The Argentine crisis of 2000–02 was among the
most severe of recent currency crises. With the
economy in a third year of recession, in December
2001, Argentina defaulted on its sovereign debt and,
in early January 2002, the government abandoned the
convertibility regime, under which the peso had been
pegged at parity with the U.S. dollar since 1991. The
crisis had a devastating economic and social impact,
causing many observers to question the role played
by the IMF over the preceding decade when it was al-
most continuously engaged in the country through
five successive financing arrangements.
Overview
The convertibility regime was a stabilization de-
vice to deal with the hyperinflation that existed at the
beginning of the 1990s, and in this it was very suc-
cessful. It was also part of a larger Convertibility Plan,
which included a broader agenda of market-oriented
structural reforms designed to promote efficiency and
productivity in the economy. Under the Convertibility
Plan, Argentina saw a marked improvement in its eco-
nomic performance, particularly during the early
years. Inflation, which was raging at a monthly rate of
27 percent in early 1991, declined to single digits in
1993 and remained low. Growth was solid through
early 1998, except for a brief setback associated with
the Mexican crisis, and averaged nearly 6 percent dur-
ing 1991–98. Attracted by a more investment-friendly
climate, there were large capital inflows in the form of
portfolio and direct investments.
These impressive gains, however, masked the
emerging vulnerabilities, which came to the surface
when a series of external shocks began to hit Ar-
gentina and caused growth to slow down in the sec-
ond half of 1998. Fiscal policy, though much im-
proved from the previous decades, remained weak
and led to a steady increase in the stock of debt,
much of which was foreign currency denominated
and externally held. The convertibility regime ruled
out nominal depreciation when a depreciation of the
real exchange rate was warranted by, among othe