Argentina crisis

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The term Argentina crisis denotes the last major economic crisis in Argentina between 1998 and 2002, the effects of which were felt until 2005.

The two high points of the crisis were a severe recession in 1998/99 and the collapse of the financial system in 2001/02, which led to the resignation of President Fernando de la Rúa on December 21, 2001 , followed by a period of great political instability. During the time of the crisis, Argentina's gross domestic product fell by a total of 21%. The social consequences were devastating: at the height of the crisis (mid-2002) the poverty rate was 57% and the unemployment rate 23%. The country's economy recovered again from mid-2002 and grew again from 2003 (2003: 8.9%, 2004: 8.8%).

The share of national debt in foreign exchange accounted for 92% of GDP in 2002, in 2011 it was only 9.6%.

History and causes of the crisis

Argentina, which had heard in the first half of the 20th century one of the richest countries in the world (1913 was the per capita income on a par with France and Germany), had since the dismissal of Juan Perón a politically in 1955 as also went through economically unstable phase. There were frequent changes of government, which were also reflected in an economic policy with strongly changing ideologies. The result were numerous economic crises, which in turn led to short-term stabilization programs, which, however, usually exacerbated the unstable situation and caused high social costs (see external effect ), in particular due to the high inflation rate of the local currency, the peso . It was and is often spoken of a slow descent of Argentina from the first to the third world .

Many mistakes in the economic policy of this phase were the foundation for the crisis at the turn of the millennium. In recent Argentine history, the attitude has changed several times as to whether one should submit to foreign law or not. In 1976, the military dictatorship permitted the issue of Argentine government bonds under the law of New York State with 21,305 law. A special contract for the bonds, the "Fiscal Agency Agreement", was drawn up by American lawyers for the Argentines. It was determined that the repayment would be made through a New York trustee. It was included in the contract that all bonds would be serviced equally . It was decided not to allow the conditions to be changed by a qualified majority. Such conditions later became known as the Collective Action Clause . That mistake would make itself felt in the 2000s when not all creditors agreed to a haircut.

In 1983 - after the brief Falklands War against Great Britain - the political instability had been overcome by the final establishment of democracy; the economic instability - high inflation rates and the resulting tough austerity programs like the Austral plan - lasted until 1991, when Argentina pegged its currency to the US dollar with a fixed exchange rate and was able to stop inflation for the time being. After just a few years, the first after-effects of this monetarist stabilization program became apparent : Argentine products became more expensive on the world market ; the competitiveness sank; there was a negative trade balance and a sharp increase in foreign debt .

For some mass media, the culprits for the crisis were clear early on (namely the ex-presidents Carlos Menem and Fernando de la Rúa, as well as the Minister for Economic Affairs, Domingo Cavallo ); in fact, there arguably several complex factors at work. The most important factors are:

High debt rate

During the military dictatorship (1976-1983), Argentina's debt rose rapidly due to a negative trade balance, speculation and capital flight and was only able to stabilize for a short time thereafter. During Menem's reign , the debt ratio rose moderately but steadily to around 55% of the country's gross national product due to the almost always negative trade balance . Between 1996 and 1999 alone, national debt rose by 36%.

Overvaluation of the peso against the US dollar

In 1991 the then Minister of Economic Affairs Domingo Cavallo initially pegged the Austral , then, after its introduction, the peso to the US dollar . The fixed exchange rate was 10,000 australs per US dollar or 1 peso per US dollar. This measure initially led to a successful fall in inflation, which had reached three-digit values ​​per month during the hyperinflationary crisis of 1989. Nevertheless, one to two-digit residual inflation remained, which made Argentine exports more expensive on the world market. In the second half of the 1990s in particular, this led to an import glut and a negative trade balance , which had to be offset by new borrowing (see budget balance ). Today there is criticism that Argentina should have replaced the 1: 1 parity before 1998 with a flexible exchange rate mechanism , which would probably not have made the crisis so drastic. This effect was exacerbated by the strong dollar at the end of the 1990s.

Consequences of other South American crises

In 1995 Mexico devalued its currency after the so-called tequila crisis , the same happened in 1998 in Brazil . This made the products of these countries significantly cheaper on the world market, with devastating consequences for the export-oriented Argentine economic sectors. In addition, some Argentine companies and international corporations then relocated their production to Brazil, which further increased the unemployment rate.

Lack of confidence in the financial system

Because of the checkered history of the Argentine economy, Argentines had become suspicious of the banking system; the consumer confidence index fell by 20% between 1998 and 2001. This led to panic reactions - massive dollar purchases and capital flight (relocation of capital abroad) - especially after the new banking law at the end of 2001 and the subsequent devaluation in 2002, which set the economy back even further.

Internationally, too, trust in the Argentine economy sank rapidly around the turn of the millennium. The country risk premium , which indicates how high the interest rates for bonds in a country are compared to the standard interest rate in the USA, rose steadily from 2000 onwards, from October 10, 2001 it was 1916 points, which meant 19.16% additional interest , the tallest in the world. In fact, this meant that Argentina was denied access to the regular foreign capital market and was dependent on loans from the International Monetary Fund (IMF) . In 2002 the premium rose to over 6,000 points, and it wasn't until 2005 that the situation eased.

