Analysis of Argentinean Debt Crisis: IMF and Government Actions Essay

The Argentina debt affected the country between the late 90’s to the early 2000’s and can be attributed to misdiagnosis and ineffective policy. During this time the IMF and Argetina’s government worked closely together. Previous to the crisis Argentina had been celebrated for its economic policies and growth. The government worked to put in place conservative economic policy, including the privatization of companies, looser trade regulations, among other conservative changes. Economic growth in that period appears to have been in large part the result of increasing amount of international debt. Before the end of the 90’s, things began to fall apart. The crisis can be traced back to the 80’s, where the country experienced extreme hyperinflation. The currency inflated at over 5000% this was during the presidency of Carlos Menem and, his finance minister, Domingo Cavallo who attempted three ways to limit inflation. The first was a stabilization act with the backing of a large private firm; the second attempt was to buy up certificates of deposit into government bonds (Nataraj & Sahoo 2003). After the first two methods failed the third option was introduced, this was to peg the argentine peso to the US dollar. To fixate the exchange rate, the currency board kept up dollar reserves, and could not change the supply of pesos without the same change in dollars as well (Sergio L., Eduardo, & Augusto 2003). By the mid-1990s, inflation had vanished but the government were unable to alter many of the concretionary policies that stabilized inflation yet hurt growth. When debt crisis began to develop, the government could not exp and the money supply as a means of stimulating the economy, resulting in stagflation in the 90’s (Macewen 200... ...e World Bank. IMF. The IMF and Argentina, 1991–2001. Rep. International Monetary Fund: Independent Evaluation Office, 2004. Web. 24 Apr. 2012. . Krueger, Anne. "Crisis Prevention and Resolution: Lessons from Argentina." Speech. "The Argentina Crisis" Cambridge, Cambridge. 17 July 2002. IMF. Web. 23 Apr. 2012. . Macewan, Arthur. "Economic Debacle In Argentina: The IMF Strikes Again." Foreign Policy in Focus Jan. 2002, Latin America & Caribbean sec. Print. Nataraj, Geethanjali, and Pravakar Sahoo. "Argentina's Crisis: Causes and Consequences." Economic and Political Weekly 38.18 (2003). Print. Paddock, John V. "IMF Policy and the Argentine Crisis." The University of Miami Inter-American Law Review 34.1 (2003): 155-87. Print.