Europa World: The Europa World Year Book online Routledge -- Taylor & Francis group
A return to Peronismo Kirchnerismo

Economic crisis

Argentina: Economic crisis

At the presidential election of October 1999 the ATJE candidate, Fernando de la Rúa, ended 10 years of Peronist rule, winning 49% of the votes cast. The ATJE also performed well in concurrent congressional elections. In December the Congress approved an austerity budget that reduced public expenditure by US $1,400m., as well as a major tax reform programme and a federal revenue sharing scheme.

In April 2000 the Senate approved a controversial revision of employment law. The legislation led to mass demonstrations by public sector workers and to two 24-hour national strikes. Later that year the Government came under intense pressure after it was alleged that some senators had received bribes from government officials to approve the legislation. In September the Senate voted to end the immunity that protected lawmakers, judges and government ministers from criminal investigation in order to allow an inquiry into the corruption allegations. The political crisis intensified on 6 October when Carlos Alvarez resigned as Vice-President, a day after a cabinet reorganization in which two ministers implicated in the bribery scandal were not removed. One of these, former labour minister Alberto Flamarique, who was appointed presidential Chief of Staff in the reshuffle, resigned later the same day. The other, Fernando de Santibáñez, head of the state intelligence service, resigned in late October. Earlier that month the President of the Senate, José Genoud, resigned after he too was implicated in the scandal. (In December 2013 de la Rúa was acquitted of bribing the senators in 2000.)

In November 2000 thousands of unemployed workers blocked roads throughout the country in protest at the worsening economic conditions and a 36-hour national strike was organized in response to the Government’s proposed introduction of an International Monetary Fund (IMF)-backed plan that included a five-year freeze on federal and provincial spending, a reform of the pension system and an increase in the female retirement age. In December, following the approval of the reforms by the Congress, the IMF agreed a package, worth an estimated US $20,000m., to meet Argentina’s external debt obligations for 2001.

The resignation of the Minister of the Economy, José Luis Machinea, precipitated another political crisis in March 2001. The subsequent announcement of major reductions in public expenditure resulted in several further cabinet resignations. As a consequence, a second reshuffle occurred, in which Domingo Cavallo was reappointed Minister of the Economy. In June Cavallo announced a series of measures to ease the financial situation. The most controversial of these was the introduction of a complex trade tariff system that created multiple exchange rates; this was, in effect, a devaluation of the peso for external trade, although the dollar peg remained in operation for domestic transactions. As the debt crisis intensified and fears of a default increased, a further emergency package, the seventh in 19 months, was implemented in July. A policy of ‘zero deficit’ was announced, whereby neither the federal Government nor any province would be allowed to spend more than it collected in taxes. In order to achieve this, state salaries and pensions were to be reduced by 13%. In the October legislative elections the PJ won control of the Chamber of Deputies and increased its majority in the Senate.

In December 2001, as the economic situation deteriorated and the possibility of a default increased considerably, the Government introduced restrictions on bank account withdrawals (the corralito ) and appropriated private pension funds. These measures provoked two days of rioting and demonstrations nationwide, in which at least 27 people died. On 20 December Cavallo resigned as Minister of the Economy and de la Rúa stepped down as President. The newly appointed head of the Senate, Ramón Puerta, became acting President, but was succeeded two days later by the Peronist Adolfo Rodríguez Saá. He, in turn, resigned one week later after protests against his proposed economic reforms resulted in further unrest. (Due to Puerta’s resignation as President of the Senate, Eduardo Camaño, the head of the Chamber of Deputies, briefly became acting President.) On 1 January 2002 the Congress elected Eduardo Alberto Duhalde, the Peronist senator for the Province of Buenos Aires, as President. On 3 January Argentina officially defaulted on its loan repayments, reportedly the largest ever debt default, and three days later the Senate authorized the Government to set the exchange rate, thus officially ending the 10-year-old parity between the US dollar and the peso. In February the Government initiated the compulsory conversion to pesos of US dollar bank deposits in order to prevent capital flight. This process of ‘pesofication’ led to many lawsuits being brought against financial institutions in an attempt by depositors to recover their losses. However, in 2004 the Supreme Court ruled that the ‘pesofication’ was not unconstitutional.

Nevertheless, in February 2002 the Supreme Court did rule that the restrictions imposed on bank withdrawals were unconstitutional. In order to forestall the collapse of the financial system the Government imposed a six-month ban on legal challenges to the remainder of the bank withdrawal regime. Numerous bank holidays were also decreed. Later that month the Government signed a new tax sharing pact with the provincial Governors, linking the monthly amount distributed to the provinces to tax collections, as recommended by the IMF. In April Jorge Remes Lenicov resigned as Minister of the Economy following the Senate’s refusal to support an emergency plan to exchange frozen bank deposits for government bonds. While the number of deposits in Argentine banks increased, Argentina still defaulted on a US $805m. loan instalment to the World Bank in November, thus jeopardizing the country’s last remaining source of external finance. Furthermore, public anger against the Government and at the state of the economy remained strong.

Citation: Economic crisis (Argentina), in Europa World online. London, Routledge. Retrieved 24 February 2020 from

A return to Peronismo Kirchnerismo

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