National bankruptcy skeptics like to claim that while countries went bankrupt hundreds of years ago, such a catastrophe is out of the question in the modern world.
The story of Argentina’s bankruptcy in 2001 proves them wrong.
Most crises follow a common logic which is characterized by sudden onset, rapid growth, and the transition to a new quality and normalcy.
The difference between the Argentinean scenario from the usual canons laid in the absence of the normalization phase – crisis at the time were simply “preserved”, then to break out with renewed vigor.
The decline in GDP of 15%, unemployment at 24%, a default on its foreign liabilities of $ 141 billion, a decline in business activity, the removal of the hard peg to the US dollar and the subsequent devaluation of the Argentine peso by more than 70%. 13% cut in state pensions and civil servants’ salaries.
There was a run on banks following the collapse of the country’s national currency. Argentina’s citizens were so desperate and panicked that many spent nights sleeping in front of the ATMs. The systematic impoverishment of the population led to mass discontent and riots all over the country. Eventually, the situation became so chaotic that President Fernando de la Rúa fled from an enraged mob by helicopter. Despite all the protests and bank runs, the nation simply could not repay its $145 billion in foreign debts.
The country had a population of 35 million, of whom 19 million were classified poor as of this June, with earnings of less than $190 a month; 8.4 million were destitute, with monthly incomes below $83.
Left bankrupt by their government, their bankers and the International Monetary Fund, Argentines have lost faith in their political leadership. Five presidents passed through the Buenos Aires in the span of two weeks, until Nestor Kirchner, a provincial governor until then, assumed the presidency in 2003. Over the next few years he managed to pull the country out of the economic chaos, but evidently the bankruptcy never passes without a trace. Just last month Argentina announced its biggest currency devaluation in a decade, with the peso’s plunge rattling financial markets worldwide. With inflation running at about 30 percent, it seems the country is on the verge of yet another devastating collapse.
Audio: to Download
These are not the opinions of the `Ace News Group ‘ and are the news and views of the writer.