So what happened in Argentina?
First, this presidential election was defeated.
Argentine President macri and former President Cristina Fernandez participated in the primary election. According to the primary results, Fernandez won more than 47% of the votes, leading Macquarie by nearly 15%. Macri has admitted losing the primary election.
The general election will be held on 10127 October. If the candidate gets more than 45% of the votes or more than 40% of the votes, and is higher than the second place by 10%, he will be elected as the next president. The primary election results show that it is almost impossible for macri to be re-elected.
Financial markets voted with their feet, expressing pessimistic expectations for Fernandez's economic policies that are likely to be elected as the new president in the future.
Second, the differences in economic policies between the two sides.
Fernandez advocated a loose policy and proposed to provide free medicines to retirees and raise the wages of ordinary workers. The market is worried that if Fernandez is elected, the Argentine government budget may expand again, thus endangering the International Monetary Fund's economic assistance to Argentina. China may consider returning to policies such as currency and capital controls.
The current President macri took office on 20 15, pursuing a free market policy, developing the economy, improving transparency and opening the market. However, Argentina has not been able to get out of the economic crisis in the past few years. The currency continues to depreciate, the unemployment rate exceeds 10%, and inflation even exceeds 55%. In 20 18, Argentina just reached a loan agreement of $57 billion with the International Monetary Fund (IMF).
The market crash shows that investors at home and abroad in Argentina are disappointed with the results of the primary election. The deterioration of market sentiment and the resulting tightening of financial conditions may continue to affect Argentina's fragile economy in the future. Investors are worried that the return of the left-wing populist government, represented by former President Cristina, will reverse macri's pro-market and pro-business policy tendency, which will lead to the collapse of the financial market that opened on Monday.
This market crash is not the first time in Argentina. In the past 2065438+2008, Argentina also had a similar triple play market. The fundamental reason lies in Argentina's fragile economy, high foreign debt and low foreign exchange reserves. In yesterday's market crisis, the Argentine government's rescue measures can only come up with 50 million US dollars.
(20 18 Argentine peso depreciated sharply).
Third, Argentina's fragile economy
Argentina's domestic inflation is serious, and the average inflation rate in 20 18 years is as high as 25%. Since 20 13, Argentina's foreign debt balance has grown rapidly, exceeding its foreign exchange reserves. The high foreign debt has caused international investors to worry about the repayment ability of the Argentine government's sovereign debt, which has accelerated the capital outflow, thus entering a vicious circle of "accelerated capital outflow-devaluation of the local currency".
The high welfare policy implemented by former Argentine President Cristina, who came to power on 20 10, led to the emergence of current account and financial account twin deficits in Argentina, which lasted until macri succeeded on 20 15.
Argentina's economy has long been in a situation of high inflation, widening trade deficit and backward industrial level. The high debt ratio, the lack of foreign exchange control and the dependence of trade on the export of agricultural products are the root causes of the crisis.
As can be seen from the structure of Argentina's export commodities, food, beverages and agricultural products account for half of the total export. The natural disasters in Argentina's important grain-producing areas since last year have made its economy worse.
Argentina's capital account is basically open, its current account has a long-term deficit, its foreign exchange reserves are small, and its foreign debt is high, which makes Argentina's balance of payments very fragile, and its limited foreign exchange reserves cannot repay its debts due, so its financial market is very fragile.
Fourth, the only country that has returned from developed countries to developing countries.
In 20 17, Argentina's GDP was $637.6 billion. In 20 18, due to currency devaluation, its GDP was only 51950 million US dollars, ranking 2 1 in the world.
Who would have thought that this country was once rich in resources, prosperous in economy and eighth in the world in economic aggregate; /kloc-more than 0/00 years ago, the per capita income exceeded that of France, an old capitalist power in Europe; In the whole southern hemisphere, it is one of the best powers.
Argentina is located in the south of South America, and its land area is second only to Brazil in South America. Rich in mineral resources, suitable for the development of agriculture and animal husbandry, it was once called "the granary and meat storehouse of the world". The earliest Europeans immigrated to America, except the United States, followed by Argentina.
