Argentina’s Sovereign Debt & Financial Crises

Argentina’s political history has experienced as much volatility as its economy. Once a top-ten economic contender in the world, Argentina has historically competed with its agricultural export sectors in international markets. Due to a growing lack of faith in Argentina by international capitalists, the country has fallen victim to their most-powerful creditors. This paper will examine the historical, economic, and political development of Argentina as well as the alleged causes and effects of their financial crises. The Argentine economy was developed as a staples-export hinterland, especially under the convertible exchange-rate years, and has been subjected to years of legal uncertainty due to lengthy litigation which ultimately caused Argentina’s second sovereign debt-default in under two decades.


The Macro-Economic Policy Trilemma

Under fixed exchange-rate policies, a sovereign’s monetary policy must be aimed at maintaining consistency between the pegged exchange-rates, in this case between Pesos and U.S. Dollars ($USD), offering the government the flexibility of its fiscal policy (government spending / revenue-generating decisions). Under floating exchange-rate policies, a sovereign can additionally choose domestic interest-rates and set money-supply. If a country has its own currency, it can devalue its currency, and its prices and wages in terms of the other currency will be cut. When a country does not have its own currency, it has to do “internal devaluation”, or deflation. In capitalism, monetary policy only works well when accompanied by fiscal policy and structural reforms which facilitate economic adjustments to market volatility.


International Finance: Long-Term Effects of Macro-Economic Relationships

Gross Domestic Product (GDP) is calculated by adding: Net Consumer Spending + Investment + Government Spending + Net Exports. Gross National Product (GNP) is actually a more appropriate monetary measure for a sovereign nation because it includes internationally-held investments (a common trend in Argentina’s history) in its calculations. Unfortunately, most research that is sourced in this paper used GDP valuations.


Interest-rates are intended to be set by domestic, deposit-holding banks (e.g. how much a currency is worth within a sovereign state). Interest-rate changes have an inverse effect on money-demand, since a higher interest-rate encourages savings, which decreases consumer spending, and therefore decreases demand on currency. A higher interest-rate has a positive effect on GDP growth, since people use more domestic currency to purchase that country’s output (in the short-term, interest-rate changes do not affect prices). Money-demand decreases with technology improvements (especially in payment processing – another externality for a technology importer); and money-demand increases in relation to GDP growth.


Foreign exchange-rates are calculated, along with GDP, using a sovereign’s aggregate supply and demand for what is produced within that country, relative to that of the other nation being compared. Within economic academia, there exists an awkwardly unproven, underlying assumption of zero-sum foreign exchange-rate (FX) relationships, as FX should offset foreign returns on currency deposits to discourage trading currencies like securities. Carry-trading is a common practice of borrowing and investing in different currencies in the foreign exchange market; additionally, citizens with enough wealth will also buy-up currencies that are experiencing devaluations. Monetary policies that enable currency devaluations result in a reduction of marginal productivity of domestic capital, as foreign-currency-denominated debt payments will increase. The disconnect between underlying assumptions in economics and real-world examples demonstrates capitalists’ dedication to appear scientifically neutral. This disconnect is exacerbated by economic power imbalances, as closer and larger economies will be able to manipulate foreign economic indicators through international debt and trade relationships.


A long-term decrease in GDP (i.e. a recession) affects expectations in FX rates. If government spending increases during this time, the currency is then expected to depreciate. Prices will change in the long-term relative to the money-supply/demand equilibrium, while FX rates will experience “over shifting” with changes in expectations of changes in money-supply. Changes in money-supply changes expectations (e.g. anticipated increases in money-supply will increases prices), which can be caused by excess demand of goods and services, or due to changes in expectations about inflation rates. An investor’s expected return on foreign deposits increases short-term based on expectations in returns from future depreciation.


