Crisis of Argentina



Crisis of Argentina

Introduction

A large number of financial crisis are marketed in the nineteenth century. The attack of change rate mechanism (ERM) in 1992, the East Asian crisis in 1997, the crisis of Tequila in 1994, the default of Russia in 1998, and the devaluation crisis of Brazil in 1999. Most of the crisis spread from one country to other country and from one region to other country like a contagious disease. Argentina has faced huge economic crisis in the year 2001. In 2001, Argentina experienced an economic crisis of enormous political and social importance and of unpredictable consequences. It originated from various causes, the main application of poor economic policy, have a gigantic state apparatus (fertile breeding ground for corruption and compromises) and political instability for decades have affected the country, and have drawn the economic chaos that was at that moment. The country endured five years of recession and a debt load of 132,000 million dollars, which led to the default (Bazdresch &Werner, 2001, pp 24-33). Argentina holds an unenviable record holder. It is the only nation in recent history that has gone from being a wealthy nation (in 1913 was among the ten richest nations in the world) to poor (ranked 36 in the year 1998) (Argentina, 2010).

Discussion

Argentina in the 90s century (pre-crisis period) Marked the beginning of this period is the Carlos Menem was appointed president (at that time that President Raúl Alfonsin resigned as) in 1989. Soon after, Carlos Menem appointed Domingo Cavallo as the minister of finance. The duo helped the Argentine economy with an impressive growth rate in later years. In addition, the government of Carlos Menem also issued policies such as liberalization of trade, building a competitive economy with absolutely no government intervention, carried out the privatization of public national title company, etc (Argentina, 2010).

Domingo Cavallo

These policies were then immediately taking effect:

The amount of foreign currency "flowing" in Argentina continued to grow (with the foreign currency reserves at 17.8 billion to U.S. dollars), helped the government to pay old debts.

Inflation has declined substantially, sometimes almost to 0% (caused by currency board policy always helps quality control and make money in circulation Argentine inflation rate equals the U.S. rate of inflation)

GDP growth rate consistently achieved high levels (above 6% / year), except for 1995 was negative 2.8% growth.

Argentina people's living standards are improving. They are able to pay for foreign travel, shopping electronics and imported goods, the bank loan with low interest rates.

However, the growth of the Argentine economy cannot sustain for long. With the errors in the macro policy and with the government too weak management, Argentina finally falling into a debt crisis created by yourself. Argentina crisis The starting time of this period is 1999, the year the Argentine economy began to have signs of leveling off and decline. However, we need to return to the time before 1999. That was in July 1997, the East Asian crisis ...