Is Argentina heading toward economic crisis – again? | CNBC Explains

Is Argentina heading toward economic crisis – again? | CNBC Explains


Argentina was once one of the
richest countries in the world. But over the last half century, it has been hit by a
major economic crisis roughly once every decade. For citizens of South America’s
second-largest country, this boom and bust cycle is a
situation that is all too familiar. So why does Argentina seem
to be stuck in this pattern? Argentina’s most recent economic
turmoil began in August 2019, after a surprising result in its primary elections
set off a shockwave in financial markets. That’s because the sitting president, Mauricio Macri
lost to his rival by a far bigger margin than expected. The business-friendly incumbent has since
been ousted by the opposition ticket of centre-left candidate, Alberto Fernandez, and his running mate,
former president Cristina Fernandez de Kirchner. A return of the left to power has set alarm
bells ringing for international investors, with many concerned it could herald a
new era of government intervention. The primaries on August 11 had a dramatic effect
on Argentina’s stock market, known as the Merval. It collapsed by 48% in dollar
terms the very next day. That marked the second-biggest
one-day fall anywhere since 1950. The market chaos was so extreme
that Argentina was estimated to have lost $3 billion in
reserves in just two days. The government has since restricted foreign
currency purchases in an attempt to steady the ship, putting financial restrictions on companies
as well as the country’s citizens. But unfortunately for Argentina, this kind
of economic turbulence is all too familiar. In addition to wine, steak and tango dancing, Argentina
is known for enduring economic meltdown. To understand why, we first need
to look back at its long history. A century ago, Argentina was one of
the 10 richest countries in the world. The resource-rich nation boasted vast amounts of
highly fertile land and was able to capitalise on this to become one of the most important
exporters of grain and meat. By 1910, its trade amounted to 7% of the global total,
making it the so-called “breadbasket of the world.” Then the Great Depression arrived in
1929 and global trade took a huge hit. Latin American trade
declined by nearly 40%, and Argentina’s meat exports to
Europe fell by more than two-thirds. While its competitor, the United States tackled
the problem with programs like the New Deal, Argentina was paralyzed and began to move
toward nationalism and protectionist policies. Tariffs jumped in the 1930s, with the average import
tariff increasing from 16.7% in 1930 to 28.7% in 1933. The government also began manipulating exchange
rates in an attempt to protect the local industry. The government deepened these policies during World
War II and with General Juan Peron’s rise to power. After a long history of policies that favored
the rich, Peron and his second wife Eva became beloved figures among the country’s urban workers,
thanks to a wide range of new social welfare benefits. And his legacy lives on, with many of Argentina’s
politicians throughout the years calling themselves Peronists, including its
newly elected leaders. While the U.S. and Europe
lowered the barriers to trade, Argentina sought industrialization
within its borders. Unfortunately, that wasn’t enough
to kickstart its economy, with industrial productivity increasing at an
average of 2.6% between 1946 and 1963 and then actually declining at an annual
rate of half a percent until 1974. The government was increasing
spending and discouraging exports, meaning it had to borrow more and more
money to keep everything running. Gradually, what was once one of the world’s most
stable economies became one of the most volatile. To date, Argentina has defaulted
on its debt eight times, and on two separate occasions
already this century. In fact, over the last 70 years, Argentina
has spent 33% of the time in recession. By comparison, its biggest neighbour Brazil has seen
recession 12% of the time over the same period. The perennial tendency for Latin America’s
third-largest economy to slip into crisis-mode has made hyperinflation, currency devaluations
and bailouts from the International Monetary Fund very much part of the routine. This long series of economic crises has made
Argentina the only nation in modern history to regress to developing
country status. But, it was perhaps the historic economic collapse
of 2001 that saw Argentina really hit rock bottom. At that time, the country earned the dubious
distinction of recording what was then the biggest debt
default in history. People were pulling out more money
from the banks than they had, and widespread civil unrest
led to deadly street riots. The economic collapse famously led to the
former head of state Fernando de la Rua escaping the presidential palace roof by helicopter,
just moments after presenting his formal resignation. Later that same year, Argentina
proceeded to fall even deeper into crisis. The country had four presidents in two weeks
and defaulted on nearly $100 billion in debt. Nearly a generation later and the warning signs on
Argentina’s economy are flashing red once again. And, in the spring of 2018, the IMF readily-
stepped in to offer a record-breaking bailout. Argentina’s chequered past with the IMF
stretches back more than six decades. Since it first sought the fund’s help back in 1958,
Buenos Aires has signed 22 agreements with the global crisis lender, most of which
have ended with bad blood on both sides. Nonetheless, in the midst of another economic
storm and just a year before the 2019 election, President Macri controversially signed Argentina up
to the biggest loan package in the history of the fund. The whole point of the bailout was to get investors to
feel confident about putting money into the country and hopefully attract enough new funding from the
private sector to continue spending on imports. That program, and the austerity measures that
came with it, was rejected at the primaries. And the subsequent chaos in financial markets
has forced the country to delay payments on around $100 billion of local and foreign debt
and restrict foreign currency purchases. By the end of August, the super-sensitive peso,
seen by some as a guide for Argentina’s economy, had tumbled more than 51% against
the dollar since the start of the year. Some analysts argue it is the twin mistakes
of Argentina’s government and the IMF that are to blame for the country’s current problems,
others claim it has fallen back into crisis mode for the simple reason that it hasn’t
changed enough since the last debacle. The latest downturn has stoked fears that Argentina
could soon register its ninth credit default, making it a pariah among
global investors once more.

