Adolfo Diz
Encyclopedia
Adolfo César Diz was an Argentine economist who served as President of the Central Bank of Argentina from 2 April 1976 until 27 March 1981.
Diz earned a bachelor in Economics from the University of Buenos Aires
. He was then accepted at the University of Chicago
, where he earned his master in 1957 and a PhD in Economics
in 1966. A pupil of Milton Friedman
, Diz was the precursor of the influential "Chicago Boys
" in Latin America, where he cultivated relationships with other Chicago School
graduates such as Ernesto Fontaine, Roque Fernández
, Carlos Rodríguez, Fernando de Santibañes
, and other well known Argentine economists trained by Arnold Harberger
.
Between 1967 and 1968 he was an Executive Director of the International Monetary Fund
. He was appointed the Financial Representative for Argentina
in Europe (in Geneva
), serving until 1973, and in 1974 was named director of the Centre for Latin American Monetary Studies (CEMLA), an institution that promotes a better understanding of monetary and banking matters in Latin America and the Caribbean, as well as the pertinent aspects of fiscal and exchange rate policies.
, the last Argentine dictatorship, on March 24, 1976, led to Diz's appointment as President of the Central Bank of Argentina on April 2. Central Bank Presidents in Argentina are largely subordinate as policy makers to the Economy Minister
, and as were many of his predecessors, Diz was recommended to the post by the new Economy Minister (José Alfredo Martínez de Hoz
).
The central banker signed a number of significant policy changes during his tenure.
Diz simplified the myriad exchange rates issued following the Rodrigazo
crisis of 1975, and business sentiment recovered amid higher exports, lower inflation, and a stabilized peso. He then began a series of measures deregulating finance
. The first, the Financial Entities Law, was enacted by the Central Bank on June 1, 1977, and introduced a sweeping deregulation of the nation's financial sector, including commercial bank
s, while prohibiting non-profit banking and imposing minimum capital requirements of US$10 million. New regulations shuttered numerous Argentine credit union
s and community bank
s, which in a bid to survive, were granted a charter by Diz to form Credico-op Bank
in 1979. Domestic credit was also stymied by the new policies, particularly the Monetary Regulation Account Law of 1977, which raised reserve requirement
s to 45% of deposits, thereby doubling borrowers' interest rates while eliminating yields on demand deposit
s; GDP, which had grown by 5% amid the improved business sentiment, fell by over 3% in the year after these policy changes as fixed investment
plummeted.
Investment banking
, in turn, flourished under the Central Bank's laissez-faire
approach towards them, as well as by its extansion of deposit insurance
on high yield accounts. A a variety of exotic investment vehicles became available in Argentina around 1979, while private, financial sector foreign debt ballooned to over US$30 billion (a third of GDP). Part of an anti-inflation
package unveiled in late 1978 (prices had risen 175% annually for two years), Diz implemented Martínez de Hoz's Exchange Timetable (the Tablita). The pre-announced, progressively smaller devaluations of the peso encouraged the financial sector, and the economy benefited from both a recovering credit market, as well as from lower inflation (which slowed to half the 1978 rate). The disproportionately slow crawling peg
approach helped make the peso one of the world's most overvalued currencies by 1980, however, and the collapse of the BIR, a heavily leveraged newer bank, on March 28, touched off a wave of capital flight
as fears of an imminent crisis mounted.
Diz responded on April 1 by implementing Central Bank Circular 1050, a measure designed at the Economy Ministry. The policy tied monthly loan interest payments (almost all lending in Argentina is on an adjustable basis) to the local value of the US dollar
. The timetable, made unsustainable by the balance of payments
crisis, was abandoned in February 1981, however, and both the Economy Minister and his protégé, Adolfo Diz, stepped down at the end of March; as those privy to inside information
from the Central Bank profited with the collapse of the peso, a large number of homeowners and other borrowers were bankrupted by the sharply higher monthly payments imposed by Circular 1050.
, and University of San Andrés
, ultimately becoming a member of the faculty of the Universidad del CEMA, where he taught International Finance
as part of the Bachelor in Economics program.
As a consultant, he worked for the IMF, World Bank
, Fondo Andino de Reservas, and for several Latin America
n central bank
s, as well as in numerous countries in Africa
, Central
and South Asia
, and Eastern Europe
. Diz was designated as a member of the National Academy of Economic Sciences in 1994.
As a researcher, he has published several works on supply and demand
(University of Chicago), money supply
(CEMLA, México
), IMF Conditionality
(Federal Reserve Bank of Boston
), and fiscal impact measurement
(IMF, Venezuela).
