Editor’s Note: Daniel Fisk is the new director of the George W. Bush Institute’s economic program, whose focus is on growing the...
Editor’s Note: Daniel Fisk is the new director of the George W. Bush Institute’s economic program, whose focus is on growing the economies of North America.
This week has presented the Western Hemisphere with a reminder of good economic sense and the pitfalls of financial mismanagement. In its historical context, August 7 marks the 12th anniversary of the largest International Monetary Fund bailout up to that point in that institution’s short history.
August 7, 2002 is when the IMF agreed to lend Brazil $30 billion to address that country’s financial meltdown. Supported at that time by the George W. Bush administration, there was a good basis to believe that Brazil would engage in a course correction. It did and the record since has been more positive than otherwise.
Brazil’s challenge came in the context of another era of Argentine economic mismanagement. In 2001, Argentina produced a default in the $100 billion range.
For some, today’s news is déjà vu, another moment when Argentina is careening towards a financial cliff. Some analysts are breathing a sigh of relief that this time the amount is only in the $30 billion range and betting on economic commonsense gaining the upper hand (finally) in Buenos Aires.
The lessons learned from Argentina’s experience are well laid out in Forbes. As John Hartley notes, “This may just be the beginning for new Argentine economic woes, unless they begin to learn the lessons of dire economic consequences of defaults, better-informed sovereign debt underwriting, and honesty when it comes to reporting official economic statistics.”
While the attention may be on contemporary Argentina, the real economic success story is not in the Southern Cone…no, not even Chile these days. It is in North America and that story is Mexico.
As Argentina’s political class rationalizes economic default, Mexico is continuing to liberalize its economy, opening it further for its own citizens and global investors. With reform of the telecommunications sector in train and the secondary legislation for the energy sector reform on the horizon, Mexico is poised to (again) show that markets are the key to prosperity.
These initiatives, combined with on-going policies to support the continued growth of manufacturing jobs in Mexico, exemplify the transformation that our neighbor has taken since the approval of the North American Free Trade Agreement. Mexico passed NAFTA to raise the living standards of its citizens. By extension, that has helped the economic well-being of the United States and Canada as well. Today, 32 U.S. states list Mexico as one of their top three trading partners.
So while Argentina is grabbing the headlines — and the holders of Argentina bonds deserve to be made whole for the promises that the government of Argentina made to them – the future is next door. Let’s hope the rest of the hemisphere gives the Mexican model a good look as it confronts the false promises of Latin American populism.
Daniel Fisk is the director of the George W. Bush Institute’s economic growth initiative.
