Growth and Recovery in a Time of Default: Lessons from the Role of the Urban Sector in Argentina

Abstract

International narratives on Argentina’s recovery from the crisis of 2001-02 tend to emphasize the role of rising commodity prices and growing demand from China. Argentina is said to have been ‘lucky’, saved by global demand for its agricultural exports. The international narrative has also been used by local agricultural exporters to justify their objections against higher export taxes during periods of high commodity prices. These narratives are not correct. Data on the country’s recovery show that it was not led by agricultural exports but was fuelled by urban demand and production. When the Convertibility period ended and the peso was devalued in 2002, price increases for imports stimulated the production of domestic goods and services for consumers. This production in turn generated multiplier effects which supported small and medium-sized firms and helped to create many new jobs. This later produced a revival of the construction and then the manufacturing sectors as well. The contribution of the campo (rural sector) to the recovery came later in 2004 and thereafter, as the prices of commodities increased and the planting of larger and larger areas to grow soya and other crops had huge payoffs. These exports certainly helped build up the country’s reserves and fiscal strength, but they cannot be credited with playing the key role in stimulating the recovery. Agricultural exports later generated much additional income and eventually public revenue, but Argentina’s recovery was largely a ‘demand-led recovery’, located in urban areas where 80 per cent of Argentines work and live.

The Argentine case is significant because it suggests that the urban locus of macroeconomic phenomena in Latin America deserves much more research and appreciation from policymakers. The historical foci in Latin American urban studies have included squatter settlements and infrastructure deficits, social exclusion, civil society mobilization, decentralization, and the ‘right to the city’ claimed by excluded groups. But these bodies of work have ignored the central fact that more than 60 per cent of GDP in all Latin American countries comes from urban-based economic activities. The economic and social futures of Latin America lie in urban areas which are at once the sites of productivity and the loci of urban poverty. The impacts of high intra-urban inequality are key factors in undermining needed improvements in productivity. The capacity of Latin American economies to withstand the impact of global economic crises and other exogenous events will depend on how economic policy takes into account the constraints and opportunities in urban areas.

Citation

Cohen, M. Growth and Recovery in a Time of Default: Lessons from the Role of the Urban Sectorin Argentina. UNU-WIDER, Helsinki, Finland (2011) 16 pp. ISBN 978-92-9230-373-0 [WIDER Working Paper No. 2011/10]

Growth and Recovery in a Time of Default: Lessons from the Role of the Urban Sector in Argentina

Updates to this page

Published 1 January 2011