Denationalization of the economy

A wave of privatization at the beginning of the 1990s, in which many state-owned companies were sometimes sold below their value, resulted in large parts of the Argentine economy becoming dependent on foreign countries. This made the country vulnerable to speculation and capital flight , a phenomenon that contributed significantly to the banking crisis in late 2001.

History of the crisis

The 1998/99 recession and the 2000 stagnation

In 1997 and 1998 Brazil (a neighboring country of Argentina) fell into a deep crisis. Brazil covered 47% of the continent and had 195 million inhabitants. The Brazilian real , introduced in 1994 after hyperinflation , was initially controlled by the Brazilian central bank. In January 1999 there was a currency crisis ; the rate of the real was released and from then on it was determined in free trade ( convertibility ). It fell to about half its previous value. The effects on Argentina soon became apparent. Brazil was Argentina's most important economic partner at the time (both countries are part of the Mercosur economic alliance ); the Brazilian crisis had a major negative impact on Argentine foreign trade. The devaluation gave Brazil a decisive competitive advantage over Argentina.

As a result, imports from Brazil increased. In addition, Argentine products were replaced by Brazilian products on the world market and many companies relocated their production to Brazil. Finally, investments from abroad decreased due to poor forecasts for the entire region.

These circumstances resulted in a 4% recession in 1999 . In 2000, the economy could not recover from the crisis, it stagnated despite a billion- dollar loan ( blindaje translation: armor called) from the IMF and private banks.

Unemployment increased as a result of the recession. This led to more and more protests and demonstrations. The protests were soon centralized and various protest organizations sprang up. The protesters called themselves piqueteros and after 2001 temporarily became an important power factor in Argentine politics.

Likewise, the number of underemployed people rose as an effect, and thus especially the number of salaried employees in the informal economy . The cartoneros , people who looked for recyclable materials, mostly paper and cardboard, in the garbage and then sold them, got a lot of attention in the media . Despite this rebirth of recycling, there were only local initiatives to separate waste, in some cities such as Córdoba , however, the Cartoneros were merged in cooperatives and permanently commissioned by the city with recycling, so that the initially very informal and sometimes mafia-like activity in a more regulated framework could be managed.

A special phenomenon of this phase was the introduction of debt bonds in several provinces and also by the nation state (their bonds were called LECOP ). These were used to pay state employees and civil servants - in some cases over 50% of the wage volume. They looked like banknotes and were accepted as a form of payment in most stores, although there was often an extra charge. At the height of the 2001/02 crisis, they determined a considerable part of Argentina's payment transactions.

Furthermore, at this time, many exchange rings were created , some of which pursued a free-economic ideology (interest-free economy), but mostly only served the exchange of food and services in order to compensate for falling salaries. They became a real mass phenomenon from 2001, almost every district of every city had its own barter ring at that time. The umbrella organization Red Argentina de Trueque issued its own currency, the Crédito , in 2001 , which could even be partially used to buy real estate.

Devaluation Rumors and the Brief Cavallo Era (January to November 2001)

Because of the stagnation of the economy and the unchanged negative trade balance, the voices calling for a devaluation became louder. The government countered this with an energetic no, as they were afraid of falling victim to capital flight and speculative attacks . In retrospect, many critics state that an orderly, planned devaluation would have significantly weakened the crisis.

Domingo Cavallo , who was promoted to the post of economics minister after several worn out predecessors , had a plan to get out of the 1: 1 peg to the dollar in an orderly manner. This link was to be replaced by a complicated mechanism that would link the value of the peso to both the US dollar and the much lower euro . Instead of being pegged to a currency, the peso should have been pegged to a basket of currencies . This was initially introduced for foreign trade while maintaining 1: 1 parity for other financial transactions, which meant a devaluation of 5–8%. According to the new mechanism, 50% of the value of the peso is made up of the value of the euro and 50% of the value of the US dollar. This meant, for example:

  • if a euro is worth 0.83 US dollars, that the value of the peso is 0.5 * 0.83 + 0.5 * 1 = 0.915 per US dollar;
  • if a euro is worth 1.08 US dollars, that the value of the peso is 0.5 * 1.08 + 0.5 * 1 = 1.04 per US dollar;

This new exchange rate should have been introduced for all financial transactions when the exchange rate of the euro to the US dollar is 1, i.e. H. 1 euro = 1 US dollar = 1 peso. However, this would only have brought real benefits if the euro - which was very low at the time - had reached parity with the US dollar and then fell again. Today it is clear that the euro has continued to rise after reaching parity. The new exchange rate regime would only have brought further disadvantages for the Argentine economy, if one considers that the majority of Argentina's foreign trade is done with dollar countries and not with euro countries. That is why critics of the Cavallo plan had suggested that the Brazilian real should also be included in the currency basket, since most of Argentina's foreign trade is conducted with Brazil.

In mid-2001 it looked like the country's economy could get away with a black eye, with economic growth slipping into a slight plus.

