Economy : economic recovery after the crisis of 2001 

Economy : economic recovery after the crisis of 2001

Argentina entered into a new period of fragile growth.

1990s model

Elected in 1989, president Carlos Menem implemented a neo-liberal model of economic policies that consisted in an extensive plan of privatizations of state organizations and the liberization of inward foreign investment. The peso has been pegged to the dollar, which helped contained inflation after several years of hyper-inflation (4,923% en 1989). Growth took place, and people were talking of the “Argentine miracle” after a “lost decade,” that of the 1980s.

Argentine Wheat

However, this policy involved some adverse effects: the increase in Argentine product prices, a growth of imports, and a decrease in the trade deficit. The bunch of privatizations has surrendered entire sectors of the economy to foreign hands, and speculation was promoted. Public indebtness increased. Corruption scandals multiplied.

In the second half of the ‘1990s, Argentine also suffered the impact of several crisis, especially those of Mexico and Brazil. The Brazilian neighbor, a member of Mercosur, devaluated and became more competitive. By the end of 1990, Argentina, which was not living as per that it could really afford, was running out of strength. The International Monetary Fund, which supported Menem´s model, granted a credit to finance the Argentine economy that was starting a recession period.

2001 crisis

After the budgetary excessive increase, the IMF denied its help in 2001. Assets started being taken out of the country. In order to avoid the collapse of the banking sector, Economy Minister Domingo Cavallo implemented the so-called “corralito”: this measure froze banking deposits to prevent the Argentine people from withdrawing their funds to get dollars. December witnessed: general strikes, loots, demonstrations with “cacerolazos” (anging pots and pans), and all the people loudly requesting “all politicians to resign now”.Thousand of Argentines, among them the most qualified, emigrated abroad. Both the economy and the social situation have gone bankrupt.

Argentine's oil

President Fernando de la Rúa, who succeeded Menem in 1999, took a helicopter to run away from the presidential palace. Interim president Adolfo Rodríguez Saá only managed to stay in office for seven days.
The social pressure was such that he resigned on December 31, 2001. His only decision was to declared the country insolvent. He was replaced by Eduardo Duhalde, who immediately implemented an emergency plan, put and end to convertibility, devaluated the peso at the beginning of 2002. The exchange rate increased abruptly. The middle class would become poorer, and the poor class would go to extreme poverty. Foreign groups left the country. The recession was climbing up to 11%.

A fragile economic recovery

In May 2003, Peronist Néstor Kirchner was elected president of the Argentine Republic. The devaluation, that had adjusted the balance of trade, started showing positive effects. The Argentine economy was experiencing a growth rate of about 8% since 2003, after a GNP decrease of 19% from 1999 to 2001. The reactivation was as amazing as the crisis itself.

Derision in Buenos Aires

When Mauricio Macri is elected as a president in 2016, the unemployment and poverty, though still high, have decreased. He takes measures to put an end to the debt issue, that exclude Argentine from international financial market since its bankruptcy in 2001. He also tries to cut down public expenses, stabilize the peso and stop the protectionist measures of the previous governement. That liberal strategy has a strong social impact. But Argentina has certain advantages: great agricultural and natural resources, high industrial potential, qualified labor force, and outstanding scientific and technological training. Reforms still need to be implemented to undergo its main weaknesses: the permanent risk of inflation and the lack of energy.