International Financial Crises of Argentina

International Financial Crises of Argentina

Introduction

During the period from 199-2001, the ongoing economic crash of Argentina changed vigorously into a financial chaos. This situation of Argentina can be properly explained with the help of two critical discussions; one argued that the country was suffering from the confidence crises while other argued that current crises are solely related to economical aspects (Evans, 2003).

According to the analyst, the actual reasons for the prevailing crises were due to the high percentage of Currency production, significant usage of other currencies like Dollar and pound, and preference was given to the importance use of the dollar to denominate domestic demands of the country. In addition to these, convertibility system of the country, which is conventionally described as (Currency board management), has played a vital role in political decision making of the country.

Under such prevailing circumstance, the role played by Argentina's political system was pathetic, as it was unenthusiastic in taking pre-emptive decisions to trim down the extent of economic crises, which according to many economists was an undeniable crisis. During the course of these crises it was observed that no steps were taken from the government perspective, there was no consent done with other political parties to overcome this chaos.

Further, no efforts were made to reduce the fiscal deficit, reducing the salaries of governmental officials, and reducing the prices of commodities to make the economy compatible with the problems of the currency board of the country. For instance, one major constraint that could be dealt with was frequent reduction in capital inflows.

However, the government of Argentina was hoping that these crises are temporarily, and with the support of international monitory fund, by using their own foreign reserves, the government would be able to prevent the rising of payment crises (Evans, 2003).

Discussion

Sarcastically, all the hopes, died as economic crises, and feeling of Bankruptcy not only ended the political system of the country, preferably made it paralyzed. A wish of avoiding the fear of apparent losses changed into the failure of allocating the losses among the citizens have already showed in the eyes of officials (Feldstein, 2002).

As discussed above, the majority of key players were initially hoping that someone, with his qualities would be able to produce a draft that might ease the difficulties around the commercial bill. In addition to this, government was able to pay compensation to minor percent of the populations.

The crises of Argentina were termed as financial chaos by experts, who led to the non-payment of loan in year 2001, and rejection in getting the fixed exchange rate besides provoked the situations. In addition to this, economic condition of the country worsened further as inflation rate goes up to an extreme level of 25 percent within first nine months of the year, the recession goes to more than 4.4 percent, and there was a phenomenal decline in the gross domestic product of the country (Feldstein, 2002).

Consequently, in the year 2002 GDP was 20 percent lower that preceding years, the rate of ...