Perhaps the ultimate trigger for the further decline could have been the global economic depression after September 11, 2001 , which caused investor confidence in the markets around the world and in crisis countries such as Argentina in particular to wane.

Capital flight, banking chaos, devaluation and changing presidencies (November 2001 to April 2002)

When Cavallo said at the end of November 2001 that the budget target set by the IMF would not be achieved, this led the IMF to refuse to transfer a planned USD 1.25 billion tranche to Argentina. This terrible news led to a drastic loss of confidence in the state and thus to a rapid flight of capital that plunged the banking system into a deep crisis. To prevent total chaos, Cavallo introduced the so-called corralito in early December , which included an upper limit of 250 pesos per week for withdrawing cash from checking accounts . The background was to prevent the currency from being exchanged for dollars, as otherwise the banking system would no longer have been able to pay out current and savings accounts .

The Corralito, however, exacerbated the crisis of confidence in the economy at home and abroad and aroused the anger of the middle class, which first manifested itself in a general strike on December 13 and finally on December 19 and 20, 2001 in a series of massive, sometimes violent demonstrations ( Cacerolazo ) with a total of 28 dead. This climate led to the resignation of Domingo Cavallo and, the next day, Fernando de la Rúa.

The post of President was temporarily taken over by the Peronist Ramón Puerta , the President of the Argentine Senate , and two days later by the Peronist Adolfo Rodríguez Saá , who had been governor of the province of San Luis up to that point . His term of office lasted only five days. The trigger for his resignation on December 30, 2001 was on the one hand the refusal of some provincial governors to support him in his economic course, which among other things a radical rationalization of the state as well as the creation of a second currency (the so-called Argentino , whose exchange rate moves freely against the dollar should), as well as the growing resentment of the population, which was expressed in further large protest rallies. The most important occurrence in Saá's presidency was the declaration of insolvency ( national bankruptcy ) against the country's creditors; a decision that was initially upheld by his successors.

the development of the exchange rate of the Argentine peso to the US dollar from the beginning of December 2001 to October 2004

After the President of the Chamber of Deputies, Eduardo Camaño , had temporarily held the office of President in accordance with the Argentine Constitution , the Peronist Eduardo Duhalde was appointed President on January 1, 2002 , and he took office the following day. He was the fifth president of Argentina in 13 days. The economists around him clearly decided in favor of devaluing the peso. First of all, the opening of the banks across the country was banned for several days in order to prevent panic dollar purchases. The extent of the devaluation was set at 28% (1.40 Peso = 1 dollar), but this “official” rate only applied to foreign trade. In domestic trade, the rate was allowed to fluctuate freely ("free dollar rate").

The consequences of the devaluation were sobering. As a result of massive panic buying, the “free dollar rate” rose to over two pesos within a few days. This prompted the government to abolish the "official" course, which resulted in further panic buying and pushed the course higher.

In a dilemma, especially because of the fatal consequences of the devaluation of the peso for the banks, a rigid measure was decided that soon became known as Corralón . It consisted of converting all accounts above a certain limit into fixed income savings books with return dates stretched until 2010. The situation of the dollar accounts introduced under Menem's reign turned out to be particularly problematic, as they had multiplied in value. So it was decided to regard dollar accounts as peso accounts with a value of 1 to 1.40 and only to return them over the course of several months, and in the case of high values ​​even several years. On the other hand, debts could initially be repaid at a rate of 1: 1. This so-called asymmetrical pesification occupied the Argentine courts for a long time, the result was that a new bond program called Plan BODEN was introduced and the debt was converted at a ratio of 1: 1.4 plus an inflation index, the CER . From 2003, the accounts affected by the Corralón were paid back early due to the better economic situation .

All of these measures led to a further loss of confidence, so that in April 2002 the exchange rate of the dollar soon rose to around 3.50 pesos. However, the central bank was soon able to lower the rate to around Peso 2.80 by buying pesos.

Economic Uncertainty (April to August 2002)

To calm the population, welfare payments of 100 and later 150 pesos were introduced for unemployed heads of families (the so-called Plan Jefes y Jefas de Hogar ), but in view of inflation this was more of a symbolic amount. The dollar exchange rate in pesos fluctuated further and rose again to almost 4 pesos in the middle of the year, where however it stagnated due to massive support measures by the central bank .

The situation of the banks created further uncertainty. In the end, the Plan Bonex II or Plan BODEN prevailed, which converted the accounts in dollars into a wide range of fixed-income securities with a term of 5 to 10 years (Boden) .

The Corralón made at this time that large sections of the economy, such as the real estate market and the automotive industry, have been stalled normal. In the first few months of 2002 there was a recession of 12%.

The end of the crisis and a tentative recovery (August 2002 to July 2003)

The Argentine MERVAL share index has been
rising steadily since August 2002 . The marked point marks the beginning of the unrest towards the end of the De la Rúa presidency (December 19, 2001).
President Néstor Kirchner

After the middle of the year, there were signs of an economic recovery for the first time. The dollar exchange rate stabilized at a level between 3.60 and 3.70 pesos, which brought a little more security into the plans of the companies.

