 Argentina Crash of 1982 Ryan Cavanaugh Ahmed Al Ghazali Trent Davis Ben Wildt

Before the Crash

A History of Crisis  Civil war after liberation from Spain in 1810  No stable government in place until 1862  crisis:  Stemmed from budget problems; Argentina tried to repay national debt with fiat currency, investor flight to safety.  Argentina was on the gold standard at the outbreak of WWI (have to sell debt to fund a war), abandoned it soon after

 GDP value is extremely misleading because of hyperinflation

Events during economic crash of 1982  1982 president of Junta: Leopoldo Galtieri  Invaded Falkland Islands 2 nd April th June  Coup used to appeal to masses and divert public attention off economic crisis.  1 st July 1982 new president by Junta: Reynaldo Bignone until 10 th December  Raul Alfonsin democratically elected president 10 th December,  Fighting many guerilla wars with anti-junta groups.

Causes of crash  Growing government spending, large wage raises, inefficient production- created chronic inflation and job losses.  Loss of confidence in economy led to capital flight out of country.  August 1982-Argentina approached Mexico for debt help, Mexico going through economic troubles their self.  Went to IMF for help, once IMF visited country and witnessed all of the damage they denied help.  High foreign debt interest payments.  Tax evasion prevented new revenues from helping economy revive.

Facts  1983 inflation near 1000%  1983 Peso replace by New Peso: 10,000 old pesos=1 new Peso  Official unemployment “5%”  400,000 companies of all sizes bankrupt by  policies failed to reverse situation.

Attempts during recession  Attempted price controls, freezing wages, negotiating with unions.

Falklands war  Led to loss of Argentine military and suffered heavy causalities.  Used war to divert attention from economy onto a popular Argentine subject eventually leading to death of military Junta and new democratic Government.

Main Theory: Growth of State Debt  increase of public expenditure  Deficits averaged 5.2% of GDP  Financed through international borrowing  Eroded real savings and private investment  Most of the debt was not registered  1983 Argentina had the highest inflation rate in the world

Crowding Out  Real savings and private investment plummeted leading up to 1982  Capital outflows

Steps Taken  IMF Agreement committed the military government to limiting fiscal deficit to 2.1%  Actual figure for the year was 16.8%  1985, Raúl Alfonsín introduces Plan Austral  1987, Plan Austral begins to fail  Another IMF arrangement made in 1987 but fails in 1988

Steps Taken  President Carlos Menem is elected in May 1989  Appointed Domingo Cavallo in 1991  Set up free-market reforms such as opening trade, deregulating, and reforming the state  April 1991, Convertibility law pegged exchange rate between Peso and US Dollar

Effects of Policies  Inflation went from 1,344% annually in 1990 to 29% for a portion of 1991 and finally to a rate of 4% in 1994  Bimonetary system where people used US Dollars freely  Real GDP per person grew more then 10% between 1991 and 1992 then slowed to above 4% in 1993 and 1994  Increases in foreign investment

Works Cited  Remmer, K. L. (1990 ). Democracy and Economic Crisis: The Latin American Experience. World Politics,  Saxton, J. (2003 ). Argentina's Economic Crisis: Causes and Cures. Hispanic Center for Economic Research.  The Economist. (2002, February 28th ). Retrieved April 19th, 2015, from   "AROUND THE WORLD; Argentina's Inflation Skyrockets to 924%." NYtimes. October 12,  Marsh, Sarah. "Chronology: Argentina's Turbulent History of Economic Crises." Reuters. July 30,  Saxton, Jim. "ARGETINA’S ECONOMIC CRISIS: CAUSES AND CURES." Hispanic American Center for Economic Research. June 1,  Smitha, Frank E. "Financial Crisis in Argentina, from the 1980s." Macrohistory and World Timeline. January 1, 2010.