The Argentine Financial Crisis



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Code : ECC0001

Year :
2004

Industry : General Business

Region : Argentina

Teaching Note:Not Available

Structured Assignment : Not Available

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Abstract: Before World War II, Argentina was one of the most prosperous countries in the world in terms of agricultural and energy resources. Since the 1940s, its economic growth had declined as it changed its financial and trade policies. In 1991, the Convertibility Law was introduced through which the exchange rate of the Argentine peso was fixed at one peso per US dollar. Between 1991 and 1994, Argentina's economy grew and its deficits decreased. But the devaluation of the Mexican peso in 1994 and the devaluation of the Brazilian real in 1998 shook the confidence of the investors. The government took many measures to control the economic situation, but the country's deficits continued to increase. In January 2002, the Currency Board arrangement was abandoned and the peso was devalued. During 2002 and 2003, Argentina showed a trade surplus in its balance of payments.

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Pedagogical Objectives:

  • To discuss the economic challenges that Argentina is facing, in the light of huge external debts.
    Keywords : Economic Crisis Case Study, Argentine financial crisis, Convertibility Law, Economic stability, Devaluation of the Mexican peso, Currency board, President Eduardo Duhalde, Balance of payments, Import substitution policy, Free Trade Agreement, Financial rescue package, Domingo Cavallo, Inter-American Development Bank, Current account deficits, Zero deficit law.

    Contents :
    » Background
    » The Convertibility Law
    » Beginning of the Crisis
    » Devaluation and After


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