The financial crisis in Argentina during the late 1990s and early 2000s resulted in severe issues with foreign debt, inflation, unemployment, and political turmoil for the country. Argentina not only suffered a currency crisis, but also suffered a political crisis. Fallout from the economic collapse was so severe the Argentinean population resorted to civil unrest and protest, which in turn exacerbated Argentina’s problems at the turn of the century. While other issues related to this financial crisis such as the impact on the lives of the Argentinean population or the political turmoil and corruption are certainly worthy of discussion, this paper will focus on the currency crisis and the Argentinean government’s role in this economic catastrophe, primarily discussing the relative fiscal policies and external shocks that led up to the crisis in 2001, followed by a brief examination of the governmental reaction and recovery efforts.
In order to identify the causal factors of this crisis, it may be best to start by looking at the 1980s in Argentina. While the economy of Argentina may have suffered deeply during 2001 and 2002, economic instability was nothing new to the country. During the 1980s Argentina was a victim to the Latin American Debt Crisis and high inflation. In 1989, inflation spiraled out of control, reaching nearly 200% in July alone (Hanke and Schuler, 2002). Not long after, the president at the time, Raúl Alfonsín, resigned due to subsequent protests and riots. As a result, the next elected president, Carlos Menem, took office several months early and appointed Domingo Cavallo as Minister of Economy. Together, starting in the early 1990s, Menem and Cavallo enacted certain major structural reforms—includin...
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...rts. The Argentine administration enacted pro-growth policies and avoided the drain of resources by controlling expenditures. Also, the government firmly negotiated the restructuring of the defaulted foreign debt. Argentina broke with the IMF in making important decisions regarding its economy recovery, despite the International Monetary Fund’s continued borrowing to Argentina during the late 1990s and early 2000s. In the next few years following 2003, Argentina managed to return to growth, as GDP increased foreign currency reserves increased. In the future, other less developed countries can learn from the Argentinean experience. In hindsight, the adherence to the fixed exchange rate system was maintained too long. Other countries should be wary before adopting such a currency board system, since this fixed rate could lead to an overvalued exchange rate.
The depression in the 1930’s in the country of Argentina was one of the most devastating internationally. In 1929, Argentina had the fourth highest gross domestic product; however a few short months later, this would no longer be considered the case. Considering that the economy heavily depended on foreign trade for daily essential produces, the economy was deficient of vital goods and thus lacked important industry. Mainly dependent on the foreign capital from Great Britain at the time, domestic industry was severely affected by the market crash due to the halt of British domestic capital investment. Through the Domino Effect, mass and widespread unemployment was a major and constant theme in the Argentinian culture at the time. This further affected the government revenue dropped significantly as the export of the country faulted investment and imports were decreased exponentially due to the international depression. As a result of the decline in national revenue, grand deficits began to appear. To repair the shortage of the countries’ profits, the government began to borrow mo...
report of the national commission on the causes of the financial and economic crisis in
In early 1994, Fernando Henrique Cardoso was selected as minister of finance, his primary objective was to develop a new stabilization plan. The plan named Real Plan and it focused mainly on the causes of inflation in country. Th...
This paper argues that the Mexican peso crisis of December 20 should have been expected and foreseeable. In the year preceding the crisis, there were several indicators suggesting that the Mexican economy and peso were already under extreme pressure. The economy bubble was ballooning to burst so much so that it was simply a crisis waiting to happen.
Argentinian have some components known in Poland: stabilization of money , liberalization of foreign trade , the removal of barriers to foreign capital , the privatization of the state sector , the removal of detailed state interference . Busting the Argentine economy based on the same assumptions of the model , which present the Polish economy , is thus for Poland a serious warning . Without being hysterical , polish people need to carefully consider whether the current crisis of state finances in Poland is not the first symptom of impending disaster . Indicates are same as in Argentina, for example the level of unemployment – According to UC Atlas of Global Inequality 20% in December 2001 .
Since the 1970s, Venezuela has gone from being South America’s richest nation into a nouveau-poor society in search of an identity. Once known as the Saudis of the West, Venezuelans have seen their economic fortunes decline in exact proportion to the general fall in world oil prices. Even so, Venezuela’s many problems were hidden from view until relatively recently, when severity measures heralded the sort of economic crises so painfully familiar to other Latin American countries. Runaway inflation, currency devaluations and even food riots have marked this new phase in Venezuelan history, to which the country is still trying to adjust.
