Argentina: An Economic Chronicle. How one of the richest countries in the world lost its wealth by Vito Tanzi

Author:Vito Tanzi [Tanzi, Vito]
Language: eng
Format: epub
Publisher: Jorge Pinto Books Inc.
Published: 0101-01-01T00:00:00+00:00

In October 1994, I was invited back to Buenos Aires by Mr. Marcos Victorica, the president of the Instituto de Estudios Contemporáneos (IEC) at the time, to be part of an honor committee that would present a special citation to Carlos Tacchi, the revenue secretary. This prize was given annually to the person who, in the judgment of the IEC, had contributed most significantly to the success of the Argentine economy in that year. President Menem had received the prize in 1991 and Domingo Cavallo in 1992. The chairman of the honor committee in 1994 was President Menem and I was the only foreign member. I felt very honored by this invitation because I was told that, in the two previous years, the invited foreign members had been Henry Kissinger and David Rockefeller respectively. I was also very pleased because of the admiration I had developed for Carlos Tacchi.

The year 1994 was, in many ways, the best year for Argentina in a very long time. The economy had been growing for five consecutive years at the fastest rate in Latin America. In the 1990–1994 period, the growth rate had averaged a spectacular 7.9 percent per year, while the inflation rate had fallen to only about 4 percent per year from the 5000 percent rate reached in 1989. Argentina had risen to the rank of a “tiger” in economic performance. Considering that in the 1960–2002 period Argentina had suffered seventeen years of negative growth rates and that the 1975–1990 period would be defined as one of deep depression, it is easy to see how extraordinary this performance was considered both nationally and internationally. The share of taxes into GDP, including social security contributions, had reached 22 percent of the much higher GDP, having risen by 6 percent of GDP since 1989. So, having seen its real income grow phenomenally, the government had a lot of money that it could spend.. This increase was in part due to the efforts of Carlos Tacchi, who was being honored that evening. He had taken over his job with a dedication and a determination that acquired him the reputation of being a kind of Taliban of taxation; or a true fundamentalist of taxation. In spite of this success, however, Argentina continued to have a fiscal deficit for the public sector close to 2 percent of GDP. This should have made some alarms go off both in Washington and in Buenos Aires.

In 1994 there was a lot of euphoria in Buenos Aires. It seemed that Argentina had finally regained its place in the sun and God was Argentine again. The country had become the darling of the international financial community and the celebration to honor Tacchi was one way in which the Argentine society would commemorate the country’s success. I arrived in Buenos Aires accompanied by my wife on the morning of October 26, in the middle of the Argentine spring. It was a splendid sunny day. We stayed at the Caesar Park Hotel, in front

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