Thread: The 99-02 currency crisis in Argentina

http://en.wikipedia.org/wiki/Argenti...2%80%932002%29

Could you make ends meet, if your effective buying power was cut in half while your wages stayed the same?

Argentine economic crisis (1999–2002)

The Argentine economic crisis was a financial situation that affected Argentina's economy during the late 1990s and early 2000s. Macroeconomically speaking, the critical period started with the decrease of real GDP in 1999 and ended in 2002 with the return to GDP growth, but the origins of the collapse of Argentina's economy, and their effects on the population, can be found in action before. As of 2005, arguably the crisis was over, though many challenges remain for the country.
Origins

Argentina was subject to military dictatorship (alternating with weak, short-lived democratic governments) for many years, that resulted in a number of significant economic problems. During the National Reorganization Process (1976–1983) huge debt was acquired for money that was later lost in different unfinished projects, the Falklands War, and the state's takeover of private debts; in this period, a neoliberal economic platform was introduced. By the end of the military government the country's industries were severely affected and unemployment, calculated at 18% (though official figures claimed 5%), was at its highest point since the depression.

In 1983, democracy in the country was restored with the election of president Raúl AlfonsÃ*n. The new government's plans included stabilizing Argentina's economy including the creation of a new currency (the Austral, first of its kind not to carry the word peso as part of its name), for which new loans were required. The state eventually became unable to pay the interest of this debt and confidence in the Austral collapsed. Inflation, which had been held to 10 to 20% a month, spiraled out of control. In July 1989, Argentina's inflation reached 200% that month alone, topping 5,000% for the year. During the Alfonsin years, unemployment did not substantially increase; but, real wages fell by almost half (to the lowest level in fifty years). Amid riots, President AlfonsÃ*n resigned five months before ending his term, and Carlos Menem, who was already President-elect, took office.

Menem, who had campaigned on a populist platform, had a lukewarm start regarding the country's economy under ministers Miguel �ngel Roig (who died after a few days in office) and Antonio Erman González, but then went back on his promises and began a plan, aligned on the economically liberal Washington consensus, of trade liberalisation, labor deregulation and privatisation of state companies which were the source of "much spending" (such as those providing the telephone, energy and water services).