At the end of 2002 the economy finally picked up again, the positive sides of the devaluation (more competitive prices on the world market) were clearly noticeable. At the beginning of 2003, the Corralito, the Corralón and, in the course of the year, most of the substitute currencies based on debt bonds (for example LECOP) were abolished, which significantly boosted consumption again. Nevertheless, President Duhalde announced new elections in order to restore legitimacy to the state institutions.

In May 2003 Néstor Kirchner , who belongs to the left wing of the Peronist Party , won the presidential election in the second round because his opponent Carlos Menem did not run for the runoff election. He created a “doer image” with several campaigns, but essentially kept the economic course of his predecessor. Economic growth remained constant and reached 8.9% in 2003.

Further development

Since the end of 2003 / beginning of 2004 there have been energy bottlenecks again and again, which are due to the relatively strong economic growth, the very high crude oil prices and a lack of investment in the energy infrastructure.

Another conflict in the post-crisis period was the long unresolved issue of Argentine bonds that were no longer serviced by the state. Much of Argentina's debt is claimed from private creditors. Since Argentina would not have been able to meet the payments to private creditors after the devaluation in 2002 without an extreme austerity program, plans were drawn up for a debt rescheduling offer ( canje ). Argentina, however, always paid its obligations to the multilateral creditors such as the World Bank, IMF, etc. in full (albeit in some cases with a time lag).

In 2004, several proposals were made to the creditors' representatives , which provided for a capital cut of 75%, later 65%. Initially, they met with general rejection, particularly from foreign creditors, who claim more than 55% of the debt volume, and also clouded Argentina's relationship with the IMF . However, through several diplomatic missions Argentina succeeded in convincing most of the groups of creditors, and until the end there was resistance from the German and above all from the Italian creditors.

The debt rescheduling process was originally supposed to begin at the end of November 2004, but only started after delays on January 12, 2005 and provided for a capital cut of only 50% on average, which was achieved through the introduction of three new bonds, from which creditors were subject to restrictions could choose. The past due interest on non-performing bonds, which had accrued since 2002, was not recognized by Argentina, contrary to the conditions, so that the actual loss for Argentina's former lenders is significantly higher than officially stated.

The three bond types are:

  • the bono par without a capital cut
  • the Bono Cuasi Par with a capital cut of 30%
  • the Bono de Descuento with a capital cut of 70%

What all three have in common is that they entail a significant deterioration in the legal position of the creditors. Among other things, in contrast to the earlier bonds, there is no longer a foreign place of jurisdiction if Argentina should no longer service its debts, which means that lawsuits will then have to be brought under the Argentine legal system and place of jurisdiction.

Subscribed were Bono Par and Bono Cuasi Par , which were limited to 15 billion US dollars ( Par ) and 23.4 billion US dollars ( Cuasi Par ), respectively. Investors who subscribed above this quota were awarded the Bono de Descuento .

While the Bono Par only offers low interest rates and a very long term, the Bono de Descuento has the highest interest rate and the shortest term. Furthermore, some of the bonds are linked to the inflation rate, but are calculated in pesos and no longer in US dollars . According to the Clarín newspaper , this was around 40% of the bonds after the end of the rescheduling offer.

The then Argentine Economy Minister Roberto Lavagna stressed several times that this would be the last and only offer Argentina would make to its creditors. The first group to join the offer was the Argentine creditors, the majority of whom held debt through the Argentine Pension Fund ( AFJP ).

In mid-February 2005 the negotiations were declared closed. By the end of the rescheduling period on February 25, 2005, 76.15% of the creditors had accepted the offer.

After the end of the rescheduling offer, there were a few voices, both from groups of creditors and from the IMF, who called for a renewed rescheduling offer. However, the Argentine government stressed several times that it would not comply with these demands.

On August 3, 2012 - and thus ten years after the national bankruptcy - President Cristina Fernández de Kirchner announced to repay the rest of the debt stemming from this national bankruptcy - with only a special domestic bond issue.

The first years after the crisis

The growth in Argentina has remained steadily high since mid-2003. This economic growth can mainly be explained by the positive successes of the devaluation. The Argentine industry has been strengthened by exports and import substitution. From 2004 the business with imported goods increased again strongly, so the economic situation in Argentina was normalized again.

Despite the economic growth, there are still severe social and economic deficits in the country. Unemployment (8.7%, as of 4th quarter 2006) and the poverty rate (26.9%, as of 2nd half of 2006) remained high despite a steady decline, and it is not yet possible to predict whether the partially development-inhibiting factors , neo-feudal structures in the Argentine economy and politics can be overcome by the Kirchner government. The very high inequality between the regions continued to cause concern, with the poverty rate ranging from 5% in Ushuaia to 56% in Resistencia .

Another decisive question was how the disputes between Argentina, the IMF and the private creditors were to be resolved, even if after the debt rescheduling in February 2005, rather optimistic voices had the upper hand and Argentina from a large number of the G8 countries, including from Germany was supported. Nevertheless, there were still groups of creditors who called for a renewed rescheduling offer.

The continued high inflation rate continued to cause concern in 2005 (around 11%). It was fought primarily through short-term agreements between the Kirchner government and the commercial sector.

