrelated to the registries job. </s> |
1,159 | <s>[INST] Full text: BUENOS AIRES -- It seems that whenever there's [/INST] a big and controversial business deal in Argentina nowadays, a former U.S. ambassador is in the thick of it. </s> |
1,160 | <s>[INST] James Cheek, who left Buenos Aires in December 1996, and [/INST] his predecessor, Terence Todman, both represent groups bidding today on a 30-year concession to run 33 of Argentina's airports. </s> |
1,161 | <s>[INST] In the run-up to the bid, they [/INST] have been busy lobbying U.S. and Argentine officials, including President Carlos Menem. </s> |
1,162 | <s>[INST] Last year, Mr. Cheek also [/INST] lobbied here on behalf of AMR Corp. </s> |
1,163 | <s>[INST] , parent of American Airlines, before [/INST] its purchase of a stake in former state-owned carrier Aerolineas Argentinas. </s> |
1,164 | <s>[INST] Last month, it was Mr. Todman who explained to Argentine [/INST] politicians and media owners a $605 million deal by a U.S. investor-backed local buyout firm called Exxel Group. </s> |
1,165 | <s>[INST] Mr. Todman is a director of Exxel, which bought two companies that, in [/INST] the past, have been linked to Alfredo Yabran, a local businessman accused by former economy minister Domingo Cavallo of being an organized-crime boss. </s> |
1,166 | <s>[INST] Mr. Yabran, who denies any wrongdoing and [/INST] hasn't been convicted of any crimes, is suing Mr. Cavallo, alleging libel. </s> |
1,167 | <s>[INST] Separately, Mr. Cheek has taken on advisory [/INST] work for another company that previously was linked to Mr. Yabran. </s> |
1,168 | <s>[INST] The company, printer Ciccone Calcografica SA, is part of a group bidding [/INST] on the $600 million-plus contract to computerize registries of all Argentine residents and visitors and to print and distribute identity cards. </s> |
1,169 | <s>[INST] Mr. Cheek, who during his stint here pushed for beefed-up border controls to combat transnational [/INST] crimes such as drug trafficking and terrorism and was a frequent critic of Mr. Yabran, says he helped Ciccone last year on matters unrelated to the registries job. </s> |
1,170 | <s>[INST] Cheek and Todman have taken pains to emphasize they no longer represent the U.S. [/INST] government and have endlessly noted that none of this work is illegal under U.S. laws governing retired executive-branch officials, their high profiles here have raised eyebrows. </s> |
1,171 | <s>[INST] Former President Raul Alfonsin accuses them of "wanton [/INST] influence peddling" while center-left opposition Congressman Juan Pablo Cafiero says he considers their activities "shameful". </s> |
1,172 | <s>[INST] The U.S. embassy, which has been without [/INST] an ambassador since Mr. Cheek's departure, has kept a polite distance. </s> |
1,173 | <s>[INST] , Native Mr. Cheek says the recent emphasis placed by [/INST] Washington on expanding global trade and investment ties means such work is natural for a retired diplomat. </s> |
1,174 | <s>[INST] "Ambassadors who have a reputation for forceful advocacy of [/INST] U.S. business interests are sought after when they retire," says the 61-year-old Little Rock, Ark. </s> |
1,175 | <s>[INST] "Ten years ago, a U.S. ambassador [/INST] who retired probably didn't know many corporate executives," he adds. </s> |
1,176 | <s>[INST] That's true for countries such as Argentina, [/INST] which, a decade ago, had state-dominated economies unattractive to foreigners and anti-U.S. policies. </s> |
1,177 | <s>[INST] Since Mr. Menem took office in 1989, [/INST] the year Mr. Todman arrived as ambassador, U.S.-Argentine ties have blossomed. </s> |
1,178 | <s>[INST] The affair between Washington and Buenos Aires, which Argentine Foreign Minister [/INST] Guido diTella has half-jokingly described as "carnal relations," has been accompanied by an upsurge in U.S. corporate investment here. </s> |
1,179 | <s>[INST] American investment, attracted by Argentina's high growth rates [/INST] and conservative economic policies, grew to $8.1 billion last year from $2.8 billion in 1991. </s> |
