A perspective on Argentina's recovery.

Since its record breaking default in 2001, and the ensuing economic collapse, Argentina's economy has grown 50 percent. "In the process, more than 11 million people, in a country of 39 million, have been pulled back onto the positive side of the poverty line," says an October 2007 analysis of Argentina's economic recovery from the Center for Economic and Policy Research (CEPR) (Washington).

Additionally, the recovery happened, "with the use of unorthodox macroeconomic policies."

Among these policies was government intervention in the foreign exchange market, which helped to stabilize the peso and shore up the economy by helping to control inflation. The government sold dollars when the peso was low, and bought dollars when the peso was too high. The CEPR observes that most central banks would do this. Argentina also employed unorthodox tax policies (exports and financial transactions.) This by itself was a major help to the recovery.

The CEPR says that one of the most important components of Argentina's recovery was domestic demand--not exports or high commodity prices. "It seems clear that the government made the right decision in deciding to prioritize its immediate economic recovery over satisfying foreign creditors and international credit markets."

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