Biography José Alfredo Martínez de Hoz

1 biography

1.1 career
1.2 work minister of economy

1.2.1 sweet money
1.2.2 circular 1050 , shattered tablita


1.3 legacy

biography
early career

martínez de hoz, scion of 1 argentina s oldest cattle ranching families, born in buenos aires, argentina. pursuing higher studies @ university of cambridge, returned , in 1955, following coup against president juan domingo perón, appointed province s minister of economy. though democracy returned argentina 3 years later, armed forces continued exercise vetting power on policy , in 1963, martínez de hoz became 1 of series of conservative argentine economy ministers during jose maria guido s brief presidency (an interlude marked squabbles among military brass , recession).

becoming influential lobbyist acindar, 1 of argentina s largest steel manufacturers, martínez de hoz became ceo in 1968. 7 years later, after union laborers @ acindar s villa constitución plant elected socialist shop steward, martínez de hoz retaliated using family s long-standing connections armed forces have them brutally repressed. supported metalworkers union leader lorenzo miguel, security forces abducted new shop steward, alberto piccinini, , 300 others (most of whom murdered).

work minister of economy

by 1975, argentina had considerably developed, nevertheless in throes of of worst instability since 1930. argentine public opinion turned military, deposed isabel perón s weak regime in march 1976 coup. inheriting wave of violence , 700% inflation, new regime called on martínez de hoz, appointing him minister of economy. anxious restore business confidence, announced plan further open argentina s markets, believing country s national industry inefficient , uncompetitive internationally. moved lessen argentina s trade barriers quickly, believed cause of economic isolation. enjoyed personal friendship of david rockefeller, facilitated chase manhattan , international monetary fund loans of us$1 billion following appointment.

he decreed general freeze on wages, , instituted value-added tax while rescinding inheritance tax. result of changes instituted martínez de hoz, inflation fell sharply; but, many local retailers , home builders became incapable of coping fall in demand , declared bankruptcy.

a year later, billion-dollar trade deficit had turned around , business investment had soared 25%. however, real wages had lost 40% of purchasing power, , while consumer spending remained weak, shock might have been worse hitherto high savings rates. inflation revived again, , martínez de hoz responded in june 1977, deregulation of financial markets, removing checks on banks , transferring responsibility bad loans state, took charge of debt needed.

the central bank, many key economic posts in martínez de hoz era, led 1 of number of chicago boys: adolfo diz. diz enacted of economy minister s financial deregulation policy, while moving limit domestic credit. enacted monetary regulation account law of 1977, raised reserve requirements 45% of deposits, thereby doubling borrowers interest rates while eliminating yields on demand deposits.

short-term financial speculation flourished, while chronic tax evasion , budget deficits remained high. frequent wage freeze decrees continued depress living standards , income inequality increased.

sweet money

again in recession 1978, economy continued saddled inflation around 175%. image-conscious , so, fearful of possible riots, martínez de hoz relented , in december, issued new, more generous wage guidelines. address fellow conservatives fear might lead higher inflation, introduced novel take on currency crawling peg: fixed, progressively smaller devaluations of official exchange rate between argentine peso , dollar set monthly timetable, popularly known tablita.

the tablita invariably set slower depreciation of peso value local inflation warranted , although inflation did ease somewhat, imported goods , foreign credit became cheaper locally available. imports tripled in volume , 1980, peso became 1 of overvalued currencies in world; high purchasing power abroad had many referring plata dulce ( sweet money ). record numbers of argentines vacationed abroad, stocking on appliances; between negative trade deficit , tourists foreign spending, however, chalked then-record us$4 billion annual loss national balance sheet in both 1980 , 1981.

having suffered weakened demand, many industries (particularly smaller factories) not compete flood of imports , second wave of industry bankruptcies began. ostensibly avoid sharp rise in unemployment, martínez de hoz took more controversial step when decided begin absorbing private sector debts (mostly of well-connected, including us$700 million of acindar s) national debt. 1 of chief business interests, insolvent compañía italo argentina de electricidad, nationalized @ orders @ reported cost of us$394 million.

the economy still in relatively high gear and, rising fiscal revenues, nation s finances appeared healthy during 1979 , 1980. secretly, (as of data censored @ time), local speculators taking advantage of overvalued peso taking on us$30 billion in loans overseas. money found in risky gambles @ home , abroad , when 1 bank s ponzi scheme collapsed in march 1980, martínez de hoz responded possible panic luring investors one-year treasury bills, paying 60% in dollars. facing these pressures, argentine peso increasingly became object of short-selling insiders, including martínez de hoz himself.

circular 1050 , shattered tablita


martínez de hoz addresses nation in 12 march 1981, farewell address

the end of tenure near , increasingly unpopular, in april 1980 martínez de hoz had central bank promulgate new regulations governing adjustable loans. central bank circular 1050 tied monthly loan interest payments (almost lending in argentina on adjustable basis) value of dollar vis-a-vis peso. borrowers confident gradual peso devaluations continue on schedule , new homeowners rushed secure (or refinance) mortgages @ these favorable terms. brokerage houses proliferated put options against peso increased sharply , in february 1981, martínez de hoz announced unthinkable: time had come sharp devaluation. tablita shattered , retired following month.

what followed 1 of worst financial crises in history of modern argentina. speculators took advantage of 1977 deregulation write off debts, legitimate borrowers (including many large employers) faced unaffordable dollar payments , homeowners monthly payments (tied circular 1050 value of dollar), rose on tenfold during next fifteen months.

legacy

it took defeat during disastrous malvinas war in june 1982, usher in more moderate leadership in junta. in july, new central bank president, domingo cavallo, rescinded hated 1050 . thousands saved financial ruin change, economic damage remain.

business confidence destroyed whole calamity , though argentina s productive agricultural sector brought in on us$34 billion in trade surpluses on next 8 years, none of sufficed deal chronic capital flight or newly monstrous public debt (us$7 billion @ start of dictatorship, had grown us$43 billion time of restoration of democracy in 1983).

martínez de hoz himself indicted in 1988 involvement in human rights abuses @ acindar , spent 77 days in jail. freed, benefited pardon president carlos menem in 1990. returning world of high finance despite 1992 conviction of operating brokerage revoked licence, martínez de hoz became member of board of directors of 2 arbitrage houses: rohm group , banco general de negocios ( general business bank ).

the general business bank, defunct, later helped clients illegally wire us$30 billion out of country prior december 2001 financial crisis.

in 2006, judge declared pardon unconstitutional , revoked suspension of judicial process dictated before, leaving way open investigate martínez de hoz s alleged involvement in kidnapping , extortion of federico , miguel gutheim (a local textile mill owner , son) in 1976, murder of juan carlos casariego (one of own assistants @ ministry of economy).

martinez de hoz arrested on 5 april 2007, following supreme court ruling deeming 1990 presidential pardons unconstitutional, , given preliminary sentence of house arrest (due advanced age) on 4 may 2010, pursuant indictment in gutheim case.