Researchers have made suggestions for a more sustainable framework for economic policy geared toward stabilizing macro-regulations that define a positive relationship between a progressive distribution of income and a sustained process of investment:[1]

  • Investment spending should not depend so much on the previous generation of profits; it should rather be determined by the expectations of future earnings;
  • Financing of corporate investment should be more dependent on credit and less on self-financing;
  • Increasing the propensity to save of nonwage-earners in order to relax the pressure on non-voluntary savings that come from the total income of wage-earners;
  • Investment should be more exogenously determined, which implies a range of non-economic policies in order to boost the incorporation of technological progress and systemic competitiveness in the economy;
  • Public investment should be more stable as well as oriented in the same direction stated in (iv); and
  • The progressive distribution of income should not depend so much on a growing total income of wage-earners, but rather on fiscal policy. The latter should be based on a more progressive tax regime and on a system of income transfers with less reliance on social insurance and on the tax requirements of the payroll taxes.

A government that seeks economic stability and sustainability should develop their own, distinct economic policy. Of course, policies should be based on accurate and abundant data, but should also consider the domestic social ramifications of uncontrollable variables (externalities). Due to the close ties between politics and economics, the best-case-scenario is often the focus during the development and implementation of monetary and fiscal economic policies.



A History of Political and Economic Volatility in Argentina

Beginning in 1881, until 1970, Argentina’s economy developed under its first paper-currency, the Peso Moneda Nacional (ARM), backed by the commodity value of gold. Argentina’s first constitution, enacted in 1853, was modeled on the U.S. “The constitution promulgated in 1994 provides for consecutive presidential terms (which had not been allowed previously), but few other changes distinguish it from the 1853 document; in its largely original form, the constitution has sustained Argentina with at least a nominal form of republican, representative, and federal government.”[2] In 1902, as a policy response to foreign creditors’ violent response to Venezuela’s debt-crisis, the Argentine Minister of Foreign Affairs announced the Drago Doctrine whereby no foreign power could use force against a Latin-American nation to collect on debt obligations. Leading up to the Great Depression, president Hipólito Yrigoyen would survive an assassination attempt during his second presidency in 1929, before being deposed in Argentina’s first military coup d’état since the enactment of their constitution.


As a staples-export periphery economy, World War I caused a severance of valuable international trade routes and resulted in major deficits for Argentina. In 1932 Argentina introduced its first national income tax law. Prior to this time, 72% of Argentina’s national revenue was based on customs-taxes on imports and some duties on exports.[3] Argentina’s first major deficits were likely caused by the need for credit to stabilize trade balances and develop new trade routes to replace those that were lost in the war. The years following this period would be characterized by electoral-fraud, which led to Conservative government control in 1935 in Buenos Aires, and control over the National Congress in 1936.[4] Conservatives would continue to resort to fraud and intimidation until the military coup in 1943.[5]


During the period of 1943-1944, Juan Perón was the government head of Labour and lured union leaders into supporting him by proposing legislation which would improve work conditions (Peasant Statutes), and jailed union leaders who disagreed with him, thereby creating union loyalty to the government.[6] In October of 1945, the military government put Perón in jail; he would be released prior to the presidential elections, which led to a popular uprising that “enabled Perón to personify himself as the hope for the future of workers’ rights against the oligarchy of international capitalists.”[7] 1947 was characterized as the Populist rise to power of Perón;[8] under his first presidency, “social welfare services were developed on a large scale.”[9] By 1948, in the foreign-exchange market, both the Argentine Peso and the German Deutsche Mark were valued at 4:1 $USD (50-years later the Deutsche Mark was valued at 2:1, and the Peso was valued at 10,000,000,000,000:1 $USD).[10]


The 3 Musketeers: Capitalist Influences from the IMF, World Bank, and U.S.A.

In 1958 Arturo Frondizi won the Argentine presidential election and immediately announced the beginning of his new attempt at import-substitution, aiming to achieve national self-reliance on oil. Just over a decade after its establishment, the IMF would intervene in Argentina’s increasing inflation rates, putting strict conditions on the release of funds, including mandates that: wages must be frozen; government deficits cut; money-supply restricted; price and exchange controls lifted; and a devaluation of the Peso. This austerity plan was accepted by Frondizi, which garnered support from larger industrialists and landowners, to the dismay of common citizens. This approach offered a slight, short-term benefit to the economy in 1960-1961 due to massive influx in foreign investment; however, price uncertainty eventually led to balance-of-trade deficits which would eventually be funded by IMF-approved loans.[11]

By 1962 the military deposed the former president after he lost congressional elections; the replacement governments headed by José María Guido and Arturo Umberto Illia chose to reverse Argentina’s trade policy by adopting a reformist-nationalist strategy for economic recovery.[12] In 1970, the military government introduced a new currency, the Peso Ley (ARL), under an expansive monetary-policy which would last until its replacement in 1983 due to hyperinflation.