Argentina got rid of Spanish control through uprising in 18 16, and achieved independence before other countries in South America. While other South American countries were still being colonized, Argentina had achieved independence and exported a large number of its own minerals and agricultural products to Britain, and its national life reached the level of developed countries.
However, it is absolutely impossible for a country to become a world power only by relying on the export of agriculture and mineral resources. It is a pity that Argentina missed the opportunity to develop its industry. The main reason is that in the first half of the 20th century, Argentina's domestic political situation was unstable and military coups occurred frequently, which delayed Argentina's industrial construction.
1946 President Veron, who came to power, directly pulled Argentina into the abyss. Veron carried out drastic reforms in Argentina, killing the goose to get the egg to suppress business owners and establishing trade unions, which turned Argentina into a high welfare country.
Veron did not nationalize most of Anglo-American assets in Argentina; Refusing to repay the foreign debt that Argentina once owed; Impose heavy taxes on domestic capitalists and give workers high benefits; Close the door, create trade barriers and impose high tariffs.
These practices won him the support of votes in the short term, but in the long run, they brought fatal damage to the Argentine economy. Peron's reform led to a sharp decline in Argentine exports and a serious decline in national income. However, in order to maintain the high welfare policy, Peron adopted a worse method, that is, printing a lot of money, which opened the era of serious inflation in Argentina.
After that, although Veron stepped down, successive governments also continued the policy of high welfare and high tariffs, and the country fell into the middle-income trap and its development stagnated.
Verb (abbreviation of verb) Middle-income trap in South American countries
In economic theory, the middle-income trap in South American countries is very famous. South American countries are generally rich in resources, with good land and climate conditions, and their income has long been ahead of developing countries in Asia, Africa and Latin America. But South American countries can't reach the level of developed countries.
The characteristics of "middle income trap" countries include stagnant economic growth, chaotic democracy, polarization between the rich and the poor, frequent corruption, excessive urbanization, shortage of social services, employment difficulties, social unrest, lack of faith, and fragile financial system.
During this period, the contradictions accumulated by rapid economic development broke out intensively, and the original growth mechanism and development model could not effectively cope with systemic risks, and economic growth was prone to large fluctuations or stagnation.
The reasons for falling into the middle-income trap are:
First, missed the opportunity to change the development model. Taking Argentina as an example, after implementing the import substitution strategy in the early stage of industrialization, it failed to change its development model in time, but continued to promote the import substitution of durable consumer goods and capital goods.
Second, the bottleneck of technological innovation is difficult to overcome. After entering the middle-income stage, the low-cost advantage is gradually lost, but in the middle and high-end market, it is difficult to compete with high-income countries because of the constraints of R&D ability and human capital conditions. In this environment, it is easy to lose growth momentum and lead to economic growth stagnation.
Third, social unrest. After Latin American countries entered the middle-income stage, due to the rapid expansion of income gap, the consumption of low-and middle-income residents was seriously insufficient. The disparity between the rich and the poor and the serious social division have triggered fierce social unrest and even regime change, which has a serious impact on economic development.
Fourth, the ability of macroeconomic management is limited. From the perspective of Latin American countries, influenced by western regimes, the government's role has been weakened, macroeconomic management tools are lacking, policies are unstable, government debt is high, inflation and balance of payments imbalance are difficult to eliminate, and frequent economic crises have caused large economic fluctuations. During the 45 years from 1963 to 2008, Argentina experienced a negative growth of 16.
The common problem in South American countries is that the industrial system has not been established. Most neighboring countries have established a multi-party system similar to that of the United States. The government can only maintain a high welfare policy for the support of votes.
As a result, the country is not rich, falls into a heavy welfare burden in advance, has less foreign exchange reserves, and the financial market is greatly affected by international capital flows. At the slightest sign of trouble, there may be great turmoil in the financial market. Even yesterday, Argentina's stock market, bond market and foreign exchange market appeared frequently.
The weak South American economy provides a rare comparative sample for China. China should cross the middle-income trap, avoid the problems of South American countries and go its own way.
Shanglinyuan: Yang Fei, Ph.D. in Economics, a university teacher, is concerned about financial events and industrial economic development. As the family says, look at the sky from the bottom of the well. WeChat official account: "Go to Forest College".