Argentina’s Imaginary Miracle

SANTIAGO/BUENOS AIRES – Argentina has achieved a miracle in its economic response to the COVID-19 crisis, the Nobel laureate economist Joseph E. Stiglitz claimed in a recent commentary. The white knight in this saga, according to Stiglitz, is President Alberto Fernández, who inherited a mess on taking office in late 2019 and introduced policies that spurred high growth and a rebound in employment and investment. Stronger activity, coupled with higher and more progressive tax rates and a debt exchange in 2020, in turn improved the public finances.

It certainly does look miraculous. Unfortunately, the data tell a different story.

The oldest statistical trick in the book – one for which progressive Latin American economists have often and correctly chastised their conservative counterparts – is to label as growth what is just a rebound from a massive output dip. That is exactly what has happened in Argentina. In 2020, the economy contracted by a whopping 10%, the second-largest slump in the region, after Peru. Argentina’s rapid recovery in 2021 – like that of most of its neighbors – thus came as no surprise, but output has yet to return to pre-pandemic levels.

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