In a reaction to the energy-crisis in 1973-1974, the World Bank furthered its commitment towards trade liberalization, and abandoned its support for public enterprises.[13] As Perónism reigned from the mid-1970s onward, there was a clear trend toward a higher share of the gross operating surplus (GOS) in the GDP at the expense of the wage share.[14] Isabel Perón took over the Argentine presidency, succeeding her husband, between 1974-1976.


Following the Perónist saga, the US-led “Operation Condor” developed a campaign to install dictatorships within the southern nations of South America beginning around 1975, and by 1976 the Military Junta had begun the National Reorganization Process which would lead to human rights abuses, increased inequality, and diminished living standards. The 1982 international debt crisis triggered a change in U.S. foreign policy characterized as the Brady Plan in 1985, which eventually resulted in renegotiated debt with Argentina, and promoted privatization of core areas including petroleum and minerals.[15] In 1982, 400,000 Argentine companies had gone bankrupt, and the country would go through three different presidents.


The end of 1983 marked the end of Argentina’s military government and a new democracy as Raúl Alfonsín became president and would hold office until 1989. Alfonsín would soon create a government inquest into the crimes and disappearance of persons during the prior coup, however in 1996, Argentina would pass the Full Stop Law granting amnesty to military subordinates until the Supreme Court would reopen investigations in 2005. With democracy reinstalled, Argentina would also convert their currency to the Peso Argentino (ARP), which would be devalued to promote exports, until its replacement in 1985. The Austral (ARA) currency, its successor from 1985 until 1991 would be plagued by hyperinflation, with monthly inflation rates up to 300% in 1989. Argentina was experiencing shock, and this extremely volatile economic atmosphere was inherited by Carlos Menem who served as president between 1989-1999.


Menem was instrumental in carrying out extreme neoliberal reforms;[16] he was openly receptive to foreign-aid, and by the end of 1989 the World Bank had a proactive role in Argentine policy reform.[17] The World Bank “had access to virtually all areas of the Argentine state and to organized groups, such as trade unions”; and “resisted the involvement of the Argentine Labour movement in changes directly affecting its interests.”[18] Furthermore, IMF loans imposed excessive conditions which few countries could have complied with.[19] In 1990, the Argentine government issued Fiscal Agency Agreement Bonds (under the Austral currency), which could be considered onerous debt for the following government who would inherit power prior to the 2001 financial crisis. “The extent and depth of macro-economic reform in Argentina between 1991 and 1996 was unprecedented, maybe greater than in any other country during a similar time span.”[20] From the mid-90s onwards, poverty and unemployment grew exponentially.[21] Socioeconomic satisfaction persistently declined throughout 1980s-1990s.[22] The government of Argentina is described as experiencing “institutional weakness due to the years of bureaucratic-authoritarian dictatorships followed by neoliberal policies after 1990 under Menem.[23]

In 1991, Argentina introduced a new central bank charter that would create a currency-board association (CBA), tasked with deregulation of the economy, and later, the liberalization of capital flows; the CBA also controlled bank liquidity, invested in the public bond market, and held a large fraction (10-20%) of reserves in short-term, $USD denominated, Argentine government paper.[24] Argentina’s new Peso ($ARS) began its fixed exchange-rate policy with the $USD which was intended to both attract foreign-investment (due to stable future expectations) and end hyperinflation (Argentina’s inflation rates reached international levels by 1994). According to Cavallo & Cottani, the three key elements to the successes of the Argentine convertibility system are: “(1) it was established by a law; (2) it abolished price indexation; and (3) it allows contracts to be denominated in foreign currencies and even allows foreign currencies to be used as alternative means of payment… In particular, dollarization allowed the extension of financial asset maturities, eliminating the short-term debt overhang. Also, from a political point of view, convertibility was a smashing success. It stopped hyperinflation without producing a recession and without causing regressive income redistribution”[25]


