The story of Argentina is the most depressing of all the case studies in this book. Argentina did many things right in developing a financial system that would promote economic growth. Unfortunately these efforts were not enough to ensure success for this emerging market economy. Structural problems in the Argentine economy, a failure to deal with fiscal problems, and some bad luck, which weakened macroeconomic fundamentals, led to a financial crisis that was far more devastating in a more long-lasting way than the crises in Mexico and South Korea.
Argentina's sad story begins with the high hopes engendered by a major shift in economic policy under the presidential administration of Carlos Menem: the adoption of the Convertibility Plan in April 1991.1
After a bout of hyperinflation in which inflation rose above 2000% in 1990, Argentina, under its minister of the economy, Domingo Cavallo, embarked on a bold plan of reform with the enactment of the Convertibility Law in April 1991. This law put in place a strong commitment to fixing the exchange rate of the Argentine peso, called a currency board. A currency board fixes the