The Argentina crisis: bad luck, bad management, bad politics, bad advice

Abstract

In my view the crisis was avoidable and one can even point to key events and decisions at particular moments of time. If some combination of these events had turned out different, it is likely that crisis would have been avoided. For example, if Argentina had managed to renegotiate the tax sharing agreement between the Provinces as the Constitution demanded, if Argentine federal public sector savings had been higher in 1996- 1998, if the Peronist Party had not been split down the middle in 1998/9, if the Radical Party had had an outright majority in the new Government in 1999, if the new Alianza Government had reduced (the right) expenditures immediately, if the Radical Party had actively ditched Freepaso pre-emptively and sought an alliance with “moderate” Peronists and others, and if the Lopez Murphy plan had been endorsed, all would have reduced the probability of default significantly.