“Argentina emerged as one of the model cases of global neoliberalism during the 1990s.”[26] However, Argentina’s debt would eventually grow, while their export value decreased; GDP fell, and hyperinflation continued. Argentina’s debt was also downgraded twice by 2001. The new Peso would survive the effects of Mexico’s “Tequila Crisis” in 1995; but leading up to 2001, Argentine banks were taking Peso deposits while issuing USD$ loans, creating further debt-risk exposure. The IMF attempted to forestall Argentina’s pending financial crisis,[27] without offering a sustainable policy framework; while the Argentine central bank attempted to monetize government deficits in the late 1990’s, ultimately resulting in funding shortages for social security.[28] However, historical economists posit that the lengthy duration of the Convertibilidad policy was ultimately responsible for economic collapse;[29] as Argentina was hit in 1998 and 1999 by a strengthening $USD, increasing international interest-rates, and the effects of the devaluation of the Brazilian Real.[30]


In 1999 Fernando de la Rúa of La Alianza was elected as president. Around this time, Argentina was experiencing the effects of external shocks from the financial crises in Russia and Brazil.[31] The government’s continued poor performance led to further deterioration of governmental institutions (worsening institutional weaknesses). Two years after new leadership, 2001 marked the peak of Argentina’s economic recession (consistent negative GDP growth). As GDP was falling, Argentina was experiencing increasing inflation and a growing debt burden, with nearly all public-sector debt held in foreign-currency denominated bonds.[32] The IMF lent over $21B to Argentina over the course of 2001, before defaulting on its foreign debt payments of $155B.[33] This economic volatility would eventually put an end to the convertibility regime, with a new law stating that re-pegging would only take place with a selected basked of $USD and Euros, only once the Euro (€EUR) reached parity with the $USD.[34]


Argentina’s crisis process consisted of several steps: the division of the government; internal defections; ongoing activist protests; the Executive’s isolation, then opposition; and, activist cooperation. Together these elements provoked the government to infringe on collective rights, triggering the mass-mobilization of December 19th  and 20th.[35] The protestors adopted the slogan “¡Que se vayan todos!” or “Everyone Go!”, referring to their demands for the resignation of corrupt government officials. Argentina’s 21.6% unemployment rate was foundational in triggering a critical-mass of organization (protests) due to ordinary citizens joining activist, union, and student-led protests.[36] This would lead to the resignation of Fernando de la Rúa, and the following congressional appointment of Adolfo Rodríguez Saá as president.


Argentina’s default on their debt would also trigger a “bank-run” on USD$ deposit accounts, with one-fifth withdrawn by December. The Corralito was implemented, which limited bank withdrawals and “pesified” USD$ accounts at a lower exchange-rate. Argentina’s government debt default would eventually be the basis of lengthy litigation against “vulture funds”, notably NML Capital. Rossi describes the creation of a “vulture fund” of creditors who refused to participate in a debt restructuring process of a sovereign state.


Following their 2001 sovereign debt default, Argentina was unable to secure credit from lenders and/or investors, especially after severing negotiations with the IMF due to alleged reporting-data manipulation. The following is an excerpt from an IMF evaluation report:

“In retrospect, it would have been better to have pushed for such a change much earlier in the 1990s. A clear position on the need for exit would have shaped subsequent exchanges with the authorities. Even after the onset of the crisis in 2000, the IMF’s strategy remained essentially unchanged. This reflected two factors:

  • (1) The IMF’s culture discouraged questioning a member country’s choice of exchange-rate regime, despite the fact that, from the late 1990s, guidance to staff increasingly stressed the importance of providing candid advice to member countries on exchange-rate policy in the context of bilateral surveillance.
  • (2) The IMF lacked a forward-looking concept of exchange-rate sustainability and failed to use the best analytical tools. At most, staff looked at standard measures of the real exchange-rate based on past price developments, and came to the conclusion that the real exchange-rate was at most moderately overvalued by the end of the 1990s. But a deeper and more systematic analysis of the conditions facing Argentina would have led to the conclusion that, in 2000, Argentina’s fixed exchange-rate could not be sustained for long.”


