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Argentinian Economic Crisis

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Argentinian Economic Crisis

Post  Hayz.. on Sun Jan 13, 2013 5:19 pm

In the years of 1998 to 2002 the country of Argentina suffered an economic collapse which until this day they have still yet to recover from. In the 1970’s and 1980’s Argentina was in a state of turmoil. The militant government was swamped with debt because of projects and the Falklands war. However in 1989 after democracy was restored, president Carlos Menem changed all that. He took the country in a better direction, and slowly the Argentinian economy grew. The Argentinians even became wealthy enough to travel.
Now Argentinia’s exported goods were sent to mostly two places, namely European countries and Brazil. In the 1990’s Argentina inflation was skyrocketing. In order to counter-act this Domingo Cavallo economy minister pegged the Argentinian peso to one dollar. This meant that the country’s currency became more expensive to European countries and Brazil.
But wait a second, isn’t that a good thing?
Not necessarily, seeing as how the increase in price actually discouraged those countries which were where Argentina sold 53% if its exported goods. This meant that Argentina’s export industry collapsed. But that isn’t the end of it. Because of the increase in the value of its currency, Argentina actually increased its import. Now since it was importing more than it was exporting, it did not profit and actually lost money ultimately leading to Argentina’s economic crisis
There were actions that could have been taken to prevent the collapse. The most obvious one being removing the peg in order to reboot the export business of Argentina. This was done, but it was too late.
http://wine-republic.com/mendoza/culture/178-the-origins-of-crisis
http://news.bbc.co.uk/2/hi/business/1721061.stm

Hayz..

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Join date : 2013-01-13

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