A lesson from Argentina

A lesson from Argentina

Don't cry for me, Argentina. This is the song that
appropriately paints the ups and downs and patriotism of the
legendary Eva Peron.

Argentina was assaulted by unrest last week after the country
became bankrupt due to its economic recession. The main cause was
the huge foreign debt, amounting to US$ 132 billion.

Today the state of the country in the southern part of the
American continent is worse than Indonesia's, so the new
government has taken a drastic decision by stopping loan
repayments and by issuing the "argentino", a new currency
alongside the peso and the US dollar.

This Latin American country has some similarities with
Indonesia. Both have been clients of the International Monetary
Fund (IMF) for the past four years. There has been a rapid
succession of presidents in both countries because they were
considered to be incapable of solving their country's crisis.

Both countries are also going through a crisis caused by the
huge amount of loan debt. However, the structure of the debts is
slightly different.

Indonesia's situation is indeed better than Argentina's.
Indonesia's debt is much smaller -- only half of Argentina's --
while our economy is far larger. Pegging the exchange value of
the peso equal to that of the US dollar apparently did not do
much to help the hemorrhaging economy. If its currency exchange
rate were as free as Indonesia's, probably the collapse of
Argentina's economy would have been earlier.

Besides, Indonesia has far more natural resources compared
with Argentina.

Fiscal and monetary tightening have always been the IMF's
classical move whenever it assists in the economic recovery of
any country, although the results have yet to be clearly seen.
Argentina has served as an example by becoming the victim of the
IMF's failure.

-- Bisnis Indonesia, Jakarta