As in previous years, economic growth in 2005 was 9.1%, well above the estimates of the statistical office. In 2006, too, a high growth rate of 8.5 percent was achieved. The economic expert Héctor Valle , director of the Argentine foundation for research and development Fide , also expected growth of between 6 and 9% for the next few years, while the Ministry of Economic Affairs was somewhat more pessimistic with 4% for 2007. The economist Salvador Treber assumed that the energy issue would be the core problem of the Argentine economy in the next few years and that its future growth depended on the solution to the problem.

Collection of outstanding debts

Those creditors who have not taken up the debt rescheduling offer have the opportunity to try to enforce their claims via the garnishment of Argentine state assets outside of Argentina.

The seizure of the sailing ship Libertad on October 2, 2012 in the Ghanaian port of Tema at the instigation of the hedge fund NML Capital attracted worldwide attention . After the Argentina crisis, the Libertad only stopped at Latin American ports in order to avoid the ship being seized to settle the open national debt. However, ports in Africa and Europe have also been served since 2012. As a result, the chief of the Argentine Navy, Carlos Alberto Paz , and the head of the military secret service, Lourdes Puente Olivera , resigned.

The hedge fund NML Capital, managed by Paul Singer and a subsidiary of Elliott Management , has acquired a large part of the bonds that have not been rescheduled in recent years and is aiming for 100% repayment from the state of Argentina. New York District Judge Thomas Griesa sentenced Argentina in October 2012 to pay $ 1.3 billion to the hedge fund. As a further leverage, Argentina was banned from servicing other debts until the hedge fund was paid. The Ghana Supreme Court ruled in June 2013 that the libertad was set at the suggestion of the hedge fund and was illegitimate. Since the arbitration process between Argentina and the hedge funds did not lead to an agreement in July 2014, Argentina is de jure insolvent.

Effects on the population

The Argentina crisis resulted in a general deterioration in the standard of living of the Argentine population, which, however, lasted only a few years due to the rapid economic recovery.

Loss of purchasing power and downsizing of the middle class

The direct effect of the devaluation in early 2002 was the loss of the purchasing power of the Argentine peso. In 2002 there was an inflation rate of 41% (consumer price index IPC). Since these were not or only to a very limited extent absorbed by wage increases, the real wage level fell by 23.2%. In the following years, the inflation rate remained high (between 6 and 16 percent year-on-year), but due to the improved economic situation, wage increases were in some cases strong, so that real wages rose again and in 2005 returned to around the 2000 level.

The middle classes in particular, who had achieved a relatively high standard of living in the 1990s, were affected by this loss of purchasing power; some of them even fell below the poverty rate at times (the so-called nuevos pobres , Spanish for “new poor”).

Increase in poverty and malnutrition

The loss of purchasing power was accompanied by a steep rise in the poverty rate, from values ​​of 15% in the mid-1990s to 25.9% in 1998 to a high of 57.5% in mid-2002. At the same time, according to the INDEC statistics office, 27.5% of the population did not have enough income to cover the grocery shopping basket , which is known in Argentina with the term tasa de indigencia (poverty rate).

This does not mean that this part of the population is affected by hunger, since the grocery shopping basket is not based on the absolute minimum of the necessary calorie intake, but on the average food consumption of the second poorest fifth of the population in 1986. There are also numerous aid programs from the state and non-governmental organizations . Nonetheless, there has been an increase in malnutrition, particularly among children, in some provinces, the worst being Tucumán Province , where more than 20% of children under five were underweight in 2002.

After the height of the crisis, the poverty rate fell slowly but continuously and in the second half of 2006 was at a level of 26.9%, the misery rate was 8.7%.

Stagnation in the improvement of social indicators

While numerous important indicators had improved significantly in the 1990s, they worsened or stagnated in the years that followed the crisis, as in the case of child mortality, which declined slightly over the entire period of the crisis (between 1998 and 2002) (from 19.1 to 16.8 per 1000 live births), but increased slightly year-on-year between 2001 (16.3 ‰) and 2002.

Collapse and renewed expansion of the informal sector

Argentina has had a strong informal sector especially since the 1970s , which grew strongly in the 1980s and especially the late 1990s when unemployment first rose to double digits. The media mainly focused on the so-called cartoneros - collectors of cardboard and other recyclable materials - but there are also a large number of outpatient sellers and unregistered service providers of all kinds, the so-called changueros ( e.g. day laborers). Furthermore, a large proportion of the employees in small retail establishments (e.g. kiosks) are employed informally.

Because of the cash shortage as a result of the Corralito , which restricted the amount of cash in circulation for fear of capital flight, the informal sector found itself in a very difficult situation at the end of 2001, which contributed to the explosion of the protests at the turn of the year. This sector is completely dependent on the availability of cash and its very existence has been threatened.

Despite the cash crisis, the informal sector expanded again from early 2002, when the side effects of the crisis increased unemployment and forced many newly unemployed people into the informal sector.

To cushion this social tragedy, Eduardo Duhalde introduced the Jefes y Jefas de Hogar plan , a minimal welfare scheme for unemployed heads of families, which was initially 100 and then 150 pesos. However, there was no right to this social assistance; only those entitled to it who were registered within a certain period could receive it.

