The last world financial crisis started in the United States in 2008, and spreading thereafter across countries in the European Union, did not hit Latin America with the same negative impact that previous crises did for the simple reason that the countries exhibit in this occasion much lower external private and public debt exposure which somehow permitted the Region to isolate their domestic financial systems from turbulences.
Nevertheless, negative impacts began soon to be felt via economies´ s external sector as the international debacle dwindled the world demand for developing countries´ manufactured and non manufactured exports which not only reduced economic sectors´ levels of activity and employment but also imposed serious strains upon their public finances, as governments found themselves not only with fiscal revenues curtailed but also facing internal demands for more active fiscal polices implying either tax reductions or spending increases or both,.
In the meantime, and alongside the development of the crisis, an important debate is taking place on whether discretionary fiscal policies should be resorted to, in place of automatic stabilizers, in order to check cyclical problems, whose depth goes beyond the pure theoretic interest and holds important economic policy implications. Let it in this connection suffice to mention Auerbach´s (2002) arguments that while considerable doubts remain about the real impact of discretionary fiscal policies upon output and its effectiveness to really play stabilizing roles, automatic stabilizers contributed to reducing cyclical fluctuations, despite attributes in tax systems that tended to weaken their real potential. In the same line of reasoning, Taylor (2008 ) asserted that ?despite this widespread agreement of a decade ago, there has recently been a dramatic revival of interest in discretionary fiscal policy?..nevertheless, after reviewing the empirical evidence during the past decade and determine whether it calls for such a revival, I find that it does not?.
In the light of the preceding observations, and having been Argentina one of countries whose manufacturing sectors suffered the consequences of the international recession, the paper aims at showing, in the first place, the extent to what the international crisis hit the government´s tax revenues (both those stemming from the external trade as well as those whose yield depends on the internal activity level). Second, the reduction of the primary fiscal surplus will be analyzed in order to determine the percentage of the fiscal loss that can be explained by the working of automatic stabilizers as compared to the percentage directly responding to the fall in the activity level.
Finally, the matter will also be dealt with of whether undertaken discretionary fiscal changes were really subject to the trade off between reducing taxes and increasing spending and also if the government, in trying to implement active fiscal polices got trapped or found itself conditioned by the limits the standing theory suggests; that is, the difficulty in resorting to fine tuning due to problems of timing, dose and legal and administrative lags or, in similar words, whether discretionary fiscal policies in Argentina were actually timely, temporary and targeted.