Life and times
Diz was born in Buenos Aires in 1931. He was known as "Vasco" to his friends and family due to his Basque descent from his mother, María Elisa Aristizabal Iparraguirre Lazaga y Gogorza. He married the former Martha E. Solari and had five children: Agustín, Joaquin, Diego, Rodrigo and Ramiro.Diz earned a bachelor in Economics from the University of Buenos Aires
University of Buenos Aires
The University of Buenos Aires is the largest university in Argentina and the largest university by enrollment in Latin America. Founded on August 12, 1821 in the city of Buenos Aires, it consists of 13 faculties, 6 hospitals, 10 museums and is linked to 4 high schools: Colegio Nacional de Buenos...
. He was then accepted at the University of Chicago
University of Chicago
The University of Chicago is a private research university in Chicago, Illinois, USA. It was founded by the American Baptist Education Society with a donation from oil magnate and philanthropist John D. Rockefeller and incorporated in 1890...
, where he earned his master in 1957 and a PhD in Economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
in 1966. A pupil of Milton Friedman
Milton Friedman
Milton Friedman was an American economist, statistician, academic, and author who taught at the University of Chicago for more than three decades...
, Diz was the precursor of the influential "Chicago Boys
Chicago Boys
The Chicago Boys were a group of young Chilean economists most of whom trained at the University of Chicago under Milton Friedman and Arnold Harberger, or at its affiliate in the economics department at the Catholic University of Chile...
" in Latin America, where he cultivated relationships with other Chicago School
Chicago school
Chicago school may refer to:* Chicago school * Chicago school * Chicago school * Chicago school * Chicago school * Chicago School of Professional Psychology...
graduates such as Ernesto Fontaine, Roque Fernández
Roque Fernández
Roque Benjamín Fernández is an Argentine economist, former President of the Central Bank, and Economy Minister, as well as the only member of the Chicago Boys ever to have been the chief economic policy maker in Argentina....
, Carlos Rodríguez, Fernando de Santibañes
Fernando de Santibañes
Fernando de Santibañes is an Argentine politician and banker. He was the Secretary of Intelligence of the Argentine Republic from 1999 to October 23, 2000, during half of Fernando de la Rúa's presidency. De Santibañes resigned the position in 2000 after the media discovered the Secretariat's...
, and other well known Argentine economists trained by Arnold Harberger
Arnold Harberger
Arnold C. Harberger is a United States economist. Harberger's Triangle, widely used in welfare economics, is named after him.-Life:...
.
Between 1967 and 1968 he was an Executive Director of the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
. He was appointed the Financial Representative for Argentina
Argentina
Argentina , officially the Argentine Republic , is the second largest country in South America by land area, after Brazil. It is constituted as a federation of 23 provinces and an autonomous city, Buenos Aires...
in Europe (in Geneva
Geneva
Geneva In the national languages of Switzerland the city is known as Genf , Ginevra and Genevra is the second-most-populous city in Switzerland and is the most populous city of Romandie, the French-speaking part of Switzerland...
), serving until 1973, and in 1974 was named director of the Centre for Latin American Monetary Studies (CEMLA), an institution that promotes a better understanding of monetary and banking matters in Latin America and the Caribbean, as well as the pertinent aspects of fiscal and exchange rate policies.
Tenure at the Central Bank
The advent of the National Reorganization ProcessNational Reorganization Process
The National Reorganization Process was the name used by its leaders for the military government that ruled Argentina from 1976 to 1983. In Argentina it is often known simply as la última junta militar or la última dictadura , because several of them existed throughout its history.The Argentine...
, the last Argentine dictatorship, on March 24, 1976, led to Diz's appointment as President of the Central Bank of Argentina on April 2. Central Bank Presidents in Argentina are largely subordinate as policy makers to the Economy Minister
Minister of Economy of Argentina
The Minister of Economy is the head of the Ministry of Economy and Production of Argentina, concerned with finance and monetary matters. The position within the Government of Argentina is analogous to the finance ministers of some countries and the United States Treasury Secretary...
, and as were many of his predecessors, Diz was recommended to the post by the new Economy Minister (José Alfredo Martínez de Hoz
José Alfredo Martínez de Hoz
José Alfredo Martínez de Hoz was an Argentine executive and policy maker. He served as Minister of the Economy under de facto President Jorge Rafael Videla between 1976 and 1981, and shaped economic policy during the self-styled National Reorganization Process military dictatorship.-Early...
).
The central banker signed a number of significant policy changes during his tenure.