After the situation on the labor market relaxed again from 2003, more formal jobs were gradually created again, so that the importance of the informal sector decreased slightly. Even so, in 2007 more than 40% of the working population were still unregistered.

Exchange rings (Red Global de Trueque)

As early as the 1990s, rising unemployment resulted in a large number of exchange rings in which not only goods but above all services were exchanged. This activity increased sharply in the crisis years. The brands of the umbrella organization of the exchange rings Red Global de Trueque (RGT), the Créditos , became an unofficial complementary currency to the peso from 2001 onwards . However, an uncontrolled expansion of this activity resulted in constant devaluations of the Crédito by the RGT, so that after the economic recovery around 2003, swapping became less and less attractive and lost its importance.

Expansion of the piquetero protest movement

From 1996 onwards, due to rising unemployment, there was a growing number of road blockades (span. Piquetes ), which were initially organized by loosely grouped unemployed people and later by organized groups, the so-called piqueteros . These activities increased sharply from 1998 and in some cases caused considerable traffic problems, especially in the capital Buenos Aires. At the same time, the movement was infiltrated by various parties that set up their own piquetero organizations, including particularly left and socialist parties such as the Partido Obrero . With the help of these alliances and through the pressure of their activities, the piqueteros achieved some of their goals, such as the supply of job creation measures , so-called planes trabajar .

In 2004 one of the best-known piquetero activists, Luis D'Elia , allied himself with the Néstor Kirchner government and achieved some concessions. However, this also contributed to the fact that the movement as a whole lost its aggressiveness and thus its importance, even if a large number of the piqueteros are on the opposition course to Kirchner (in particular the Movimiento de Jubilados y Desocupados , led by Raúl Castells ).

Temporary resurgence in rural exodus and deterioration in the housing situation

One of the short-term consequences of the crisis was a resurgence of the rural exodus, which declined in the 1990s, and which mainly affected people from remote peripheral regions who settled in the informal settlements on the outskirts of large cities and tried to earn a living in the informal sector. However, this only temporarily led to an increase in the slum population, as a number of construction and urbanization programs had been set up since the 1990s (for example the Programa de Mejoramiento de Barrios , a program for the urbanization of favorably located slums). After the economic recovery in 2003, these programs were expanded significantly, which presumably led to a sharp decline in the slum population in some provinces, even if no official data was initially available. In the particularly badly affected province of Buenos Aires, which also includes the outskirts of the state capital, the values ​​continued to stagnate due to the lack of a coordinated social building policy, for example in Gran Buenos Aires there were around 1.1 million people living in slums.

Effects on the national economy

The crisis also had short-term and long-term effects on the economy in general, which went further than the mere recession and brought about structural change.

Decline in imports and boom in exports

The rapid devaluation of the peso led, especially in 2002, to an undervaluation of the Argentine peso against the other world currencies. This resulted in a drastic decrease in the prices of Argentinean products and services, while in relation to this, imports became significantly more expensive.

This led to a sharp drop in imports, particularly during the period of the worst undervaluation of the peso between 2002 and 2004, when the trade surplus rose to 16.7 billion US dollars. As a result, numerous previously imported products were produced again in Argentina, and there was a renewed wave of import substitution, which, in contrast to the phase between 1930 and 1976, was not subsidized by the state, but was solely a reaction to the market situation. At the same time, exports rose sharply from 2003 onwards, as Argentine products had become more attractive again on the world market. This led to a positive trade balance also in the following years.

It was not until 2005, when the undervaluation of the peso subsided due to rising inflation but stable exchange rates, that imports picked up again; however, the trade balance remained positive until 2007.


The devaluation of the peso set in motion a new cycle of inflation. Although the values ​​were far below those of the crisis between 1988 and 1990, the loss of purchasing power of the peso remained constant until 2007 despite the stable exchange rates since 2004.

The main reasons for this are to be found in the price-cost-wage spiral. The increased prices caused the unions to put pressure on, in some cases strong wage increases. However, since this in turn made the products more expensive, the situation was only able to stabilize for a short time (in 2003 and 2004 with 3.7 and 6.1%, respectively). In 2005, however, inflation rose again (12.3%)

The government tried to get this development under control by means of price controls for certain products. However, she only managed to do this temporarily. The inflation figures continued to be in double digits in 2007. Official 2007 figures indicated single-digit inflation, but it was suggested that for populist reasons, the methodology was secretly changed to make the numbers nicer.

Energy bottlenecks

In the years from 2004 onwards, there were regular energy bottlenecks, especially in winter. The reason for this lay in the expansion of the economy, especially industry, and the associated increase in energy consumption, which, however, was only insufficiently covered by investments in the development of new energy sources.

A particularly severe bottleneck occurred in the winter of 2004, which was colder across the country than the climatic average and was generally referred to as an energy crisis . The reason was a far above average consumption of natural gas and electricity for heating purposes, especially in private households. As a short-term reaction to this, on the one hand the industry was imposed a temporary ban on the consumption of natural gas and electricity. On the other hand, private households were also burdened by a high penalty being applied to the electricity price of households that had consumed more electricity than in the same month of 2003. Some provinces decided to switch to winter time this year. However, due to its ineffectiveness, this measure was withdrawn only a few weeks after the crisis.

