Argentina: Stuck in a Time Warp

Argentina is stuck in a time warp. Political and economic reforms over the past decade were supposed to lead the country out of chronic economic crisis. In April 1991 Economy Minister Domingo Cavallo linked the Argentine Peso to America’s dollar at a rate of one to one, kicking off an era of radical reform. Yet ten years later, the same Signor Cavallo is trying to fend off recession and government default.

Argentina’s cycle of crisis is perplexing. The past ten years saw industries and social security privatized and international trade liberalized. A chronic budget deficit was brought under control, infrastructure upgraded, and the banking sector strengthened.

All this, and currency stabilization, made for an economic boom in Argentina that lasted until 1995, as foreign investors poured money in. In that year, the economy was set back by Mexico’s financial crisis. Growth rebounded strongly until 1998. Since then, the economy has confronted prolonged recession, and the government is having trouble refinancing the public debt. Fears of a default abound.

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.

Subscribe

Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.

http://prosyn.org/bK2RfBH;

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated cookie policy and privacy policy.