Argentine Economic Crisis (1999-2002)
26
ARGENTINA‘S ECONOMIC CRISIS (1999-2002) Presented By: - Ashish Chouksey
-
Upload
ashish-chouksey -
Category
Business
-
view
1.529 -
download
1
description
Argentine economic depression was a major downturn in Argentina's economy. It began in 1999 with a decrease of real Gross Domestic Product (GDP). The crisis caused the fall of the government, default on the country's foreign debt, widespread unemployment, riots, the rise of alternative currencies and the end of the peso's fixed exchange rate to the US dollar. By 2002 GDP growth had returned, surprising economists and the business media.
Transcript of Argentine Economic Crisis (1999-2002)
ARGENTINA‘S ECONOMIC CRISIS (1999-2002)
Presented By: - Ashish Chouksey
Current Situation
Apr 12, 2023
2
Agenda
Apr 12, 2023
3
Political and economic situation before 1999
The Currency Crisis (1999-2002) The Argentinian Recovery (2002-
today) Conclusion
Political and economic situation before 1999
Apr 12, 2023
4
Argentina has suffered from many years of unstable political and economic situation due to the frequent change of governments between completely opposite ideologies
The government faced several economic crisises which enlarged their debts
Political and economic situation before 1999
Apr 12, 2023
5
In 1983 Raul Alfonsin was elected as president who established the democracy in Argentina for good
In 1985 the Austral became Argentina`s new currency
Political and economic situation before 1999
Apr 12, 2023
6
Hyperinflation: In 1989 the country`s inflation rate increased up to 3079,5 %
Year 1981 1982 1983 1984 1985 1986 1987 1988
Inflation rate (%)
104,5 164,8 343,8 626,7 672,2 90,1 131,3 343
Year 1989 1990 1991 1992 1993 1994 1995 1996
Inflation rate (%)
3079,5 2314 171,7 24,9 10,6 4,2 3,4 0,2
Political and economic situation before 1999
Apr 12, 2023
7
In 1991 the Austral was pegged to the U.S. Dollar and in 1992 it was replaced by the Peso
Fixed exchange rate:
10,000 Austral per U.S. Dollar or
1 Peso per U.S. Dollar
Inflation dropped and price stability was assured
Quality of life improved & Imports became
cheaper
Political and economic situation before 1999
Apr 12, 2023
8
The Convertability Law was established Converting the Peso in U.S. Dollar has
been simplifiedBut convertibility had to be secured
Goal of the Law: Acceptance of domestic currency
Political and economic situation before 1999
Apr 12, 2023
9
The appreciating of the U.S. Dollar in the end of the 1990s lead to a flow of imports and Argentine exports became more expensive which resulted in a trade deficit
The global economic slowdown sharpened this situation even more
Political and economic situation before 1999
Apr 12, 2023
10
Brazilian economic crisis (1997-1998) caused the Real to drop sharply
Brazil got a competitive advantage
against Argentina regarding exports
Argentine products were substituted Companies in Argentina outsourced their plants
Political and economic situation before 1999
Apr 12, 2023
11
The Currency Crisis
Apr 12, 2023
12
The Argentinean government lost the confidence of investors and more capital flew away from the country
In 2001 the Argentinean people started to withdraw their money from the banks, converted it into dollar and sent it abroad
The Currency Crisis
Apr 12, 2023
13
The government enacted a set of measures that froze all bank accounts for 12 month and only small amounts of cash were allowed to be withdrawn
The Currency Crisis
Apr 12, 2023
14
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)
The Currency Crisis
Apr 12, 2023
15
The Currency Crisis
Apr 12, 2023
16
The Currency Crisis
Apr 12, 2023
17
The Currency Crisis
Apr 12, 2023
18
The Currency Crisis
Apr 12, 2023
19
A lot of fights between citizens and police caused Fernando de la Rua to declare the state of emergency
On 20/21 December 2001 protests at the Plaza de Mayo led to several dead and the fall of the government
The Currency Crisis
Apr 12, 2023
20
At the beginning of 2002 the fixed 1-1 Peso-USD exchange rate was abandoned after 10 yearsÞ Depreciation of the peso followed
All bank accounts in US-Dollar were converted into peso at an official rateÞ Savings of people lost their value
The Currency Crisis
Apr 12, 2023
21
After few month the currency was allowed to flow more or less freely causing high inflation rates
The situation became worse during 2002 caused by high inflation and high unemployment rates (nearly 25 %)
Argentina’s Recovery
Apr 12, 2023
22
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
Argentina’s Recovery
Apr 12, 2023
23
The government encouraged import substitution and accessible credits for businesses
New ways of tax collection were put in place while setting large amounts of money for social welfare aside
Argentina’s Recovery
Apr 12, 2023
24
Due to many exports, the Peso became more stable
The GDP growth rate over the past years is very high and the unemployment rate went constantly down (today about 8.5%)
In 2005 Argentina reached an agreement that 76% of their bonds are only partly paid back (around 25-30% of their actual value) with longer repayment periods
Conclusion
Apr 12, 2023
25
Argentina’s government undertook very important steps to recover from the crisis
High export rates, economic growth and careful choices about how to use foreign currencies helped the country to recover
It is questionable how the new global financial crisis will effect the Argentina’s recovery
Apr 12, 2023
26
muchas gracias (thank you)