In 2005 and 2006 there were also short-term bottlenecks, but since the winters were either average or warmer than average, depending on the part of the country, the effects were not as drastic. In 2007, however, there was another severe bottleneck from the end of May due to below-average temperatures, in which the industry was temporarily banned from consuming electricity and natural gas. The sale of natural gas for motor vehicles at filling stations was also prohibited on particularly critical days.

As a short-term solution, President Kirchner agreed with the natural gas-rich neighboring country Bolivia in June 2007 to invest more in new energy sources. In the long term, hope was placed in the early completion of the Atucha II nuclear power plant and the Yacyretá-Apipé hydropower plant on the Río Paraná - one of the largest in the world - in 2008, and several thermal power plants were also planned. On the other hand, the expansion of wind energy , which in Argentina is particularly abundant in the south, took place rather cautiously , although some major projects were planned in the north of the province of Chubut and in the south of La Pampa . The reason for the low usage up to now was mainly the lack of an in-house production of wind power plants, which made investments in this technology more expensive, as numerous individual parts had to be imported.

New inflation and payment crises since 2014

As early as 2014, the country again came to the brink of bankruptcy after it was unable to repay old debts totaling 15 billion to Singer's hedge fund NML Capital and other creditors. Crucial to this renewed crisis was the fact that Cristina Kirchner's government refused to pay off the debts of several creditors who owned the country's government bonds under US law. These debentures were securities issued by the Argentine government under American law. The reason for this was that at the time of the issue, in 1999, the confidence of financial investors in Argentina was so low that only debts under foreign law could be taken on. The subsequent bankruptcy in 2001 and the forced exchange of bonds according to local jurisdiction confirmed these concerns. Kirchner's government wanted to repay only 35 percent of the outstanding debt to the investors, but they refused. After negotiations between the conflicting parties failed in July 2014, the South American country was classified as insolvent under American law. This ultimately led to a recession, as a result of which economic output fell by 2.5 percent and unemployment rose from 7 to 8.5 percent.

In December 2017, the Argentine peso began to decline again, and by February 2018 the value of the currency fell from 20 peso per euro to just 25 peso per euro. In addition to rising interest rates in the United States, the government's budget deficit and the current and trade deficit of the economy as a whole are an important reason for the sharp fall in the currency. This led to a significant loss of confidence in the financial markets. Initially, the Argentine central bank tried to counter this decline by raising the key interest rate to 40 percent and using 10 billion dollars of its foreign exchange reserves, and the government wanted to reduce the budget deficit at the same time through austerity measures. However, these efforts were only successful in the short term. After the peso suffered a massive drop in value within a few weeks in May 2018, the government of President Mauricio Macri decided to ask the International Monetary Fund (IMF) for an aid loan. The government initially asked for $ 30 billion in assistance, and the IMF eventually delivered $ 56 billion over a three-year period. This is the highest loan the IMF has ever granted. In return, Argentina pledged to have a balanced budget without interest payments by 2020. The peso then stabilized again for a short period of time.

In August 2018 the value of the peso collapsed again, within a few days it lost a third of its value and stood at around 45 peso per euro at the end of the month. This slump led to a massive increase in inflation in Argentina. As a result of this development, President Macri was forced to ask the IMF to disburse the promised aid loans more quickly. The fund finally complied with this request, but new austerity measures were demanded. Since then, the government's savings have repeatedly led to protests and strikes in Argentina. In addition, the currency crisis is increasingly having an impact on the real economy of the country; While the inflation rate rose to 40 percent in August, more than 10 percent of Argentines are now unemployed (at the beginning of 2018 it was 7 percent).

After Macris suffered a severe pre-election defeat in mid-August 2019 against the Peronist Alberto Fernández , ex-cabinet head of the Kirchners, the bond markets priced in a possible national bankruptcy, which led to an increase in the cost of borrowing by around ten percentage points. Two weeks later, Macri had to admit that Argentina could not service its debts in the short term. The government tried to curb the capital flight that followed by restricting foreign exchange trading for both large export companies and private individuals.

