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THE FINANCIAL CRISIS IN ARGENTINA

AN ECONOMIC ANALYSIS OF THE FINANCIAL CRISIS IN ARGENTINA

The financial crisis in Argentina may appear to a phenomenon of current origin. In fact, however, Argentina has been a state of financial crisis for more than 20 years, although the intensity of the problems waxed and waned from time to time. There is a tendency among analysts to treat the immediate problems experienced by Argentina as of they are manifestations of something new as of yesterday, as of last month, or of the past year. The immediate financial problems being experienced by Argentina, however, can only be understood when they are considered in a broader temporal context (Alvarez-Plata & Schrooten, 2003).

Argentina implemented what some observers described as an unprecedented and successful economic restructuring based on macroeconomic stabilization, trade liberalization, privatization, and public administrative reform in 1989. The 1991 Convertibility Law created a quasi currency board that initially was successful in maintaining price stability. The law linked the value of the peso directly to the value of the United States dollar at a one-to-one ratio. The Argentinean government privatized most state-controlled companies, opened the economy to foreign trade and investment, improved tax collection, and created private pension and workers compensation systems. The privatization initiative and opening of the economy were elements of a plan proposed by the International Monetary Fund (IMF) and strongly supported by IMF's dominant member state, the United States (Newman & Arcentales, 2004).

Argentina experienced a boom in economic growth beginning in the early-1990s. Following a recession that lasted through most of 1995 and 1996, Argentina's real GDP growth reached eight-percent in 1997 higher than the average of six-percent for the 1991-1997 period (Greithner, 2003).

Structural reforms, together with monetary stability, resulted in major new i...

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THE FINANCIAL CRISIS IN ARGENTINA. (1969, December 31). In LotsofEssays.com. Retrieved 20:25, October 31, 2014, from http://www.lotsofessays.com/viewpaper/1708873.html