1,180 | <s>[INST] While the Argentine economy is more open nowadays, [/INST] political contacts remain key, particularly in privatizations and in highly regulated sectors such as aviation. </s> |
1,181 | <s>[INST] "The private sector views having Todman and Cheek [as representatives] as [/INST] carrying the implicit backing of the U.S. and of having open access to President Menem," says Mr. Cavallo, now a congressman. </s> |
1,182 | <s>[INST] Exxel Chairman Juan Navarro says Mr. Todman can get [/INST] in to see Mr. Menem without formalities and "lends an appropriate American tone" to Exxel's board. </s> |
1,183 | <s>[INST] "He has given us access, know-how and tactical skill," says Mr. [/INST] Navarro, who most recently put Mr. Todman to work winning U.S. government backing for Exxel's bid in the airports privatization. </s> |
1,184 | <s>[INST] The Exxel group includes Sideco [/INST] Americana SA and Flughafen Frankfurt Main AG. </s> |
1,185 | <s>[INST] Meanwhile, Mr. Cheek is lobbying [/INST] Argentine officials on behalf of New York-based Ogden Corp. </s> |
1,186 | <s>[INST] , which is bidding in partnership [/INST] with two Argentine companies and Italy's SpA Esercizi Aeroportuali. </s> |
1,187 | <s>[INST] Mr. Todman, a 71-year-old Virgin Islands native known for his regal bearing [/INST] and demanding management style, says that although he no longer works for the U.S. government, his work helps promote U.S. interests. </s> |
1,188 | <s>[INST] "When I was a diplomat, I played a [/INST] major role in helping investors and bankers understand what Argentina could become," he says. </s> |
1,189 | <s>[INST] "In the private sector, I am [/INST] helping to make sure the changes that have taken place work". </s> |
1,190 | <s>[INST] ___ Document 270 of 500 Review of Global Equity Markets -- AMERICAS: Americas Finish Year Battered, Not Broken Author: By Wall [/INST] Street Journal staff reporters Pamela Druckerman in New York, Thomas T. Vogel Jr. in Caracas, Craig Torres in Mexico City And Solange DeSantis in Toronto Publication info: Wall Street Journal , Eastern edition [New York, N.Y] 02 Jan 1998: R10. </s> |
1,191 | <s>[INST] accountid=28034 Abstract: Latin American stock markets had seemed invincible through the first half of [/INST] 1997, exaggerating the gains of U.S. markets and benefiting from the region's strong export growth, low inflation, massive foreign capital inflows and burgeoning capital markets. </s> |
1,192 | <s>[INST] Even an opposition victory in the Mexican congress [/INST] and delays in Brazilian privatizations didn't stop investors from pouring money into Latin stocks. </s> |
1,193 | <s>[INST] But when the Thai baht [/INST] fell to speculators, all emerging markets suddenly seemed suspect. </s> |
1,194 | <s>[INST] Although Latin markets still moved in a rocky path upward for several months, investors seeking [/INST] to protect their record profits and nervous about soaring stock valuations had moved into a defensive trading mode and were braced to see whether the volatility would persist. </s> |
1,195 | <s>[INST] Speculative attacks on the Hong Kong dollar in late October prompted [/INST] a massive sell-off of Latin stocks that led to the largest price declines since the 1994 Mexican peso crisis. </s> |
1,196 | <s>[INST] Attention focused on overlooked problems in [/INST] Latin economies, in particular Brazil's big trade deficits and overvalued currency. </s> |
1,197 | <s>[INST] Latin America appears to have [/INST] emerged from 1997 battered but not broken. </s> |
1,198 | <s>[INST] Latin governments moved resolutely to defend [/INST] their currencies against speculators, securing investor confidence in regional economic programs. </s> |
1,199 | <s>[INST] In late November, Latin markets rallied as investors [/INST] acknowledged that most economic fundamentals that powered the region's ascent earlier last year haven't changed. </s> |
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