Individual evidence

  1. Blanchard, Olivier and Pérez Enrri, Daniel: Macroeconomía . Prentice Hall Iberia, Buenos Aires, 2002. Pages 479 to 481. ISBN 987-97892-4-5 .
  2. El fallo Griesa y la operación buitre
  4. Perspectivas de la crísis económica en Argentina (PDF; 92 kB), p. 8
  5. On this criticism see El lado oscuro de la globalización: causas de la crísis económica en Argentina ( Memento of October 8, 2007 in the Internet Archive ) (PDF; 60 kB), p. 3 ff
  6. ^ María Laura García: La nueva crísis argentina
  7. Chronology of the Argentina Crisis ( Memento of May 7, 2007 in the Internet Archive ) (Spanish)
  8. China Today on the causes of the 2001/02 Latin American recession
  9. Argentina suspends debt payments . In: BBC News , Tuesday 25 December, 2001 . Retrieved April 25, 2009. 
  10. Line under the former national bankruptcy @ (accessed March 11, 2014)
  11. Data: Surveys by the INDEC statistical office
  12. The Time About Believers in Argentina
  13. CIA World Factbook:   (English)
  14. Interview with Valle
  15. ^ Article in the Clarín newspaper
  16. ^ Treber ( Memento of September 27, 2007 in the Internet Archive ) in the newspaper La Voz del Interior
  17. O. Hollenstein: Hedge Funds Seize Naval Ship , October 4, 2012,
  18. Dispute with US hedge funds - Argentina evacuates crew from seized naval ship , in SPON from October 21, 2012, online
  19. Argentina defends itself against "US vultures". In: . March 1, 2013, archived from the original on March 4, 2013 ; accessed on March 2, 2013 (German).
  20. Clarí La Corte Suprema de Ghana dictaminó que la retención de la Fragata Libertad fue injusta. Retrieved May 17, 2019 (Spanish).
  21. The body that decides whether a "credit incident" has occurred in the case of Argentina is the International Swaps and Derivatives Association . Members of this body - who have decision-making powers, include the hedge fund Elliott Management, the banks Citigroup and JP Morgan, see e.g. B. [1] , [2] , [3] , [4] , page 81 ( memento from August 19, 2014 in the Internet Archive ) @
  22. a b La crísis argentina: causas y remedios ( Memento from August 9, 2007 in the Internet Archive )
  23. To determine a large number of data, the INDEC divides the population into fifths or tenths, depending on income, details on the website of the Argentine statistical office ( Memento from April 6, 2007 in the Internet Archive ).
  24. a b c data: website ( memento of April 6, 2007 in the Internet Archive ) of the INDEC
  25. See the Promeba page ( Memento of May 13, 2013 in the Internet Archive ).
  26. See the study Derecho a la Vivienda en Argentina
  27. a b Informe Argentina February 2006. (PDF, 130 kB) Archived from the original on August 1, 2007 ; Retrieved August 30, 2015 (Spanish).
  28. Article in La Voz del Interior
  29. ^ Situation of wind energy in Argentina , INVAP, beginning of 2007
  30. Argentina's impending bankruptcy: One man against an entire country. In:, June 24, 2014.
  31. Argentina's eighth bankruptcy , Zeit Online, accessed September 29, 2018.
  32. Argentina asks IMF for financial aid, Zeit Online, accessed on 29.09.18
  33. Holger Zschäpitz: Peso collapse: Argentina threatens the ninth national bankruptcy . September 3, 2019 ( [accessed September 3, 2019]).
  34. Why is Argentina not getting on its feet? In: WirtschaftsWoche, accessed on September 29, 2018
  35. FAZ: Financial markets assume state bankruptcy , August 13, 2019, accessed on the same day
  36. Holger Zschäpitz: Peso collapse: Argentina threatens the ninth national bankruptcy . September 3, 2019 ( [accessed September 3, 2019]).

See also


  • Diana Klein: The Argentina Crisis , Vienna 2003
  • Ulrich Brand (ed.), Stefan Armborst (translator): Que se vayan todos. Berlin 2003. ISBN 3-935936-19-2
  • Cornelius Huppertz: Corruption in Argentina. A network-analytical explanation of the financial crisis. In: Writings on international politics. Vol. 8. Kovac, Hamburg 2004. ISBN 3-8300-1359-0
  • Christoph Jost: Argentina, extent and causes of the national debt and problems of debt rescheduling. ( Memento of October 22, 2012 in the Internet Archive ) in: Foreign information. Konrad Adenauer Foundation, Sankt Augustin 2003, 11. ISSN  0177-7521 (pdf download; 258 kB)
  • Ralf Kronberger: Emerging Markets - The Case of Argentina. (PDF, 711 kB) In: Current documents, Economy and Society 2002, No. 39. Working Group for Economy and School, Vienna, October 18, 2002, p. 28 , archived from the original on January 8, 2007 ; accessed on August 30, 2015 .
  • Jutta Maute: Hyperinflation, Currency Board, and Bust: The Case of Argentina. Hohenheim Economic Writings. Peter Lang, Frankfurt 2006. ISBN 0-8204-8708-2
  • Peter Birle, Sandra Carreras (Ed.): Argentina after ten years of menem. Change and Continuity. Frankfurt am Main 2002. ISBN 3-89354-586-7
  • Rainer Schweickert: New crisis - old problems. (PDF; 136 kB) In: Focus Latin America, No. 17/2002. Institute for Ibero America Customers, Hamburg, September 13, 2002, accessed on November 23, 2015 . ISSN 1437-6148  
  • A survey of Argentina. In: The Economist . Economist Group, London June 15, 2004. ISSN  0013-0613
  • Matthias Bickel: The Argentina crisis from an economic point of view: challenges to the financial system and the capital market . In: 'Contributions to transnational economic law', issue 38, March 2005. PDF, 69 pages. (PDF; 881 kB)
  • F. Bortot, Frozen Savings and Depressed Development in Argentina , Savings and Development , Vol. XXVII, n.2 , 2003:

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