Abstract This paper is an in-depth analysis of the "dollarizing" of Argentina's economy. It describes the affects of the Convertibility Plan aimed at ending the soaring inflation in the late 80s and reorganizing the national economy. The plan replaced the Argentine peso with the U.S. dollar in the hope of eliminating the peso-dollar exchange-rate risk, lowering interest rates and stimulating economic growth. The author gives a brief overview of the economy of Argentina and its history and describes the continuous protests and national strike since 1996. The paper also looks at the "social costs" of the economic success in Argentina.
From the Paper "The "dollarizing" of Argentina's economy was the product of the genius of Domingo Cavallo, finance minister of former President Carlos Saul Menem, under a Convertibility Plan aimed at putting the country's chillingly soaring inflation in the late 80s to a sudden stop (Mark Falcoff) and then saving and re-ordering the economy as a whole. No more Argentinean money to be printed than there were dollars in circulation ? a radical measure, which worked. But it also created more trouble by raising prices above those of the United States and resulted in slow capital inflows and high unemployment rate (17% in 1997) and the consequent overthrow of President Menem after 10 years of rule.
The Convertibility Plan replaced the Argentine peso with the US dollar in the hope of eliminating the peso-dollar exchange-rate risk, lowering interest rates and stimulating economic growth (Hanke & Schuler 1999) The one-on-one rate (1 Argentine peso to US$1) induced currency stability and helped achieve free-market reforms and high growth, but this streak of genius ?proved to be more a manipulation than miracle, because it came the price of selling off national industries, services and resources (Looksmart).? These resources included airlines, telephones, railroads, subways, roads, even the control of the petroleum industry. The Plan stabilized the currency all right, but eventually damaged export trade "by shoring up the peso" (Looksmart) ?
Abstract Examines the leaders and their actions over the past twenty years and the consequences of those actions. This paper was written for an assignment to study the political environment of the country.
From the Paper "To study the past twenty years in the history of Argentina is to see a country struggling with financial difficulties and unsuccessful social reforms. Leaders of this South American nation of more than 38 million people (CIA, July 2003) have tried to keep it from sinking deeper into recession and foreign debt, and bring Argentines back on their way to the high quality of life they once enjoyed. Despite the fact that Argentina has maintained a stable democracy, the economic crisis has not been resolved."
