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 …show more content…
In an effort to move Argentina from an internationally isolated and state-dominated economy to one that encouraged international trade and foreign investments, Carlos Menem, in the early 1990s, initiated a wave of privatization, which included state-owned industries such as utilities (Feldstein, 2002). Following the examples of Chile and the emerging economies of Southeast Asian nations, Menem hoped this liberalization would foster growth in productivity and economic growth.
On April 1, 1991, Argentina’s Congress, with Domingo Cavallo as Minister of Economy, enacted the Convertibility Law (or Ley de Convertibilidad) legally adopting the currency board (Hornbeck, 2002). This legislation essentially pegged the Argentinean peso to the U.S. dollar. The government guaranteed the convertibility of the peso to U.S. dollar at a one-to-one exchange rate, limiting the printing of pesos to only those necessary to purchase dollars in the foreign exchange market. Thus, the central bank was required by law to hold foreign reserves to cover its peso liabilities (Hanke and Schuler, 2002). With this fixed exchange rate, the Argentinean government was hoping to preserve the value of their currency and stabilize inflation. The peg was initially successful, as it cured hyperinflation that occurred at the end of the 1980s and provided price stability needed for economic growth in the early 1990s. However, by the late 1990s,
The government also advocated the development of domestic industry in order to protect Chile from future external economic shocks. Thus, Chile, like many other Latin American nations at the time, adopted a policy of import-substitution industrialization. Its aim was to “encourage the creation of homegrown industries to replace Latin American dependence on foreign manufactured goods” (Berliner) which was done in part by establishing quotas, licenses, and higher tariffs on imports and a strict exchange rate in Chile.
Peron transformed Argentina’s economy, social structure and political culture in ways that continue to shape Argentina to this day. On the other side, Peron’s political actions as well as his legacy cannot be characterized easily, he was a politician who provided for the masses as well as being supported by them while still being in various ways the president of an authoritarian regime. What were both Peron and Castro’s economic goals, and how do they differ from each other?
The benefits of globalization in Argentina at the time were economic growth, prosperity and increased productivity during the 1990s. Argentina
Sin embargo, a raíz de la crisis económica que sufrió Argentina a finales del 2001. Pecom vio reducidas sus posibilidades de seguir creciendo con la misma dimensión en la que venía operando.
Throughout the 1800s Latin America was trying to catch up with the rest of the Western world, progressing with increased exports, manufacturing, and industrialization. These advances did not stop the internal problems of most Latin nations. With these changes, as in the rest of the world, there was a growth in urban populations and in the middle class, adding another layer in the social structure; which in turn is just another group that will vie for power, and benefits from the government (180-90). This period is characterized with a large amount of wealth being concentrated in the hands of a few, which on paper shows great economic progress in the form of a GDP number, but there was still great wealth disparity. The switch, in Latin America, from conservatives in the early part of the 1800s, to liberals for the latter half, eventually turned to authoritarian governance; the democratic goals liberals set out to achieve were trashed for power and economic benefits, in keeping with previous generations (191).
Throughout 1994, Mexico lost significant amounts of reserves trying to stabilise the exchange rate. In 1989 the current account deficit was US$6 billion; by 1991 it had grown to US$15billion, before swelling to approximately US$20billion 1992 and 1993. However, after losing US$1.5billion in reserves over three days in early December 1994, the Government decided to depreciate the Peso by approximately 15%. Within days the Peso plummeted in value as the Government abandoned its new peg, sending the country into the 1994 Mexico financial crisis (Joseph & Whitt 1996).
On January, 2002 after more instability the government announced an economic plan devaluing the Argentine peso which had been pegged to the dollar for a decade. The devaluation plunged the banking industry into crisis, caused unemployment to reach 20% and wiped out much of the savings of the middle class, plunging millions of Argentineans into poverty.
