Labor Market Reform in Argentina: Where Do We Stand?

During the 1990s, Argentina made considerable progress in implementing market-oriented structural reforms. The reform package was based on three pillars: (a) a wide-spread opening of the economy; (b) an ambitious privatization and deregulation program; and (c) the stabilization of prices based on a predetermined nominal exchange rate anchor, instrumented by implementing a monetary currency board in 1991 (Convertibility Law). However, the there was a shortfall in the fiscal accounts of the country during the decade, and hence, the stabilization achieved was feebly backed. Thus, during the last decade, there was a drastic change in the macroeconomic rules and inflation was overcome. Towards the middle of the decade, the fiscal imbalances reappeared and, at the end of 2000, after three years of acute recession, the solvency of the state was severely questioned. In the future, more attention should be posed on the inter-temporal consistency of the economic policies adopted. It is important to concentrate the reformist efforts exclusively on those institutions that are essential to the problems of the country. In our view, the priorities of the economic policy in Argentina are: (a) to achieve an equilibrium path of the country's fiscal accounts, and preserve the stability of prices; (b) to maintain those reforms made during the 1990s that were successful; and (c) to rectify the pitfalls of the reforms adopted during the past decade.