By 2002, Argentine Government debt was 50% more than its GDP; this led to a devaluation of Peso due to poor expectations, increasing export and decreasing import values. Eduardo Duhalde was elected president between 2002-2003. “After defaulting on its external obligations and confronted with the absence of international credit, the Argentine government in 2002 began to force exporters to liquidate foreign earnings at the Argentine currency market and placed restrictions on buying dollars from the Central Bank. This inflow of dollars… was the foremost contributing factor to the 67.3% industrial output increase over this period.”[37] This output growth led Argentina to re-introduce taxes on exports that would help generate further government revenue,[38] to the disappointment of smaller farmers who were easily priced-out of their markets by larger competitors.


In 2003, Néstor Kirchner was elected as president on a platform he presented as progressivism. Shortly after his appointment, he declared the IMF as an enemy of Argentina. “The main policy instrument of the new macroeconomic governance under Kirchnerismo is the Competitive Exchange-rate (CER), a monetary policy centered on sustaining the value of the US dollar at a higher value than the Argentine peso. Even if the ‘high dollar’ in 2002 was the outcome of the post-Convertibility devaluation, the merit of the current government has been to make it a macroeconomic policy that is at the centre of the new economic model.”[39] Kirchner’s policy instrument of export-promotion and import-substitution greatly benefitted from external demand-growth from China. After May, 2003, when the “Model of Growth with Social Inclusion” came into effect and after the recession of the late 1990s, Argentina experienced economic recovery, a fall in unemployment and an improvement of social indicators. “The three macroeconomic pillars that were identified as central to the success of the ‘Model’: a competitive exchange-rate, a budget surplus, and an external surplus.”[40] Between 2003 – 2010, GDP grew by 79%, minimum-wage increased by 200% and real wages went up 34% by 2009.[41] The analysis model developed by Berkmen demonstrates the improvements were mainly caused by higher world commodity prices, with Argentina’s reclamation of their monetary policy having the effect of countering an increase in interest-rates and output costs.[42]

The U.S. Congressional Joint Economic Committee released a report in June, 2003, entitled Argentina’s Economic Crisis: Causes and Cures. The report sought to represent Argentina’s four-year-long financial crisis in 1998 as a result of externalities. The U.S. government strongly denounced claims that Argentina’s experience is “an example of the failure of free markets and fixed exchange-rates”,[43] and sought to specifically discredit other arguments claiming that corruption, the Argentine currency-board association (CBA), and exchange-rate overvaluation had some responsibility for its financial crisis.


Less than a year later on Wednesday March 10, 2004, the U.S. Senate subcommittee on International Trade and Finance of the Committee on Banking, Housing, and Urban Affairs, held a hearing on Argentina’s financial crisis.[44] Senator Chuck Hagel opened the hearing noting the specific amounts of privately-held, defaulted Argentine debt, and asking for input on the impacts on U.S. direct investment and the IMF’s role in protecting private investments. Senator Evan Bayh’s comments added his fears of Argentina’s default, without consequence, as setting a dangerous precedent in the long-term. Bayh expressed his skepticism towards Argentina’s recent announcement to recognize their creditors, bolstered support for the IMF’s credibility, and sternly addressed the creditors in attendance of future failure to hedge their risk though loan premiums, even (ironically) warning creditors that “no one will be coming running to your rescue in the future to try and help you”.[45]  The witnesses heard included:

  • Roger Noriega [Assistant Secretary for Western Hemisphere Affairs S. Department of State] was glad to see Argentine payments made to the IMF, and noted “Kirchner stressed he wants to make Argentina a more predictable nation.”[46]
  • Michael Mussa [Senior Fellow – Institute of International Economics] noted institutional weakness in Argentina as the root of their recent financial crisis.
  • Randal Quarles [Assistant Secretary for International Affairs U.S. Department of the Treasury] pointed out the lack of fiscal spending limits which led to unrestricted lending in Argentina’s federal and provincial governments, as well as the impacts of the financial crisis and de-pegging of the Peso which caused real-GDP to fall by 11% in 2002, inflation rose to over 40%, the Peso depreciated by 69%, and unemployment rose to 24%. He also noted that he believed that Argentina’s economic stance, in regards to its debt default, was unlikely to be emulated by other countries.
  • Adam Lerrick [Leader of the Negotiations Team of the Argentina Bond Restructuring Agency (ABRA), & Director at Gailliot Center for Public Policy], represented Argentina’s largest creditor in their debt restructuring process. ABRA is also one of three founders of the Steering Committee of the Global Committee of Argentina Bondholders which collectively held $37B in bonds, more than two-thirds of the total Argentine debt held by foreign investors. His statement almost immediately blames U.S. president Clinton’s bailout policies in the 1990’s as having “socialized the risks and privatised the returns from emerging market lending.”[47] He warned of the changing expectations behind debt-defaults which were increasingly being followed by new debt issuances, putting governments in precarious situations, and resulting in costly bailouts (funded by G-7 taxpayers). The statement end by echoing other writers’ claims[48] that the delays in sovereign debt restructuring actually benefit borrower (by halting the accrual of interest).


In 2005, Argentina held debt negotiations, and entered into its first sovereign debt restructuring process. The Argentine congress also passed the Lock Law, forbidding the government to re-open the debt-exchange offer and forbidding them from conducting any settlement with non-participating bondholders (in the restructuring process). Argentina would eventually pay-off most of their IMF and multilateral-agency debt; with their debt-swap accepted by 90% of creditors. However, these agreements included extra payments to bondholders if the Argentine economy growth was greater than 3.25% per year, causing further hindrance to Argentina’s growth and sovereignty.


In 2007, Christina Kirchner was elected as president, succeeding her husband. The integration of American economic standards was furthered in December of 2009. Based on a recommendation of the national voluntary professional accountancy organization, the CNV (the National Securities Commission, which is an agency of the Argentine Ministry of Economics and Public Finance) adopted a requirement that all companies regulated by the CNV must prepare their financial statements using IFRS Standards for annual periods beginning on/or after January 1st, 2012. However, this requirement was not applicable to domestic banks and/or insurance companies.


Between 2008-2010, 5 TNCs controlled 79% of soy exports (replaced dominant control previously retained by IMF).[49] The FAA estimated land-size of Uruguay was owned by foreign nationals in Argentina, but government was still sympathetic to foreign direct investment (FDI) in land for soybean exporters.[50] In 2010, Argentina entered into its second debt restructuring process which was also being conducted during ongoing litigation. At this point, 91% of Argentina’s debt was comprised of “participating” bonds.


By 2011, Argentina’s restructuring was impeded by the decision in NML Capital v. Republic of Argentina.[51] The court entered an injunction providing that, “whenever the Republic pays any amount due under the terms of the [exchange] bonds,” it must also pay plaintiffs “the same fraction of the amount due them (the ‘Ratable payment’).” Argentina’s appeal in 2012[52] led to U.S. Federal Trial Judge Griesa’s interpretation of pari passu (equal treatment of creditors) which would bar the Argentine government from paying restructured debt unless it paid its “holdout” creditors, giving priority to the property rights and the speculative purposes of the bondholders who had not agreed to the restructuring agreement. Weidemaier posits that Argentina could have either surrendered in its decade-long fight against holdouts, or defaulted on payments bondholders – as both choices are consistent with the injunction, with starkly different consequences.[53] This also presents the potential U.S. interpretation of pari passu as a bar to sovereign’s ability to enact legislation similar to Argentina’s Lock Law enacted in 2005. NML Capital even won a favorable verdict in Ghana that allowed for the seizure and detention of an Argentine navy ship, challenging the assumption of asset immunity previously assigned to sovereign debt. President Cristina Fernández’s government would also nationalize YPF in April, Argentina’s largest oil company, causing tensions with Europe. In 2013, Argentina’s appeal in the U.S. was denied. In this year, Argentina also became the first country to be censured by the International Monetary Fund for not providing accurate data on inflation and economic growth, under a procedure that can end in expulsion. On July 31, 2014, Argentina defaulted on their debt for their third time in twenty-five years.


Mauricio Macri, Argentina’s current president, was elected president on December 10, 2015; he was the first non-radical or non-Perónist party candidate to be elected since 1916. In February 2016, Argentina finally reached a settlement agreement, ending the 15-year-long litigation with holdout creditors, by offering a 75% valuation (including principal + interest of original claim value); whereas, other bondholders had already accepted between 30%-50% valuations. This caused the New York court’s injunctions to be lifted allowing capital market investment. This case highlights the issue of a foreign judiciary’s ability to be influenced by a sovereign’s perceived attitude towards creditors (especially due to the lack of a framework for debt-restructuring).

By April, 2016, Argentina had announced a $16.5B debt-issue. Then, in October, Argentina sold-off $2.8B of their debt (€2.5B euro-denominated dual-tranche debt) due to the expectation of future GDP contraction, and external threats from expectations of $USD interest-rate increases. These actions parallel the forecast of the U.S. government with added risks due to more complicated securities developed through financial engineering.


Annual GDP decreased in 2016, the following year saw a boost in annual GDP growth, with another recession forecasted for Argentina’s near-future by the World Bank. This past year, in 2018, Argentina experienced –2.8% annual GDP growth. Over the same year, the International Finance Corporation (IFC) of the World Bank had approved five investment projects, three focused on financial institutions, and two focused on agribusiness and forestry.

As described in the World Bank’s investment disclosures, the three IFC financial-sector loans are to be used for: (1) Banco Itaú Argentina to begin a 5-year lending program for small-to-medium enterprises (SMEs), and a 7-year lending program for its sustainable energy portfolio; (2) Banco Industrial to finance small-to-medium enterprises; and (3) an investment in a 7-year “green bond”, to be issued by Banco de Galicia y Buenos Aires, whose proceeds will be used to finance sustainable energy sub-projects in Argentina. The two agribusiness and forestry sector loans offered to the San Miguel Corporation and Vicentin S.A.I.C., are to be used for rescheduling and refinancing existing loans, and for the relocation of packing plant and offices, improvements in plantations and working-capital financing. The intended purpose of these loan agreements is to enhance Argentina’s export sector global-competitiveness in order to obtain growth in foreign revenues to offset its current financial crisis. The financial sector loans are similarly intended to mitigate macroeconomic crisis assumingly through SME business diversification by making hundreds of millions of dollars available to be further loaned-out.

Currently, Argentina is also supported through three projects promoted by the World Bank’s Multilateral Investment Guarantee Agency (MIGA), which are mostly invested in the financial sector through the commercial bank, Banco Santander Rio, with one project invested in the Los Hercules Wind Farm infrastructure.




Occupied by a large majority of descendants of European immigrants, Argentina inherited similar cultures and economic traits shared by colonies. Historically developed as a staples-export periphery economy, Argentina has been destined to be susceptible to global influence; this has caused a growing lack of faith in government institutions both domestic and internationally over the years.

American corporatist influence has guided Argentina’s history through the U.S. funding of violence against socialism, the IMF acting as a U.S. intermediary, and coalitions of private creditors holding sovereign debt. Latching on to the U.S. exchange-rate helped foreign investors’ expectations, until U.S. monetary policy ignored the importance of this relationship, to Argentina’s demise. Unchecked lending was nobody’s problem until Argentina was unable to make their payments. The practices of financial engineering financed by bailouts created a continuous atmosphere of boom and bust with no end in sight for a great deal of Latin America.

Similar to Naomi Klein’s descriptions of international disaster capitalists utilizing the shock doctrine to corporatize governments in crisis, Argentina has experienced a constant wave of political and economic crises, ultimately to the benefit of international capitalists. Argentina probably would have benefitted greatly from an already-established sovereign debt restructuring framework, avoiding uncertainty from lengthy litigation and costly judgements.

One thing for certain in Argentina’s future is that there will be lots of uncertainty. Argentina has become an internationally known worst-case-scenario in terms of overall handling of their sovereign debt, however it was never truly their system to begin with.





Bibliography & Endnotes


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[1] Briones & lo Vuolo, Cara Levey, Daniel Ozarow & Christopher Wylde, eds “Argentina Since the 2001 Crisis: Recovering the Past, Reclaiming the Future” (New York: Palgrave Macmillan, 2014).


