The Argentine Crisis

This site hosts two documents. The first paper, "Argentina's Economy: Why an economy with such potential is performing so poorly, and policy proposals for recovery," has been researched and written since the crisis exploded in December of last year. It is an extensive document detailing Argentina's economic history- what led to the current crisis, and what should be done.

The second, "The Necessity for International Aid to Salvage Argentina's Banking System," was written on April 24, 2002 in response to the government's closing of Argentine banks. It is a short paper which urges the international community, and the US government in particular, to send aid to Argentina's failed banks. It is argued that without aid the banks and financial markets, which have been closed for several days now, will completely fail. This failure of an entire country's financial system will have negative repercussions on the rest of the world.

Argentina's Economy
Why an economy with such potential is performing so poorly,
and policy proposals for recovery

This paper examines the economic history of Argentina in an attempt to understand the events that led to the current crisis. It concludes that the grave recession sprang not from irresponsible government spending (as is often argued), but rather from the country's inability to adjust to external shocks, and its history of debt accumulation that was exacerbated in the 1990s by the overvalued exchange rate and rising interest payments.

The paper argues that the reestablishment of International Monetary Fund aid to Argentina is both justified and necessary. Furthermore, the demands of the IMF that Argentina decrease government spending and cut jobs is poor policy; this would just worsen the recession. It also argues that within the broader context of sound fiscal and monetary policy, breaking up the foreign-owned monopolies created by privatizations is an important tool for stimulating Argentina's economic growth.

  • View/Download the paper in PDF format (recommended)
  • View/Download the paper in Word XP format
  • View/Download the paper in earlier versions of Word

  • NOTE: Spanish translations coming soon.
    The Necessity for International Aid to Salvage Argentina's Banking System

    Argentina is struggling through the effects of a four year recession, unemployment of twenty-five percent, poverty of almost fifty percent, and intense political and economic turmoil. The IMF predicts that GDP will shrink by 10-15% this year. To make matters even more bleak, on April 19th, 2002, the Argentine government closed all of its banks- the citizens of Argentina have been robbed of access to their own savings, with no clear exit to this crisis in sight.

    The failure of the financial system of Latin America's third largest economy would be devastating not only to Argentina, but also to the region and the entire international financial structure. So far, the IMF, the United States government, and the rest of the world have seemed willing to allow the failure of the Argentine economy. However, to permit this next round of catastrophe would be not only unjustifiable on humanitarian grounds, but also extremely unwise considering the interconnectedness of the global economy and the continuing potential for contagion effects.

    In the final analysis, the potentially anarchic consequences of a complete economic degeneration of the Argentine system are incompatible with the US government's stated desire to foster stability and democracy in the hemisphere. The negative economic and geopolitical effects of a complete meltdown of the Argentine government and economy pose enough of a threat to overall US goals of hemispheric integration and cooperation as to justify a significant effort on the part of the United States and international community to prevent this negative outcome. This effort would constitute an investment in hemispheric security, democracy, international goodwill, and the economic health of the Americas.

  • View/Download the paper in PDF format
  • View/Download the paper in Word format
  • La necesidad de ayuda internacional para salvar el sistema bancario argentino

    La Argentina se encuentra luchando contra los efectos de una recesión que lleva ya cuatro años, veinticinco por ciento de desempleo, un índice de pobreza que roza el cincuenta por ciento, y una intensa inestabilidad política y económica. Las predicciones del FMI dan cuenta de una reducción del PBI de entre un 10 y un 15 por ciento para este año. Para empeorar aún más el panorama, el gobierno argentino decidió el 19 de abril de 2002 cerrar todos los bancos, privando a sus ciudadanos del acceso a sus ahorros, y sin vislumbrar una salida clara a esta crisis.

    La caída del sistema financiero de la tercera economía de América Latina provocaría un efecto devastador, no solo a la Argentina, sino a la región y a toda la estructura financiera internacional. Hasta el momento, tanto el FMI, como el gobierno de los Estados Unidos, y el resto de la comunidad internacional han permitido, aparentemente, el fracaso de la economía argentina. No obstante, sería no solo injustificable en términos humanitarios permitir esta segunda catástrofe, sino también muy poco prudente teniendo en cuenta la interconexión de la economía global y el constante riesgo de contagio a otras naciones.

    A manera de análisis final, las potenciales consecuencias anárquicas de una completa degeneración económica del sistema argentino son incompatibles con el deseo expreso de los Estados Unidos de fomentar la estabilidad y la democracia en el hemisferio. Los efectos económicos y geopolíticos negativos de un desmoronamiento total del gobierno y la economía argentinos representan una amenaza a los objetivos estadounidenses de alcanzar una integración y cooperación hemisférica lo suficientemente importante como para justificar un esfuerzo significativo por parte de los Estados Unidos y de la comunidad internacional para evitar estos resultados negativos. Dicho esfuerzo constituiría una inversión en la seguridad, la democracia, el bienestar internacional, y la salud económica del continente americano.

  • El trabajo en formato PDF
  • El trabajo en formato de Word
  • Matt Hedges
    April 2002