The Argentine Financial Crisis: A Chronology of Events (CRS Report for Congress)
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| Release Date |
June 5, 2003 |
| Report Number |
RL31582 |
| Report Type |
Report |
| Authors |
J.F. Hornbeck and Meaghan K. Marshall, Foreign Affairs, Defense, and Trade Division |
| Source Agency |
Congressional Research Service |
Summary:
In December 2001, after four years of recession and escalating social unrest, Argentina's
economy
collapsed, forcing the resignation of President Fernando de la Rua. After a period of short-term
presidential successions, on January 1, 2002, the Argentine Congress selected Eduardo Duhalde to
complete de la Rua's December 2003 term. Duhalde then struggled to resolve Argentina's
deep-seated economic and political problems. The seeds of Argentina's financial and political crisis
were planted in 1991 with adoption of a currency board to fight hyperinflation, a plan that rested on
the guaranteed convertibility of peso currency to dollars at a one-to-one fixed rate. Argentina,
however, proved unable to enforce the economic policies needed to support the convertibility plan
and when beset by numerous external shocks, went from prolonged recession to financial crisis,
including defaulting on $151 billion of debt, despite repeated financial assistance from the
International Monetary Fund (IMF).
Argentina's economy resumed growth in late 2002, quicker than many had predicted. By 2003,
however, it was clear that many problems persisted, most notably high rates of unemployment and
poverty. The country's financial problems also remain unresolved. Argentina faces a large debt
workout with private creditors and has been unable to come to terms with the IMF over a
medium-term financial assistance package. On January 16, 2003 the IMF agreed, with some
reservations, to a new transitional $6.8 billion arrangement, supported by the United States and other
G-7 countries as necessary for Argentina to avoid defaulting on the IMF. The IMF arrangement had
few new conditions and provided sufficient financial resources only to "roll over" Argentina's IMF
repayments through August 2003. The program's designers assumed that a medium-term IMF
arrangement could be put in place by September 2003, when a nearly $3 billion payment comes due.
On May 25, 2003, Governor Néstor Kirchner was inaugurated President of Argentina
in what
was widely considered a fair election with high voter turnout. His administration faces daunting
long-term problems as well as dealing with short-term needs, such as negotiating a new IMF
agreement. To meet its multiple obligations, Argentina will have to face calls from the IMF and
others to impose strict fiscal measures, redefine its federal/provincial fiscal relationship, reassess its
tax structure, restructure its banking system and utility rate contracts, and face head on debt
restructuring, among other painful policy choices. Under these conditions, it remains to be seen if
Argentina is on a true path to political and economic recovery, or merely biding time. This is the
final version of this report, which provides a summary of events from before Argentina's adoption
of the currency board in 1991 to the May 25, 2003 inauguration of President Kirchner.
