Argentina's Currency Crisis: Solutions
From Dickinson College Wiki
How they fixed it
- There existed governmental encouragement of import substitutions and accessible credit for businesses to restart and regrow.
- The government developed an agressive plan to improve tax collection - imports taxes and royalties
- They also set aside money for social welfare
- The government also took measures to strengthen the currency
- They sold reserve dollars in the public market to help the peso regain its value
- After this measure had sufficiently stimulated the economy, the Central Bank bought dollars in the local market and stocked them as reserves, building their foreign currency reserves back up.
Possible Solutions
- One solution to Argentina's Currency Crisis is "dollarizing." In this instance, they treplace their current currency with the dollar. This is most likely the best alternative to Argentina during this time, since other countries in Latin America have achieved success through this exact system. In addition to reaping stability in the country, this action would also be beneficial for the United States who in turn would be further stabilizing the region, increasing the ability for greater relations between the United States and Latin American countries.
Many authors and economists continue to study the implications of the 1998 Argentine Currency Crisis today. In addition to dollarizing the economy, many of these scholars offer different solutions and corrections to ensure a more stable economy and country.
- Reform of law and judicial systems
- This presents a problem because the Argentine judicial system has a long history of crime and "turning-their-head" during times of crisis. Protests and riots broke out in numerous streets during the 1998 Currency Crisis, which sparked violence and even deaths. In this way...
The comeback
- GNP increased 8.8% in 2003
- 9.0% in 2004
- 9.1% in 2005
- Dec 2005 - foreign currency reserves were at $28,000 million.
- Exchange was stablilized at 3 pesos to the dollar...or 33 cents per peso.
- Inflation decreased.
