Abstract
Nobody thought, in the early 1990s, that Argentina’s public sector could easily recover access to capital markets after having being in default during the 1980s. However, while at the end of 1991 Argentina’s public indebtedness amounted to $61 billion, by the end of 1999 it had soared to $145 billion. Lenders could argue that they had lent money to a country that was at that time blessed by the IMF. In fact, the IMF played a key role in restoring confidence in Argentina by capital markets. It is hard to believe that lenders would have rushed to buy Argentine bonds without the IMF’s seal of approval. Continuous support by the IMF to the Argentine program, even after the Tequila crisis, showed its economy’s high sensitivity to external flows and allowed the government to pile up a huge debt, long after it was evident that the Convertibility regime was unsustainable. Finally, in 2001 Argentina defaulted again. This chapter shows this end was practically inevitable and emphasizes the role played by the IMF’s misjudgment on the sustainability of the Convertibility regime implemented by the Argentine government in 1991.
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Notes
- 1.
Although Argentina is known as a serial defaulter, its record is surpassed by many countries in the New World and by almost as many in the Old World including France and Germany (Reinhart and Rogoff 2004, 3).
- 2.
During the 1990s, there were four IMF arrangements: that under the Extended Fund Facility (EFF) approved on March 31, 1992; the Stand-By Arrangement (SBA) approved on April 12, 1996; the arrangement under the EFF, approved on February 4, 1998; and the SBA approved on March 10, 2000.
- 3.
See Beker and Escudé (2008, 23–24).
- 4.
At that time, the one-year US Treasury interest rate fluctuated around 3.6 %.
- 5.
Those interested in Argentina’s development after the 2001 devaluation and default may have a look at Frenkel (2012).
- 6.
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Beker, V.A. (2016). Argentina’s Debt Crisis. In: Modern Financial Crises. Financial and Monetary Policy Studies, vol 42. Springer, Cham. https://doi.org/10.1007/978-3-319-20991-3_2
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