The Argentinian Economic Crisis ( 2001-2002 )

Argentina is one of the largest countries in the world. It is sitting at the eighth largest country. It is filled with many valuable minerals. Also, Argentina has a great background of history. It was discovered by Juan D?az de Sol?s in early 16th century. It was disputed and is still being disputed today! Sebastian Cabot went exploring in 1526. He established a fort named Sancti Sp?ritus. Then in 1529, the natives of Argentina wiped out the whole fort, while Cabot was out looking for the ?City of Caesars.? Asunci?n and Buenos Aires played an important role in the rise of Argentina. It lured many settlers from Spain. After the Independence Movement, the area went through some tough times. The country fought until they were free from Spain. The government declared independence on July 9, 1816. A few years after that, the government fell apart.

This fills a gap in introducing the reader to economical problems that were triggered due to this banking collapse such as macroeconomic problems. Which I will include in to paper to furthermore give the reader a more global approach in how the economy plays a significant role in our day to days lives.

The reforms caused a period of success followed by worse conditions. These policies made the rich get richer and the poor get poorer. Towards the end of the 1990s the country experienced rising unemployment and decreasing wages. The privatization of industries in addition to the international debt and government corruption led to many citizens distrusting the government and failure to pay taxes thus keeping the problems still at large. Unfortunately, the fragile Argentine economic infrastructure, while seemingly strong, was not able to withstand the downturn in the world economy after the severe correction of the both the Dow Jones Industrial Average and NASDAQ stock markets in the United States in March 2000 and the terror attacks of September 11, 2001. The widespread economic failure caused the Argentine peso to become devalued and this caused extreme inflation in prices. In June of 2002 the peso was valued at just $0.26 of a U.S. dollar. The unemployment rates skyrocketed as well hitting over 25% in most parts of the country and the poverty rate increased from 30% in 1999 to over 50% in 2002. The benefits of globalization in Argentina were short-lived but still vital in the countries development.

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

Despite the introduction of several tough economic austerity programs by 2001 the recession slid into its third year and Argentina was bankrupt. The IMF gave Argentina $13.7 billion in emergency aid in January, 2001 and $8 billion in August, 2001. The international help was not enough however and Argentina verged on economic collapse forcing it to default on its $141 billion foreign debt payment which was the largest such default in history.

Latin America politics in the past 50 years have been regarded as being unstable with military regimes, authoritarian rule, and violent. Latin America has been considered an authoritarian region with rulers either military or civilian directed. 3 governments are important to stabilize countries with tension of nation crisis by eliminating the popular sector in the national politics. In Argentina the prevalence of authoritarian changed the principal lines of the former government in their social, economic, and political ideas. Argentina in the early 1930s was led by a “populist” government, which was the dominant national political coalition, then converted to an authoritarianism government with alternative economic strategies, and improved

One of these three was Argentina, a nation whose trusts of monetary salvation through money related integration with the world economy now lie in remnants. A second was Uruguay, likewise in a bad position. Just Chile resembles a long-term victory. Among the previous communist economies, genuine yield still stands beneath 1990 levels taking all things together be that as it may, four of them. Furthermore, destitution rate s stay higher than in 1990 even in Poland, obviously the best of the East European nations. In sub-Saharan Africa, results stay extreme disillusioning, and far more terrible than those got preceding the late 1970s.(Rodrik 2002)

Along with the most significant outcomes of the current crisis has been a sharp increase in the concern concerning national debt. Certainly, what nourishes debt accumulation is deficit expenditure. The 1996 era, and throughout 2001, show up as "golden years" from the time where distinct development was done in reducing accumulated debt2. Stuck between 2001 and 2007 that development was obliterated. Consequently, at the period of the crisis years 2007-2010, declining federal returns and attempts to fix the economy and financial system radically enlarged the debt to GDP ratio.

In recent years has been developing in Latin America and especially in Venezuela, an economic crisis of such magnitude that in this country the increase in poverty has grown dramatically, as a result of the decrease in sources

The alleged "lost decade" (the 1980s) in Latin America was portrayed by monstrous outside obligation and genuine macroeconomic issues—including high expansion

Buenos Aires formally declared independence from Spain on July 9, 1816. Argentines revere General Jose de San Martin, who campaigned in Argentina, Chile, and Peru, as the hero of their national independence. Following the defeat of the Spanish, centralist and federalist groups waged a lengthy conflict between themselves to determine

Over the past five years Argentina has suffered from one of the worst economic crises of its history. Mired by currency devaluation, diminished business confidence, contracting GDP, and a large current accounts deficit, the Argentine economy is, at very best, weak. Of its problems, Argentina’s international debt is of greatest concern. Servicing the debt has created a large financial burden for the Argentine government limiting the steps it has been able to take to stimulate economic growth. Since temporarily stopping payment on US$132 billion of debt in 2001 , Argentina has experienced some economic expansion, but this growth has come with large costs.

In addition, in the decade leading to 1994, the government saw an increasing expenditure for various projects in the country. The result was an increased reduction in the funds of the government. Another more important factor was that the country experienced hyperinflation from 1985 through 1993. This period was also characterized by significant increases in debt loads of the financial sector, as well as the low oil prices that also contributed to the weakening of the Mexican economy (Mathur, 18). One would argue that the Mexican

Budgetary policy is lacking of rigor due to the conflict among departments and the restricted import policy. Argentina’s policy remained a controversial conflict between executive department and congress. Because the Kirchner government enjoys a high popularity and controls the majority seats in congress, it passed some controversial legislation, and those actions bring criticism within the country. For instance, in 2012, Kirchner used her executive power to force congress to comply the federal budget bill that congress previously had more power to plan the budget bill than Kirchner’s Government (Fausto, 2010). The action weakened budget’s rationality because the government could budget without consulting the congress. As a result, government budget increased the deficits to 2.9% due to many exemptions and relying on customs duties in 2012 (Argentina: risk assessment, n.d.). Furthermore, more strictly import restrictions would deteriorate Argentina’s government budget’s deficits. More importantly, using administrative power (import restriction policy) to create an international trade surplus would become a time bomb in Argentina.

The external shocks had a big role in how the crisis occurred; the increases in interest rates are shown in the figures below found in “The Latin American Debt Crisis in Historical Perspective” by Jose A. Ocampo: