Argentina engages in import substitution industrialization, facilitated by the decrease in imports during and after the Depression. Traditional export agriculture stagnates at the outbreak of World War II, however, and remains sluggish. At the same time, the intense growth spurt of the 1930s in industry gradually becomes stunted.
Perón nationalizes large parts of the economy and puts up trade barriers to defend them. He announces his first Five-Year Plan based on growth of nationalized industries. An environment of almost complete protection against imports creates a domestically oriented industry with high production costs incapable of competing in international markets.
Perón's second Five-Year Plan favors increased agricultural output over industrialization. But industrial growth and high wages in previous years have expanded the domestic demand for agrarian goods. During the '50s, output of beef and grain, the country's main export goods, falls, and the economy suffers. Argentina signs economic and trade agreements with Britain, the Soviet Union, and Chile.
President Frondizi inherits an economic crisis from Perón. Advice from the United States, substantial foreign loans, and credits help achieve some economic stability, at the cost of mounting debt. Economic growth picks up, but leftists and Peronists criticize Frondizi's stabilization program because the burden falls heavily on the working and lower middle classes.
The military government supports a more active role for the state in the economy. In a radical departure from past policies, the Ministry of Economy announces a program to reduce rising inflation while promoting competition, efficiency, and foreign investment. The international financial community offers strong support for this program, and economic growth continues.
Erratic economic growth reflects political turmoil as a series of economy ministers succeeds each other with inconsistent policies. A stabilization program combined with improved terms of trade finances brief economic prosperity in 1973. But international inflation increases the price of imports, and the oil crisis hits Argentina's economy through a drastic drop in the country's terms of trade.
The military shifts to an outward-oriented growth policy. The junta diminishes state intervention and promotes the private sector as an agent of growth. Success in decreasing inflation and increasing international reserves is mitigated by many factory closings and the growth of external debt. Open competition proves devastating for many industries. By 1980 a serious economic crisis develops.
Loss of access to external borrowing due to Mexico's debt crisis leads to hasty economic policies, capital flight, and inflation. In 1983 President Alfonsín asks the IMF for help after his improvised efforts to stabilize the economy fail. Argentina declares a moratorium on its debt principal and refinances its interest payments through a package deal involving several Latin American governments.
President Menem inherits a contracting economy, hyperinflation, and unserviceable debt. Economy Minister Cavallo opens the market to foreign competition and pegs the peso to the dollar under the Convertibility Law. Inflation plummets. He deregulates the electricity sector and launches a far-reaching privatization program comprising the oil, telephone, water distribution, and railroad industries.
The privatization program continues, expanding to the airline, gas, ports, and petrochemicals industries. The economic measures of Menem's administration together bring massive foreign investment and GDP growth. Large domestic conglomerates and multinationals dominate the industrial base.
Cavallo's vocal denouncement of corruption alienates him from the government and causes his dismissal. Under his successor, Roque Fernández, a series of external shocks rattles Argentina. The economy shrinks by 2.8 percent after the Mexican peso devaluation as consumer demand falls and credit becomes scarce. It rebounds quickly, but suffers another blow as a result of the Asian financial crisis.
Devaluation in Brazil, Argentina's main trade partner, triggers an exodus of industries to Brazil and contributes to an economic downturn. Falling commodity prices, bad weather, and uncertainty over upcoming elections put the economy back into recession. Menem orders a freeze on public spending.
Argentina enters the new millennium with massive external debt and poor economic performance. Investors express concern that Argentina might default on its debt. International financial institutions come together to offer a bailout package which provides a short respite from crisis but little real economic progress. In a Cabinet reshuffle, Cavallo returns as economy minister.
Having failed to stabilize the economy, Cavallo leaves in disgrace. The peso is devalued and drops 70 percent against the dollar. The collapse spreads from the banking sector to foreign exchange operations, and by late 2002 Argentina is defaulting on external debt repayments. After a lengthy standoff, a $3 billion IMF bridge loan is secured to cover the first half of 2003, until elections are held.
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