Rigidities in Openness, Export Performance and Indicators of External Solvency in Argentina

Córdoba

Jornada; 39 JORNADAS INTERNACIONALES DE FINANZAS PUBLICAS; 2006

Why cannot Argentina sustain current account deficits if other countries can? By focusing attention on the role of exports and on a long-term horizon this paper brings to the forefront the influence of structural export capacity in setting a limit for "safe" borrowing levels, as far as it carries information about the ability of this economy to regularly serve debt payments in external currency in the future. We argue that exports may be the key variable in the perception of external solvency. Operating through the interdependencies between real and financial processes for a borrowing country, the external financial weakness of Argentina has been related to the unsatisfactory long-run performance of exports. We explore also whether the relationship between exports and external debt may serve as indicator of alert, by pointing out when the stock of debt (or current account deficits) become “excessive”.