The fly in the ointment was foreign debt, which, post-devaluation, represented an even more daunting liability because it was denominated in U.S. dollars. But Nestor Kirchner, a relative unknown who'd been elected in 2003, made lemonade out of lemons, converting the external debt to a political asset. The IMF became the enemy, a convenient target for Argentines to rally ‘round. (The photo above shows a protestor tagging a door with a slogan condemning the IMF.)
One might conclude that Kirchner's rejection of austerity had, indeed, saved Argentina. Between 2003 and 2011, GDP grew more than seven percent annually, while unemployment dropped by more than 20 percentage points. Moreover, thanks to devaluation, Argentine manufactures suddenly were competitive in Brazil and other Latin American markets.
But the success of Kircher's Peronism also depended on luck. The trade surpluses created by the big devaluation were augmented by the global boom in commodity prices that fattened receipts from Argentina's agricultural sector.
This made it possible for Kirchner to repay the IMF debt. Most of Argentina's dollar-denominated debts were private, however. And here, Kirchner demanded that the creditors accept a lot less than face value. Most accepted a deal in 2005 rather than take their chances on international debt collection.
Nestor Kirchner lacked constitutional authority to run again in 2007. But in an echo of Juan Peron, he was able to usher his photogenic wife, Cristina Kirchner, into the office on a promise of domestic tranquility.
That was not to be. First, to keep to Peronists in the fold, the government sought additional taxes on agriculture. Second, inflation began to erode domestic industry's post-devaluation competitiveness. Third, the global recession reduced demand for Argentine exports. But Cristina proved a skillful politician, playing the nationalist card well for a solid win in the 2011 election.
Argentina's economy and polity seem to be slipping into a familiar, though not happy, place. But virtually no one expects a total regression to the wretched performance that extended from the end of World War II until 1990. One reason: rising productivity stemming from greater exposure to global markets. Another: the worldwide boom commodity prices, which are subject to great volatility but likely to be sustained as the Asian economies grow.