This time exactly 10 years ago, in
For most of 2001,
A fortnight of total turmoil followed in which there were five different presidents - one of whom broadcast his resignation from his sitting room surrounded by friends out of fear he was about to be lynched (by fellow politicians, not the population). In his fleeting tenure, that president announced that
The situation in
These are obviously entirely different countries and regions with their own particular problems. But there are direct parallels in terms of what led to
In the 1990s,
At the same time, of course, the dollar peg had done nothing to control corruption or tax evasion which continued to be as rampant as ever. And by the second half of the '90s, this peg had made
What the men in suits could not negotiate was the growing anger and fear of a population that couldn't face more austerity, who feared for their savings and began yanking dollars out of the bank. The December riots broke out after the government imposed a 'corralito' (literally 'a little corral') on bank accounts, allowing each account holder to withdraw only
At this point, the
Much as amongst the Greeks today, there was huge resentment at being told what to do by those with the money. Four out of five Argentines, according to most polls at the time, wanted the country to default rather than face years of yet more bailouts and austerity.
So Did Argentina Do the Right Thing?
The immediate effect of
The peso fell to a quarter of a dollar and unemployment jumped over twenty percent. People who had lost their savings and their income literally had no cash and were forced to start bartering. Bankers and politicians were hounded out of restaurants by angry crowds. The standard of living of the vast majority slumped overnight.
An army of the poorest appeared on the previously clean streets of the centre of
The middle classes saw their quality of life slip away. My neighbour in our elegant block of flats in the smart district of Palermo wept at the humiliation of no longer being able to afford to dye her hair. Piece by piece, she and her sick husband had to sell their furniture to pay for his medication. Their phone line was cut off. They could no longer afford to have a newspaper delivered.
But many argue that this suffering also set the country free.
The alternative might have been years and years of cuts and austerity imposed by the country's creditors as it continued borrowing to pay off its crippling debts.
The IMF itself concluded in a kind of post mortem on
On this basis, there is a camp of economists who believe
So would a sharp shock rather than an agonisingly long process of cuts without any guarantee of recovery free
A default would lead to a similar immediate collapse in living standards and prospects for the Greeks.
Ten years ago,
However appealing the Argentine option is for some, it is important to note that
- Democratic Speed Bumps in Latin America
- Argentina: Lessons of Default
- Latin America is Beating Poverty -- Sort Of
- Brazil and Colombia: An Unexpected Alliance
- China and the End of the Monroe Doctrine
- Major Economies Headed for Slowdown
- Is the National Security Complex Too Big to Fail?
- A Call for an Enlightened Foreign Policy toward Latin America
- The Inequality Behind Chile's Prosperity
- The Mexican Drug Cartel Threat in Central America
- FARC Leader Killed in Colombia
- Helping Cuban Reforms through Agricultural Trade
- A 'Major Win' for Panamanian Corruption
- Mexico Seeks to Extradite Americans Linked to 'Operation Fast And Furious'
- Latin American Politicians Renew Suggestions to Legalize Drugs
- Never-Ending Drug War Moves to Central America
- Venezuela Among World Leaders in Red Tape
- OAS Makes Bad 'Error' in Nicaragua
- Condoleezza Rice Book Shows 'Inattention' to Latin America
- Anonymous vs. Zetas Amid Mexico's Cartel Violence
- Child Poverty and Access to Education: Hidden Costs on the Hispanic Community
- Rafael Correa Remains the Strongest Leader in Ecuador, but his Influence is Waning
- Brazil's Truth and Reconciliation Commission
- Panamanian Corruption Spreads to Land Holdings and Prominent Politicians
- Cuban Economic Reform Allows Private Home Sales
- Cuba's Communist Party Condemns U.S. Immigration Policy
- Submarine Near Venezuela Prompts Accusations Against United States
- Seven Billion People: So Why Do Some Fear Population Decline?
- The Broken Contract: Inequality and American Decline
- The Wisdom of Retrenchment: America Must Cut Back to Move Forward
- Colombia and Panama Trade Deals Just a Chance
- Cristina Fernandez de Kirchner Wins Re-election by a Landslide
- Families of Illegal Immigrants Search for Lost Relatives in Mexico
- A Way Out of Mexico's Morass
- NAFTA Is Starving Mexico
- Redeployment of Mexican Soldiers to Urban Areas Boosting Illegal Drug Production
- Mexicans Complain About Secret U.S. Infiltration of Drug Cartels
- Cuba's Culture of Dissent
- Latin America's Blind Love With China May Be Over
- Drug War Madness
- Brazil's Really Big Problem
- Ex-Border Security Chief Calls Fence a Dumb Idea
- Argentina: Funding for a Cause
- Mexico and the United States: Surgical Strikes in the Drug Wars
- Despite Victory, Argentine Leader Faces Hard Choices
- Chilean 'Model' Is Shaken, but Very Much Alive
- Student Protests May Lead to a Better Chile
- Winds of Change: Uruguay's Sustainable Energy Plans
- The Pain in Spain
- Latin America's Security Dilemma
- A President-for-Life in Argentina? Not Likely
- There's Hope for Mexico and Central America
- Chile: The Fight to Make Education a Guaranteed Right
- Death of Layton Poses Challenge for NDP Interim Leader
Copyright 2011, The World Today, Published by Chatham House in London