The end of the Argentinean economic miracle

The economic crisis in Argentina, which has already made the country’s government resign, is entering the new stage now. Argentina’s President Fernando De La Rua has announced about his own resignation. This Latin American country has crashed in a very serious crisis after several years of euphoria, which was caused by the incredible progress of the Argentinean economy. Now the country is threatened with the largest default in its history.

Russia was very envious, admiring Argentina’s success just three years ago. After the default of 1998 the Russian government was totally at a loss. Argentina’s economic rise, which was associated with Domingo Cavallo’s policy, the Minister for Economy of the country, was a very good example for Russia to follow.

Cavallo’s reforms were rather impressive. The plan of the conversion that he offered was based on the dollarization of the economy and the total privatization of the state property. Argentina’s economy has been rising since 1991, after 40 years of constant inflation and military dictatorship. The Argentinean peso rate vs. dollar was 1:1 for many years; the inflation rate in this country was one of the lowest in the whole world. However, this economic paradise could not come for free. Argentina’s economy became very dependent on the foreign investments, the foreign trade disbalance and the high unemployment level. Peso’s rate became bad for the economy of the country.

Everything has collapsed very quickly. The results are lamentable: inflation, unemployment and mass disorders of the desperate population - at least 20 people have died in the riots and about 150 were inured.

The president of the country made an unsuccessful attempt before – Fernando De La Rua tried to offer the opposition pro-Peron party to set up the government of the national unity in order to re-establish law and order in the country. The opposition rejected the offer and De La Rua resigned.

Standard & Poor’s rating agency warned that Argentina could refuse from its debt payments ($132 billion) in January already, which would mean a total default. If it happens, then Argentina will stop getting any kind of help from the International Monetary Fund and will plunge into the crisis deeper.

Dmitry Litvinovich PRAVDA.Ru

Translated by Dmitry Sudakov