Argentina's Two Economic Crises (80s, 90s)

Argentina is the Eastern neighbour of Chile in South America. The "AEC" took place in the late 1990s and is correlated with the decrease in real GDP in 1999 and return to growth in 2002. Origins of the crisis went back to the 70s and 80s, Argentina had acquired huge debt during the National Reorganization Process (1976-1983), where the country was ruled by la ultima junta militar, the money was spent on unfinished projects and the Falklands War. In 1983, Argentina became a democracy and created a new currency known as the austral, which required new loans. When the state became unable to pay interest on the debt, confidence in the currency collapsed. In July 1989, Argentine inflation reached 200%. Although unemployment did not increase, real wages halved. In 1991, a fixing of 10,000 australs to 1 USD was introduced. A condition to secure "convertibility" of the currency was for the Central Bank of Argentina to keep USD FX reserve at the same level as cash in circulation. The currency was then renamed the peso (Argentine peso) and the exchange rate was fixed in law. So drop in inflation and preservation in currency value resulted. However, in the 90s borrowing continued and another crisis resulted.