Diz simplified the myriad exchange rates issued following the Rodrigazo
Rodrigazo
Rodrigazo is the name given to a group of economic policies announced in Argentina on June 4, 1975, and their immediate aftermath. The name Rodrigazo stems from the fact that the policies were announced and implemented by Celestino Rodrigo, the Minister of Economy of Argentina appointed by...
crisis of 1975, and business sentiment recovered amid higher exports, lower inflation, and a stabilized peso. He then began a series of measures deregulating finance
Big Bang (financial markets)
The phrase Big Bang, used in reference to the sudden deregulation of financial markets, was coined to describe measures, including abolition of fixed commission charges and of the distinction between stockjobbers and stockbrokers on the London Stock Exchange and change from open-outcry to...
. The first, the Financial Entities Law, was enacted by the Central Bank on June 1, 1977, and introduced a sweeping deregulation of the nation's financial sector, including commercial bank
Commercial bank
After the implementation of the Glass–Steagall Act, the U.S. Congress required that banks engage only in banking activities, whereas investment banks were limited to capital market activities. As the two no longer have to be under separate ownership under U.S...
s, while prohibiting non-profit banking and imposing minimum capital requirements of US$10 million. New regulations shuttered numerous Argentine credit union
Credit union
A credit union is a cooperative financial institution that is owned and controlled by its members and operated for the purpose of promoting thrift, providing credit at competitive rates, and providing other financial services to its members...
s and community bank
Community bank
Community Bank, with $365 million in assets as of December 31, 2010, is a commercial bank serving customers in Oregon and Washington. The bank is headquartered in Joseph, Oregon.- History:...
s, which in a bid to survive, were granted a charter by Diz to form Credico-op Bank
Credico-op Bank
Banco Credicoop is the largest cooperatively-owned bank in Argentina.-Overview:Banco Credicoop was established in 1979 through the merger of 44 Argentine credit unions. This was motivated largely by the adverse effect Economy Minister José Alfredo Martínez de Hoz's Financial Entities Law of 1977...
in 1979. Domestic credit was also stymied by the new policies, particularly the Monetary Regulation Account Law of 1977, which raised reserve requirement
Reserve requirement
The reserve requirement is a central bank regulation that sets the minimum reserves each commercial bank must hold of customer deposits and notes...
s to 45% of deposits, thereby doubling borrowers' interest rates while eliminating yields on demand deposit
Demand deposit
Demand deposits, bank money or scriptural money are funds held in demand deposit accounts in commercial banks. These account balances are usually considered money and form the greater part of the money supply of a country.-History:...
s; GDP, which had grown by 5% amid the improved business sentiment, fell by over 3% in the year after these policy changes as fixed investment
Fixed investment
Fixed investment in economics refers to investment in fixed capital, i.e., tangible capital goods , or to the replacement of depreciated capital goods which have been scrapped....
plummeted.
Investment banking
Investment banking
An investment bank is a financial institution that assists individuals, corporations and governments in raising capital by underwriting and/or acting as the client's agent in the issuance of securities...
, in turn, flourished under the Central Bank's laissez-faire
Laissez-faire
In economics, laissez-faire describes an environment in which transactions between private parties are free from state intervention, including restrictive regulations, taxes, tariffs and enforced monopolies....
approach towards them, as well as by its extansion of deposit insurance
Deposit insurance
Explicit deposit insurance is a measure implemented in many countries to protect bank depositors, in full or in part, from losses caused by a bank's inability to pay its debts when due...
on high yield accounts. A a variety of exotic investment vehicles became available in Argentina around 1979, while private, financial sector foreign debt ballooned to over US$30 billion (a third of GDP). Part of an anti-inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
package unveiled in late 1978 (prices had risen 175% annually for two years), Diz implemented Martínez de Hoz's Exchange Timetable (the Tablita). The pre-announced, progressively smaller devaluations of the peso encouraged the financial sector, and the economy benefited from both a recovering credit market, as well as from lower inflation (which slowed to half the 1978 rate). The disproportionately slow crawling peg
Crawling peg
Crawling peg is an exchange rate regime usually seen as a part of fixed exchange rate regimes which allows depreciation or appreciation in an exchange rate gradually...
approach helped make the peso one of the world's most overvalued currencies by 1980, however, and the collapse of the BIR, a heavily leveraged newer bank, on March 28, touched off a wave of capital flight
Capital flight
Capital flight, in economics, occurs when assets and/or money rapidly flow out of a country, due to an economic event and that disturbs investors and causes them to lower their valuation of the assets in that country, or otherwise to lose confidence in its economic...
as fears of an imminent crisis mounted.
Diz responded on April 1 by implementing Central Bank Circular 1050, a measure designed at the Economy Ministry. The policy tied monthly loan interest payments (almost all lending in Argentina is on an adjustable basis) to the local value of the US dollar
Historical exchange rates of Argentine currency
The following table contains the monthly historical exchange rate of the different currencies of Argentina, expressed in Argentine currency units per United States dollar...
