y nonexistent (Garcia 39).
Menem did not waste any time in implementing economic reforms. Shortly after taking office, the government announced a 90-day wage and price freeze designed to halt the hyperinflation and devalued the nation's currency (the austral) by 116 percent against the US dollar. In addition, many state-run companies, renown for the inefficiency, were privatized, and government subsidies ended. In addition, all workers were awarded a bonus of 8,000 australes to help them absorb the unavoidable price increases associated with the reforms (Garcia 39).
Within a few weeks, some effect of these reforms was already being felt within the economy: the black market rate for dollars fell below the official exchange rate for the first time since 1985, demonstrating a strong level of confidence for the economic reforms. At the same time, bankers and investors were favorably impressed by the commitment of the new government to the point that the stock exchange increased 6.5 percent in a single day, and interest rates dropped 44 points to 10 percent. Despite the government's intentions, the price reforms did not have entirely the effect that was intended. The announced end of government subsidies for gasoline pushed prices up more than 670 percent, and commuters throughout the nation went to subway and train stations to stock up on tokens, which increased more than 350 percent (Garcia 39).
A convertibility plan went into effect in April 1991 which required a sustainable fiscal surplus, a restrictive monetary policy and a fixed change rate; the exchange rate was backed nearly entirely by foreign exchange holdings of the Central Bank. These measures were intended to boost private sector confidence. The result was sustained economic growth in 1991 with an increase in GDP of approximately four percent; the industrial sector saw an increase of more than 10 percent. This was the first year since 1987 when both GDP and ...