By Arturo C. Porzecanski* The Argentine government’s current attempt to force investors to accept a punishing debt-restructuring plan puts the country at risk of yet another sovereign default on foreign-law, foreign-currency debt. The attempt validates the massive loss of confidence that took place last August, when local and foreign investors ran for the exits in […]

via Argentina: Yet Another Generalized Default? — AULA Blog

Professor Porzecanski makes credible arguments in the post. He demonstrates using a historical timeline the build up a lack of confidence in the Argentine economy. Once again, the intelligent economic and political policy that the country deserves takes back seat to cult politics. Investor confidence evaporated more with each victory of the A. Fernandez-C Fernandez de Kirchner ticket. Once they officially set in the country’s highest office, investor confidence hit bottom and remained there. The country’s spiral into the now too familiar position of being on the brink of default terminated before the coronavirus crisis existed.

The winds of political change blew hard in the direction of the Peronists leading up to the election. The general electorate votes for the candidate who promises to restore credibility and respect in the Argentine way of doing things. Rational economic policy sits in the back seat of the car of rationality. The average Argentine believes his country’s eternal economic meltdown is the result of the imposition of unfair lending practices and policies.

I am puzzled as to why the IMF would lend (again) the country money.

By ICEFI and CLALS* The budget that President Nayib Bukele submitted to El Salvador’s Legislative Assembly in September increases much-needed social spending appropriate for the country’s current socio-economic context, but it lacks clear objectives and benchmarks — and fails to address ongoing structural problems in public finance. The proposed budget is based on revenues of […]

via El Salvador: Draft Budget Confirms Structural Problems in Public Finance — AULA Blog

The Instituto Centroamericano de Estudios Fiscales produces first-rate scholarly work. After reading this post, I was not disappointed.

El Salvador like so many other improvised countries cannot raise enough capital to meet its budgetary objectives. If we view public budgets only in terms of their financial realities, most would fail the test. It is, in my opinion, unfair to judge these budgets outside their political contexts. Clearly, a series a political deal produced El Salvador’s current proposed deal. In this sense, it might be considered a “good budget” that everyone can find something that works for them. It is important to remember that democracies do not necessarily lead to fiscally sound public budgets.