. The timetable, made unsustainable by the balance of payments
Balance of payments
Balance of payments accounts are an accounting record of all monetary transactions between a country and the rest of the world.These transactions include payments for the country's exports and imports of goods, services, financial capital, and financial transfers...
crisis, was abandoned in February 1981, however, and both the Economy Minister and his protégé, Adolfo Diz, stepped down at the end of March; as those privy to inside information
Inside Information
Inside Information is the sixth studio album by American rock band Foreigner, released in 1987. The album hit #15 on the Billboard 200 Albums Chart and was certified Platinum in the U.S. for sales exceeding one million copies....
from the Central Bank profited with the collapse of the peso, a large number of homeowners and other borrowers were bankrupted by the sharply higher monthly payments imposed by Circular 1050.
Later career
Following his departure from the Central Bank, Diz began a teaching career at the Universities of Buenos Aires and Tucumán. He also served as visiting professor at the Argentine Catholic University, University of BelgranoUniversity of Belgrano
The University of Belgrano is a private university established in 1964 and located in the Belgrano district of the city of Buenos Aires, Argentina.It has 9 Departments:*Architecture and Urban Planning*Law and Political Science*Economics*Humanities...
, and University of San Andrés
University of San Andrés
The University of San Andrés is an Argentine university located in the town of Victoria, Buenos Aires on the shores of the Rio de la Plata, in the metropolitan area of Greater Buenos Aires, Argentina. It is a small private institution, with approximately 1031 undergraduate students and 500...
, ultimately becoming a member of the faculty of the Universidad del CEMA, where he taught International Finance
International finance
International finance is the branch of economics that studies the dynamics of exchange rates, foreign investment, global financial system, and how these affect international trade. It also studies international projects, international investments and capital flows, and trade deficits. It includes...
as part of the Bachelor in Economics program.
As a consultant, he worked for the IMF, World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
, Fondo Andino de Reservas, and for several Latin America
Latin America
Latin America is a region of the Americas where Romance languages – particularly Spanish and Portuguese, and variably French – are primarily spoken. Latin America has an area of approximately 21,069,500 km² , almost 3.9% of the Earth's surface or 14.1% of its land surface area...
n central bank
Central bank
A central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries...
s, as well as in numerous countries in Africa
Africa
Africa is the world's second largest and second most populous continent, after Asia. At about 30.2 million km² including adjacent islands, it covers 6% of the Earth's total surface area and 20.4% of the total land area...
, Central
Central Asia
Central Asia is a core region of the Asian continent from the Caspian Sea in the west, China in the east, Afghanistan in the south, and Russia in the north...
and South Asia
South Asia
South Asia, also known as Southern Asia, is the southern region of the Asian continent, which comprises the sub-Himalayan countries and, for some authorities , also includes the adjoining countries to the west and the east...
, and Eastern Europe
Eastern Europe
Eastern Europe is the eastern part of Europe. The term has widely disparate geopolitical, geographical, cultural and socioeconomic readings, which makes it highly context-dependent and even volatile, and there are "almost as many definitions of Eastern Europe as there are scholars of the region"...
. Diz was designated as a member of the National Academy of Economic Sciences in 1994.
As a researcher, he has published several works on supply and demand
Supply and demand
Supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers will equal the quantity supplied by producers , resulting in an...
(University of Chicago), money supply
Money supply
In economics, the money supply or money stock, is the total amount of money available in an economy at a specific time. There are several ways to define "money," but standard measures usually include currency in circulation and demand deposits .Money supply data are recorded and published, usually...
(CEMLA, México
Mexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
), IMF Conditionality
Conditionality
Conditionality is a concept in international development, political economy and international relations and describes the use of conditions attached to a loan, debt relief, bilateral aid or membership of international organizations, typically by the international financial institutions, regional...
(Federal Reserve Bank of Boston
Federal Reserve Bank of Boston
The Federal Reserve Bank of Boston, commonly known as the Boston Fed, is responsible for the First District of the Federal Reserve, which covers most of Connecticut , Massachusetts, Maine, New Hampshire, Rhode Island and Vermont. It is headquartered in the Federal Reserve Bank Building in Boston,...
), and fiscal impact measurement
Fiscal policy
In economics and political science, fiscal policy is the use of government expenditure and revenue collection to influence the economy....
(IMF, Venezuela).
See also
- Economic history of Argentina
- Universidad del CEMA
- Chicago School of Economics
- Big Bang (financial markets)Big Bang (financial markets)The phrase Big Bang, used in reference to the sudden deregulation of financial markets, was coined to describe measures, including abolition of fixed commission charges and of the distinction between stockjobbers and stockbrokers on the London Stock Exchange and change from open-outcry to...