The leaders of the block BRICS (integrated to Brazil, Russia, India, China and South Africa) finally accepted Argentina’s entry into this group of emerging countries and the data coincides with the announcement of the disbursement of US$7.5 billion approved by the International Monetary Fund (IMF) this Wednesday. What do these news mean for the Argentine economy? That is one of the questions answered in this interview by the chief economist of the Center for Economic and Social Studies Scalabrini Ortiz (CESO), Federico Zirulnik.
The criticisms of some opposition leaders generated some uncertainty among Argentines regarding whether or not it is good news. BRICS membership. The president defended the achievement in response and, he tells Ambit Zirulnik, “is good news”, but it will have a direct long-term effect on the real economy. And it is that it allows “access to more favorable funds for financing” and it is also a good possibility for national foreign trade.
In addition, zirulnik focuses on the need to order the local economy to achieve a better development of Argentina in the world and the income distribution into. On these and other issues, the CESO economist talks with our media in this brief talk.
Journalist: How do you see the news that Argentina joins the BRICS group? What real impact can it have on the Argentine economy?
Federico Zirulnilk: I don’t think it will have a direct impact in the short term on the real economy. In the medium or long term, it is a more significant element for our country. Among other elements that it brings, is the fact that, possibly, Argentina can access funds with more favorable conditions and subject to fewer conditionalities than those imposed by the IMF.
In addition, it implies a concrete possibility of expand markets for Argentine exports, taking into account that there are markets like that that can be very attractive within the block. And, on the other hand, this could favor Argentina getting rid of the IMF in the medium term. Being able to be sovereign in terms of monetary politics I think it is the first step to think about development.
Q.: How is this news of joining the BRICS combined with the announcement of the disbursement of the IMF and the other credits from the World Bank and the Inter-American Development Bank? Does this benefit the positioning of Argentina in the world?
FZ: I believe that the Government is right not to position itself solely in one of the two great trading blocks that are being put together right now. Although today’s announcement brings you closer to one of the blocks, the one of the BRICS, It is also important to continue relations with Western Banks (IDB, WB, CAF, etc.). Above all, thinking of the current situation, where the external fragility it is very high.
With respect to IMFI think this reinforces what was stated a few weeks ago, from the payment to the organization with Swap and Qatar funds. The IMF’s lender-of-last-resort status is increasingly being questioned. And if we take into account that Argentina is heavily indebted to this body, this is good news.
Q.: What development possibilities are opening up for Argentina based on this news and how does the relationship with China and Brazil affect this scenario?
FZ: As I said, this may favor for Argentina to get rid of the IMF in the medium term. And secondly, in the longer term, it may mean access to economies that are rapidly growing, with those of the emerging countries that are part of the BRICS bloc; to new investments and/or financing that serves to, once and for all, change the productive matrix and to be able to circumvent the external restriction.
However, as economists often say, this is a necessary but not sufficient condition. The Domestic economic policy has to play an important role in ordering macro conditions, promote the development of the right sectors, and seek the conditions to improve real income and income distribution. Otherwise, we run the risk of transforming the productive matrix in a low-wage export platform that would not solve internal problems.
Source: Ambito
