Argentina's Demise

There are several reasons why the Argentine economy fell into a state of demise. The creation of a currency board was one of them.It hurt the country’s ability to use monetary policy and exchange rate policies that limited the tools the Argentine Government had available for controlling their economy. The board increased the internal stiffness of the economy and made it harder for the economy to respond to incoming hits in good time.Four external hits happened which put the economy into recession; product prices for Argentina stopped climbing, the cost of resources for rising economies rose, the United States Dollar grew stronger, and Brazil, their main trading friend, devalued its currency. After several years of downfall, the economy of Argentina fell at the end of 2001. The effects of it have been hard for millions of people in and out of Argentina.It was even hard for the middle class and more so for the quickly climbing numbers of unemployed and poor. Poverty and unemployment went through the roof, and for the people who still had a job, their incomes fell as well. Argentina has a huge debt owed to foreign investors. It has sold off its formerly state-owned companies to corporations and is now counting on its own flow of goods. Many small businesses in Argentina have either gone under or have been gobbled up by bigger firms, both foreign and in their own country. It is kind of funny that in a country that has been one of the world’s most important food producers, hunger is becoming a huge problem. In the late 1980s, Argentina was hit by economic unsteadiness. Inflation was very high. In 1989 the Argentine Government started what was called a “free market” path. This began a huge economic “transform” program to allow the economy to let to foreign investments come in and hopefully even out the economy. It connected the value of the Argentine peso to the dollar, one peso to one dollar (known as the Convertibility Plan). Thi…

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