Populism has been part of Latin America history since early 1930. From Getulio Vargas in Brazil and Juan Peron in Argentina to Bolivian President Evo Morales and Ollanta Humala in Peru, South American leaders have used the power of the forgotten masses on several occasions against the elites promising radical changes and a better future for their supporters. Populism re-emerged in South America and other parts of Latin America in late 1990’s and early 2000s due to the economic decline and financial crises that affected the region in the late 1990s. After these events, the politics in the region took a “left-hand turn” (making reference to an increasing number leaders gaining political power from left-wing parties). One of the reasons why left parties started to gain power was due to the commodity booms and high demand for mining, oil and agricultural products. Populist leaders have the tendency to take over private sectors of the economy to increase the state’s revenue and redistribute the gains with the population. In addition, government crises are also significantly connected with a move to the left-wing politics. For example, the Argentine Great Crisis of
Latin America financial crisis are very elegance and seem very hard and impossible to solve. Although it is, here are some way taken by Latin America in means to reduce their financial problems. Firstly, according to Dr. Luisa Blanco in his book of Latin America and the Financial Crisis of 2008: Lessons and Challenges: " Just like the United States, many Latin American countries used fiscal stimulus through greater government spending to address the crisis. Because of the reforms they implemented in the 1990s, which forced governments to be more fiscally responsible, many Latin American countries had more room to maneuver and to implement these fiscal policies." (Blanco, 2010)
Venezuela heavily relied on oil exports which put it at economic risk and during 1978 the price of oil fell which put the economy in a tail spin (9 Infoplease). In 1994 with rising debts and falling oil prices half of Venezuela’s banking sector collapsed. Venezuela tried to boost its economy by expanding gold and diamond mining to reduce its dependency on oil (9 Infoplease).
By the fall of 1981, the Argentinean government under the leadership of General Galtieri and the military junta was experiencing a significant decrease of power. Economical...
U.S. State Dept. Country Notes (2009). Argentina. [ONLINE] Available at: http://www.factmonster.com/ipka/A0107288.html. [Last Accessed 4 February 2014].
Ismi, Asad. "Cry for Argentina." SIRS Issues Researcher. N.p., Sept. 2000. Web. Feb.-Mar. 2014. .
Argentina is a country that was made poor by capitalism and globalization. The video “The Take (2004) Occupy, Resist & Produce” is a documentary by Avi Lewis and Naomi Klein that exhibits the devastating effects that capitalism and globalization can have on a country. In viewing this documentary, Argentina and its workers suffered due to the governing power of Carlos Menem and the International Monetary Fund. Menem sold the country piece by piece through downsizes, corporate handouts, and by selling public property to privatized organizations. Menem wanted to close factories, have more state control, and an increase in privatization rights. The result of Menem’s goals was the rich getting richer and the poor becoming poorer. Under Menem’s government over half the population of Argentina fell below the poverty line. Before Menem’s government coming into power, the people and workers were able to spend money on the material things in life, such as going on vacations or going shopping for
This paper provides an overview of the crisis, outlines the major causes of the crisis, examine alternative solutions to the problem
The Latin American Debt crisis did not occur over night, the crisis was many years in the making and signs of its arrival were prominent in Latin American society. The reasons for its occurrence are also expansive; some fault can also be place in countries outside of Latin America. The growth rate in the real domestic product of many Latin American countries grew at a constantly high rate in the decade prior to the crisis in the 1980s, this growth led to an increase in foreign investment, corporate investment, and the world began supporting these developing nations (Ocampo). The foreign investments into Latin America created a new international financial system that gave the foreign banks access the funds to give massive loans to the developing nations of Latin America. However, the affluence was not continuous. A rise in natural resources occurred in the mid-1970s, which led to increase the prices of imported goods, and thus Latin American countries would have to find a way to pay back these deficits, which then led them to borrowing more money. By the end of the 1970s, Latin America was in debt to for over $150 billion, and the growth rates for each nations debt varied greatly with Mexico and Brazil taking on more than half of the debt themselves.