In this essay I am going to talk about the Argentinean economy crisis and its political and economic causes and consequences until the introduction of the currency board in 1991. I am going to point out why the political processes in Argentina had a
negative effect on the whole economy of this country. As from 1880 an economic upturn began in Argentina, caused by a continuously
increasing and enduring export of agricultural products which continued, interrupted by the years of World War I, until shortly after the outbreak of the Great Depression, in 1929.
Until the world economic crisis in 1929, Argentina’s economic policy was mainly focused on agrarian export, basically to Europe, Great Britain. The demand for agrarian products and raw materials by industrialized countries increased after the Great Depression – except between 1929 and 1930, when Great Britain preferred to
import products from its former colonies Canada and Australia and closed its mind towards alternative markets like Argentina’s.
In this era of Argentina’s history, when GDP grew permanently, extremely in comparison to the international average, and when foreign investors started to invest their capital, also a wave of immigrants arrived at this part of South-America. Argentina was investing in infrastructure and quickly became to the most modernized country of this continent and started the beginning of industrialization. Due to foreign investments and immigration, Argentina was able to increase the agriculturally used acreage. This situation resulted in an ongoing economical growth. By the middle of the 19th century Argentina had the biggest economy worldwide. Until 1914, 70% of the agricultural products were exported - 30% of the GDP! The WWI got Argentina’s economy into trouble as foreign investors took their capital back to invest it in the military industry. That was the beginning of the strategy of ISI (Import substitution industrialization). In 1929 Argentina became one of the biggest exporters for deep-frozen meat, corn
and other agricultural products worldwide. At this time Argentina was the richest country in the world.
A popular phrase of this time was “rich like an Argentine”
[...]
Table of Contents
The document does not contain a table of contents.
Objectives and Themes
The essay examines the political and economic causes and consequences of Argentina’s economic crisis up to the introduction of the currency board in 1991. It asks how political processes and economic policies affected the country’s economy.
- Agricultural exports and early economic development
- Import substitution and state intervention
- Debt, stagnation and hyperinflation
- Stabilization plans and structural reforms
- The Washington Consensus and the 1991 currency board
Excerpt from the Book
The Argentinean crisis
In this era of Argentina’s history, when GDP grew permanently, extremely in comparison to the international average, and when foreign investors started to invest their capital, also a wave of immigrants arrived at this part of South-America. Argentina was investing in infrastructure and quickly became to the most modernized country of this continent and started the beginning of industrialization.
Due to foreign investments and immigration, Argentina was able to increase the agriculturally used acreage. This situation resulted in an ongoing economical growth. By the middle of the 19th century Argentina had the biggest economy worldwide. Until 1914, 70% of the agricultural products were exported - 30% of the GDP!
The WWI got Argentina’s economy into trouble as foreign investors took their capital back to invest it in the military industry. That was the beginning of the strategy of ISI (Import substitution industrialization).
In 1929 Argentina became one of the biggest exporters for deep-frozen meat, corn and other agricultural products worldwide. At this time Argentina was the richest country in the world.
A popular phrase of this time was “rich like an Argentine”
After 1933, when the prices for agricultural products decreased, the government started several “juntas” and introduced a guarantee for a “minimum-buy-price” to support the agricultural industry. Furthermore, the government introduced restrictions to foreign imports, high customs and further fiscal instruments to protect their own industry, offering public investment incentives at the same time. Moreover, in 1936 the government created the central bank of Argentina. With the introduction of the plan “Acción Económica” in 1936 and “Reactivación Económica” in 1940, the finance minister (Pinedo) tried to recover the flagging economy and started several investment programs for private and public construction projects. The result was 1,8% economical growth by reason of the building industry.
By launching the IAPI institute (Instituto Argentino para la Promoción del Intercambio) the government started a monopoly for agricultural products and oilseeds produced in Argentina buying cheap from their producers and selling them at a high price on the international market. Thus Argentina could get foreign currencies for the central bank and invest the revenues in the country’s own domestic market (in particular, the construction of over 3000 hospitals and clinics and of over 8000 schools) increasing the wages of the workers, introducing Christmas bonuses, etc. The interest rates on the international financial market were so low that Argentina took foreign capital to finance their plans, e.g. for payable mortgages. Argentina’s growth rate increased by 1,7% in the 1940’s again.
Chapter Summaries
The essay has no titled chapters. It proceeds chronologically from Argentina’s export-led development through import substitution, economic instability and the reforms introduced under President Carlos Menem.
Keywords
Argentina, economic crisis, agricultural exports, import substitution industrialization, foreign investment, external debt, hyperinflation, stabilization plans, Washington Consensus, structural reform, privatization, currency board, convertibility
Frequently Asked Questions
What is the essay about?
It discusses the political and economic causes and consequences of Argentina’s economic crisis up to the introduction of the currency board in 1991.
What are its central themes?
Its themes include export-led growth, import substitution, state intervention, debt, inflation and economic reform.
What is the essay’s primary objective?
The author aims to explain how political processes in Argentina affected the country’s economy.
What scientific method does the author use?
The essay presents a chronological historical discussion drawing on cited sources. It does not identify a formal research method.
What does the main text cover?
It traces economic developments from the late nineteenth century through the stabilization measures and structural reforms of the early Menem government.
Which keywords characterize the work?
Key terms include import substitution, agricultural exports, hyperinflation, structural reform and the currency board.
Which stabilization plans does the essay discuss?
It discusses Plan Austral, Plan Primavera, Plan BB and Plan Bonex in the context of Argentina’s economic instability and stabilization efforts.
How does the essay describe the 1991 currency reform?
It describes the replacement of the austral by the peso, the legal link to the US dollar and the reserve requirements associated with the currency board.
- Quote paper
- Ernesto Neumann (Author), 2008, The Argentinean crisis, Munich, GRIN Verlag, https://www.grin.com/document/119043
