CRONYISM AND CORRUPTION ARE KILLING ECONOMIC FREEDOM IN ARGENTINA

May 13, 2010

Argentina's ranking in the Wall Street Journal/Heritage Foundation Index of Economic Freedom -- 135th out of the 179 countries ranked in the Index -- has declined steadily in the seven years since President Cristina Fernandez de Kirchner and her husband, former President Nestor Kirchner, took power.  It is by far the lowest ranked G-20 nation, says the Heritage Foundation.  

A closer look at Argentina's scores on some of the 10 indicators in the Wall Street Journal/Heritage Foundation Index of Economic Freedom reveals exactly how and why, under the rule of President Cristina Fernandez de Kirchner and her husband, former President Nestor Kirchner, Argentina has suffered a decline in prosperity and economic freedom, says Heritage. 

Government spending: 

  • The Kirchners' economic stewardship has been dismal; although highly indebted and facing declining commodity prices, the Kirchners have imposed unsustainable levels of government spending.
  • To help finance this spending spree, in the fall of 2008 the Kirchner government seized $30 billion in 401(k)-type private pension accounts belonging to individual Argentine citizens.  

Monetary freedom: 

  • Although the Kirchners manipulate official government statistics to hide the true rate, private estimates show inflation in Argentina to be spiraling out of control.
  • In 2010 it soared to more than 20 percent, raising fears of a return to the bad old days of 1980s-style hyper inflation; in trying to contain the rate of inflation, the Kirchner government has subsidized or price-controlled electricity, water, retail-level gas distribution, urban transport and local telephone services.  

Property rights: 

  • The executive branch influences Argentina's judiciary; the courts are notoriously slow, inefficient, secretive and corrupt.
  • Many foreign investors must resort to international arbitration; government manipulation of inflation statistics has caused foreign and domestic bondholders to lose billions in interest payments on their rightful property.  

Freedom from corruption: 

  • The entire political economy of Argentina is blighted by the Kirchners' brand of "crony capitalism" -- one of the most corrosive and hardest-to-eradicate forms of corruption.
  • Foreign investors complain about widespread government and private-sector corruption as well as pervasive demands by government officials for bribes; meanwhile money laundering, trafficking in narcotics and contraband, and tax evasion plague the financial system.  

Source:  James Roberts, "Cronyism and Corruption Are Killing Economic Freedom in Argentina," Heritage Foundation, April 22, 2010. 

For text:

http://www.heritage.org/Research/Reports/2010/04/Cronyism-and-Corruption-Are-Killing-Economic-Freedom-in-Argentina 

 

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