Argentina experienced three major economic crises from 1999-2001 due to a fixed exchange rate between the peso and US dollar, high government debt, and privatization of state utilities. The crises led to a 20% decline in GDP, over 50% of Argentines living in poverty, and 7 out of 10 children in poverty by 2002. Argentina eventually recovered through devaluing the peso to boost exports, which helped GDP growth reach nearly 9% annually from 2003-2007 and reduced unemployment to around 7% by 2011.

1. Argentina Crisis 1999-2001

2. History
• Rich Natural Resources
• High Human Capital
• Reasonable Infrastructure
• Great Performer in early 1900’s

3. First Crisis
• The Argentinean peso was legally pegged to the
dollar, on a one-to-one basis, a decade ago by
Economy Minister Domingo Cavallo. In the hope to
end hyperinflation.
• But due to devaluation of Brazilian Real investors
were attracted to invest in Brazil rather than
Argentina.

4. Results:
• Argentina lost the trust of investors
• The cash outflow from the country increased

5. Second Crisis
• The president Carlos Menem acquired lot of debt, in
both domestic and foreign which lead domestic
interest rates to increase
• In early 1990s, privatization was done which had
already thrown lot of people out of work
• As privatized companies were utilities, so the prices
of the utilities increased
• The economy was facing recession from quite few
years but it grew steadily worst as domestic demand
decreased

6. Results:
• Higher the borrowings, higher the credit became for
businesses
• Due to which many companies were closed
• Increase in unemployment
• The downward domestic demand increased debt
burden

7. Third crisis
• The peso was believed to be devalued
• So people rushed to their banks to convert their peso
into dollars
• So to avoid draining of banks, Cavallo enacted a set
of measures that froze only small amounts of cash
were allowed to be withdrawn

8. Results:
• These measures were followed by many protests in
the big cities especially in Buenos Aires
• First only noisy protests and later they included
property destruction (mainly at banks and big US and
European companies)

10. Economic condition during crisis
• The economy shrank by 20 percent from 1998 to
2002
• In terms of income, over 50 percent of Argentines
were poor
• Seven out of ten Argentine children were poor at the
depth of the crisis in 2002

11. Argentina’s Recovery
• At the end of 2002 the situation could be normalized
to a certain extend and new elections were hold
• The devalued peso made exports more competitive
abroad, while discouraging imports

12. Contd…
• Due to many exports, the Peso became more stable
• GDP jumped 8.8% in 2003, 9.0% in 2004, 9.2% in
2005, 8.5% in 2006 and 8.7% in 2007
• Unemployment has been considerably reduced (it has
hovered around 7% since 2011)

13. Conclusion
• Brazil got a competitive advantage against Argentina
regarding exports
• Privatization made the recession of the country go
worst
• The measures taken to avoid draining of banks caused
lots of protest
• Argentina’s government undertook very important
steps to recover from the crisis like devaluation of the
currency