Corruption in Venezuela has prevalent since the nation gained independence in 1821. But, corruption rose to unforeseen levels during Hugo Chavez’s presidential era. Hugo Chavez was president of Venezuela for 11 years. “There is no exaggerating the extent of Venezuela 's decline and fall. The wealthiest country per capita in Latin America is sinking deeper and deeper into what must inevitably be bankruptcy, as everything fiscal goes wrong.” (Thomson, 2010) He came into power with the intentions of making Venezuela a socialist nation. His impact on the nation of Venezuela has touched every aspect of the society from economics to the quality of living. His extreme, radical ideology mirrored those of the Cuban socialist revolution. Nationalization of assets and equal distribution of wealth among the nation sounds like an ideal plan, but what went wrong? Was it the decrease in oil production, investors or private businesses? Or, did the inflation and decreasing value of the currency finally catch up to the nation? It is important to note that Chavez pulled his support from the lower and middle class. His neglect of the rich made it easier for his socialist ideals to merge into Venezuelan society. During Hugo Chavez’s 11-year reign, how did his radical changes affect Venezuela’s economy nationally and globally?
Experts seem to see that Chavez modified the economy into an Import-Substitution-Industrialization (ISI) style economy (Javier). The main objective of an ISI-style economy is to increase the local production of goods and services. In order to do this, Chavez implement several protectionist policies to limit foreign competition and help current and infant industries thrive. As with other countries attempts,
Economic development: The 1991 collapse of the Soviet Union had serious negative effects on Cuba’s economic and social situation due to the loss of Soviet Aid. The Castro regime feared that economic instability would hinder their legitimacy and position in government, so Castro sought to institute liberal political reforms that appeared more open to Cuba’s social diversity, which allowed its regime to stay in power (Chu 2011). The crumbling of Venezuela’s economy has left Cuba in a particular economic vulnerable state. However, Raul has “engineered shifts in the country’s top-down Marxist economy and made major concessions to the Church” (Berry 2015).
Following a period of growth from an oil boom, President Chávez drastically expanded government spending and borrowing. The country endured extreme inflation that made it increasingly difficult for citizens to afford life’s most basic necessities. The government responded with strict price controls that continue to this day, removing incentive to import goods and actually resulting in drastically increased prices (Lee and Renwick). Consequently, millions of citizens such as Araceli Belaez believe their wage is simply “not enough at all” (Gupta). While other solutions may allow short term growth, they fail to address the real problem, mismanagement, what this solution addresses perfectly. Even so, those in disagreement may point out that after price controls are lifted, the average wage will likely stay the same. Thus, the government must go one step further and free the bolívar, Venezuela’s currency. Also under Chávez, strict currency controls pegged the bolívar against the U.S dollar, ensuring a vicious cycle where the rising black market inflation feeds back into the price of the black market dollar. In order to experience true long term economic growth, the country must free its currency by allowing it to float, an action most economists estimate would dramatically increase its value (Weisbrot). Thus,
In 2008, the world experienced a tremendous financial crisis which is rooted from the U.S housing market. Moreover, it is considered by many economists as one of the worst recessions since the Great Depression in 1930s. After bringing a huge effect on the U.S economy, the financial crisis expanded to Europe and the rest of the world. It ruined economies, crumble financial corporations and impoverished individual lives. For example, the financial crisis has resulted in the collapse of massive financial institutions such as Fannie Mae, Freddie Mac, Lehman Brothers and AIG. These collapses not only influenced own countries but also international scale. Hence, the intervention of governments by changing and expanding the monetary
The Mexican Peso Crisis can be traced to the decision of then president Zedillo’s decision to reverse the government’s then policy that imposes tight controls on the Mexican Peso. This decision is considered by critics as an important factor that led to the Mexican Peso Crisis
The Argentine debt restructuring is a process of debt restructuring by Argentina which began on January 14, 2005, and allowed it to resume payment on the majority of the USD 82 billion in sovereign bonds that defaulted in 2002 at the depth of the worst economic crisis in the nation 's history. A second debt restructuring in 2010 brought the percentage of bonds, out of default, to 93%, though ongoing disputes with holdouts remained. Bondholders who participated in the restructuring, accepted repayments of around 30% of face value and deferred payment terms, and began to be paid punctually; the value of their bonds also began to rise.The remaining 7% of bondholders later won the right to be repaid in full.
Argentina had repeated cycles of hyperinflation followed by attempts at stabilization. A typical cycle in such an inflationary economy begins with the acceleration of money creation to