What lesson can ukraine learn

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Argentina is a bad role model. But lessons can be learned from this example.

Argentina’s nine defaults: what lesson Ukraine can learn

On May 22, Argentina announced its ninth default in history, as it was unable to pay $ 66 billion in foreign liabilities. Prior to the conclusion of the restructuring agreement, the authorities refused to give the loan.

The history of defaults in Argentina is astonishing – after all, every time investors return to a country of a broken economy. And in the early 20th century, Argentina was considered one of the most promising regions and one of the ten richest countries in the world. But the country’s economic policy quickly leveled all achievements, which could serve as a lesson for any state that does not want to repeat the fate of the South American Republic.

Although Argentina is far from Ukraine and local realities, the lower places in the economic rating make the two different countries somewhat similar. Suspicious business climate, corruption, difficulty in paying taxes and mistrust of national currency are common challenges for both countries. In addition, Argentina is also a country of agriculture, although unlike Ukraine is less dependent on foreign markets.

In general, at first glance, Argentina cases are slightly better than domestic ones. Argentina’s national debt reached around $ 323 billion, which is about 59% of the country’s GDP, while Ukraine’s national debt is $ 81.4 billion, equivalent to 78% of GDP. Furthermore, the IMF is a much more actively and adequately funded Argentine than Ukraine in recent years. Nevertheless, another default was announced for Tango’s voice.

Argentina’s nine defaults: what lessons Ukraine can learn. Photo: Cyberspace TimeTime

After each Argentine default among economists, a discussion of new causes of regular occurrence begins. This time, of course, the consequences of the global crisis and the epidemic have been taken into consideration, but the roots of the situation lie buried very deep. Argentina usually chooses by default as the fastest and most convenient way to deal with problems. Sometimes such decisions are indeed justified, but for a start, it would be good for Argentina to eliminate the adverse factors of any economy:

  1. Inflation, deficit, debt. Argentina’s eternal problem since World War II, is the lack of budget. Excessive state control and nationalization led to a large outflow of labor from the country, regular “printing presses” were included to fill the deficit, and dollar loans create almost chronic inflation.
  2. Failure to adapt and change. The main export of Argentina in the last hundred years is agricultural products. In the early 20th century, the illusion of an agricultural superpower in the country was actively promoted. But in the end, South Korea, whose economy was three times smaller than Argentina’s economy in 1970, sidelined Argentina over the years by exporting high-tech products.
  3. High disparity. Highly unfair distribution of wealth, nepotism and favoritism, high taxes for low-income citizens have created an excellent foundation for the development of political populism and chaotic changes in public administration. In Argentina, they often find work “on acquaintances” and receive a salary “not according to their desert.”
  4. Lots of foreign assets. In Argentina, the convenient time zone for American business is in New York itself. In Buenos Aires, there are several companies in the United States, which own a lot of local real estate. Foreign corporations mainly send profits abroad, which is an outflow of capital. At the same time, local small and medium-sized businesses receive support neither from the state nor from the population.
  5. Weak national currency control. In Argentina, one of the largest black markets in the world – the drug and arms trade is flourishing here, most entrepreneurs do not pay taxes, and the dollar can be bought at the gateway. Furthermore, the country is not able to pursue an independent financial policy, as it is under the power of external loans.

Read: Stay away: top 5 main signs of impending bankruptcy


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