[2] Britannica Online Encyclopedia, online: <>.

[3] José Antonio Sánchez Román, “Taxation and Society in Twentieth Century Argentina” (New York: Palgrave Macmillan, 2012), at 13.

[4] Lee Alston & Gallo Andrés, “The Erosion of Checks and Balances in Argentina and the Rise of Populism in Argentina: An Explanation for Argentina’s Economic Slide from the Top Ten” University of Colorado Institute of Behavioural Science Research Program on Political and Economic Change: Working Paper PEC2005-0001, at 9.

[5] Ibid at 11.

[6] Ibid at 12.

[7] Ibid at 13.

[8] Ibid at 5.

[9] Britannica Online Encyclopedia.

[10] Holger Wolf & Atish Ghosh et al “Currency Boards in Restrospect and Prospect” (2009) MIT Press Scholarship, online: <10.7551/mitpress/9780262232654.001.0001>.

[11] David Pion-Berlin, “Political Repression and Economic Doctrines: The Case of Argentina” (1983) 16:1 Comparative Political Studies 37, at 56.

[12] Ibid at 57.

[13] Judith Teichman, “The World Bank and Policy Reform in Mexico and Argentina” (2004) 46:1 Latin American Pol & Society 39, online: <>, at 43.

[14] Supra note 1.

[15] Supra note 13 at 42.

[16] Ziya Önis, “Varieties and Crises of Neoliberal Globalisation: Argentina, Turkey and the IMF” (2006) 27:2 Third World Quarterly 239, at 241.

[17] Supra note 13 at 57.

[18] Ibid at 64.

[19] Supra note 1 at.

[20] Domingo Cavallo & Joaquin Cottani, “Argentina’s Convertibility Plan and the IMF” (1997) 87:2 American Economic Rev 17, online: <>, at 18.

[21] Onuch, Supra note 1 at 95.

[22] Ibid at 97.

[23] Ibid.

[24] Supra note 10.

[25] Supra note 20 at 17.

[26] Supra note 16 at 243.

[27] Supra note 1.

[28] Supra note 10.

[29] Supra note 1.

[30] Shinji Takagi, “The IMF and Argentina, 1991-2001” (Washington DC: IMF, 2004), at 64.

[31] Supra note 10.

[32] Ibid.

[33] Argentina, online: <>.

[34] Supra note 10.

[35] Onuch, Supra note 1 at 100.

[36] Onuch, Supra note 1 at 90.

[37] Supra note 1 at 74.

[38] Ibid at 76.

[39] Ibid.

[40] Ibid.

[41] Ibid 71.

[42] Pelin Berkmen, “Macroeconomic Responses to Terms-of-Trade Shocks: A Framework for Policy Analysis for the Argentine Economy” (May 2009) IMF Working Paper.

[43] Jim Saxton, “Argentina’s Economic Crisis: Causes and Cures” (June 2003) US Congress Joint Economic Committee, online: <>.

[44] Argentina’s Financial Crisis: Hearing before the Subcommittee on International Trade and Finance of the Committee on Banking, Housing, and Urban Affairs, United States Senate, One Hundred Eighth Congress, second session, on Argentina’s current economic and political situation, focusing on the bilateral relationship between the United States and Argentina, March 10, 2004, online: <>.

[45] Ibid at 3.

[46] Ibid at 5.

[47] Ibid at 21.

[48] Ran Bi, “Beneficial Delays in Debt Restructuring Negotiations” (February 2008) IMF Working Paper.

[49] Rivera-Quiñones, Supra note 1 at 80.

[50] Rivera-Quiñones, Supra note 1 at 82.

[51] NML Capital Ltd v Republic of Argentina, (S.D.N.Y. Dec. 7, 2011) (No. 1:08−cv−06978−TPG), ECF No. 353.

[52] NML Capital Ltd v Republic of Argentina, (2d Cir. Oct. 26, 2012) (Nos. 12-105(L)).

[53] Mark Weidemaier, “Sovereign Debt After NML v. Argentina” online: <>.


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