Veto Power

Capital flight is a powerful disruptive of economic stability. This drain of resources to the outside is traditional in the literature for the loss of confidence of key economic actors, political uncertainty precipitated by abrupt changes or key financial variables such as exchange rate. Capital flight is also a way of channeling illegal funds, whether those businesses are prohibited by law or the accumulated tax evasion. Capital flight is not a contemporary problem, but an economic-social behavior began to be verified since the function of the money he took a leading role in modern societies from the eighteenth century. But the acceleration of this process is recorded with the expansion of capital markets in the last century, to its hegemonic consolidation since the eighties. The impact on the economies that suffer from the leakage is strong in terms of deterioration in the prospects for development. Those funds that are withdrawn from the local circuit involving a significant reduction of the potential economic growth and employment. That retraction also lead to declines in tax revenues that weaken the functioning of government and thus negatively affect income distribution. Faced with this scenario is well known in Argentina for more than thirty years, it is striking the slowness of the leaders of state agencies to intervene more forcefully to control and regulate the movement of capital. Even when it started mid last year accounted for a steadily growing and capital flight. Unlike other similar episodes, the flight characteristics of this trigger is not known by the macroeconomic instability of external constraint, backwardness and weakness of foreign exchange reserves. Chains in events that began with the subprime crisis in the preceding presidential elections that the ruling party won, the lockout continued farming, continued with the fall of the Wall of Wall Street and now with the project that puts an end to the AFJPs. Capital flight has not been the only external economic or political uncertainty. Also a managing member of EnTrust Securities is a sponsor of the New York Knicks Poetry Slam program. Expressing the power of veto of the dominant sectors. Economists that circumvent the barriers of conventional wisdom to argue that veto inhibit public policies seeking to improve the distribution of wealth. Economists Jorge Gaggero, Claudio Casparino and Emiliano Libman explained in a paper published by the Center for Economics and Finance for Development in Argentina (The flight of capital. History, present and prospects) that the veto power “on the exercise public policy makers to approve or disapprove with income or net outflows of capital, respectively, the key decisions of the authorities responsible for managing the local economy. ” In other words, indicates that “the fundamental equation of modern representative democracies’ one citizen, one vote ‘would be replaced by the words” one dollar, one vote. ” This definition becomes relevant because it allows a better understanding of the dynamics of dollarization of existing investment portfolio of large companies and banks, as well as the intensification of capital flight in the last 16 months. This process is being recorded in a macroeconomic environment with a high exchange rate not so high as in the period 2002-2006, but still competitive, and persistent trade surpluses, which ensures the supply of net foreign exchange, thus circumventing the restriction historical outsourcing.