Argentina Tumbling?

As unrest and riots sweep across Argentina, the question people are asking is: How did it come to this? Argentina’s economic stagnation and financial crisis are hardly new. In fact, for the better part of this year, it seemed as though the country’s default — or bankruptcy, in plain terms — was imminent. Yet, all outside efforts to help have failed. Our new Globalist Factsheet takes a look at the current crisis and its origins.

Why does Argentina’s crisis matter?

Argentina is Latin America’s third-largest economy.

(Wall Street Journal)

What’s the trouble?

Argentina’s ratio of debt to export is about 500% compared to 200% or less in many developing countries. 75% of its banking system is now foreign owned.

(Global Economic Observer)

Is the situation getting worse?

From 1996 to 1999, Argentina’s external debt has increased from $109.7 billion (40% of GDP) to $145 billion (51% of GDP).

(IMF)

Did anybody help?

Between 2000 and 2001, the IMF helped secure nearly $50 billion in emergency aid for Argentina.

(Wall Street Journal)

Did it work?

In October 2001, Standard & Poor’s downgraded Argentina’s credit-worthiness for the fifth time in a year.

(Standard & Poor’s)

What’s the result?

As of December 19, 2001, Argentina’s unemployment rate has climbed to 20%.

(New York Times)

How does it affect people?

An estimated 2,000 people in Argentina cross an invisible line from middle-class to poverty each day.

(Wall Street Journal)

What did the government do to end the crisis?

In 2001, Argentina has tried to save $4 billion to $5 billion a year in interest payments by reducing the
interest rates on its debt to 7% — currently ranging from 11% to 24%.

(Washington Post)

How did Argentines respond?

In July and August 2001, Argentines withdrew about $8 billion out of local banks — 11% of total private-sector deposits.

(Wall Street Journal)

What were some of the causes?

No companies in Argentina disclosed over 40% of the information considered
standard for corporate disclosure in more developed countries.

(Standard & Poor’s)

Between 2000 and 2001, the IMF helped secure nearly $50 billion in emergency aid for Argentina.
(Wall Street Journal)

Were things always this bad?

Back in the 1930s, per capita incomes in Argentina were similar to those of France, Germany and Canada.

(Economist)

How about now?

By 2001, per capita incomes in Argentina stood at about $11,000 – less than half those of France ($24,000), Germany ($25,000) or Canada ($29,000).

(Transatlantic Futures)

How does this effect the U.S. economy?

70% of Argentine bank deposits are in U.S. dollars and nearly all long-term loans and business transactions are dollar-based.

(Wall Street Journal)