The Argentine case 1
José María Fanelli and Saúl Keifman
Structural reforms, the creation of a customs union with Mercosur, and the renewal of capital inflows into Latin America profoundly changed the structure of incentives Argentine firms faced in the 1990s. One important consequence was a higher degree of heterogeneity in the performance of firms and sectors. The non-tradable sector was a privileged recipient of foreign funds as a result of the privatization process and the deregulation of foreign investment. Producers of tradable goods faced greater competition as well as new opportunities from Mercosur markets as well as the availability of inputs and investment goods at international prices. The changing environment affected profitability across and within industries in complex ways and obliged firms to restructure. Some firms adopted offensive strategies to restructure, taking advantage of new market opportunities, implementing organizational improvements and upgrading capital equipment. Other firms, however, followed purely defensive restructuring strategies, their principal objective being to ensure survival in a far more challenging environment. This chapter explores how the changes in the macroeconomic setting and the interactions between developments in trade and finance created winners and losers in Argentina's recent past.
We will examine two different periods of the Argentine experience: the 1983-90 period when economic policies were dominated by the adjustment of the economy to the financial constraints imposed by the international debt crisis, and the period which followed the launching of Convertibility in 1991, when structural reforms and liberalization were implemented. We will place more emphasis on the latter, the richest in transformation, but also the least understood. The second section analyzes the stylized facts related to the evolution of trade and specialization patterns. The third part studies the characteristics of firms' financial structure and portfolio decisions in the context of imperfect capital markets such as those existing in Argentina. The fourth section builds on the stylized facts presented in the previous two sections and advances some hypotheses on micro-macro and trade-finance interactions. In what follows in this introduction, we briefly review the most important features of the overall evolution of the Argentine economy in the period under analysis in order to set the context of our research.