100 Comments on "Is Argentina heading toward economic crisis – again? | CNBC Explains"


  1. venezuela bolivia cuba argentina now chile all of us in latin america can’t seem to get out of this crisis cycle

    Reply

  2. I'm from Argentina and I can tell that living here it's like "Groundhog Day" movie, every ten year the history repeats once again

    Reply

  3. rofl…as if it isnt already a fucked up economy due to neolib chicago boy plunderings. and of course as soon as theres a new non neolib government elected the future regime change is initiated with the stereotypical question "is xy heading towards eco… crisis". next is people suddenly fighting for democratic rights, and elected presidents are suddenly called ""presidents"" followed shortly by "dictator" asf…plz do me an intellectual favor. get some new plots for the sake of good entertainment, yes? thx

    Reply

  4. They get billions of dollars from the IMF, get wealthy beneath anyones imagination and we get to pay the debt for decades. Well, thanks to Satoshi Nakamoto we now have a way to get rid of the worthless government paper money and store our wealth away from their claws. Bitcoin is our only hope…

    Reply

  5. The long rope given by imf to Argentina is baffling
    If it was a poor Asian nation I fail to see them getting so many chances and messing it up

    Reply

  6. Chile & Argentina are the only two developed countries in South America but protests & low economy is ruining them all

    Reply

  7. Messi Messi Messi Messi Messi Messi Messi Messi Messi Messi Messi Messi
    Argentinian economy is messy

    Reply

  8. Lending money is a risk. Lending money to Argentina is gambling. If IMF etc lends them money, it is their fault, not the fault people of Argentina.

    Reply

  9. The United States will soon be worse than Argentina when Hispanics and African Americans are the majority.

    Reply

  10. Well we didn't understand what was the reason behind these crises. There is no way the protectionism caused these…it was IMF that caused 2001 economic crisis

    Reply

  11. Trust me Philippines is way worse than Argentina. "We are the new Venezuela of Asia 10 years from now !!!"

    Reply

  12. Why the fuck is the West so worried about other nations ?

    Is it because they still consider the world as their colony or empire ?

    I think that’s the case.

    The so called world economy is a big scam to serve the interests of the West and their 1% criminal enterprise –

    if something is not going as they want to – they will destroy that country by invading , overthrowing regimes or destabilising that place to smithereens

    Reply

  13. Да уж, протекционизм даже в 20 веке не работал. А сегодня Россия пытается (

    Reply

  14. Do a video of their neighbor. Chile and how their economy has been and how the future seems for the country. Apreciado👌🏽

    Reply

  15. heading toward economic crisis??/?? i think they hit that point awhile ago… stupid fucking millennial's…

    Reply

  16. We didn’t have any debt before this US/MFI got to power in 2015, and started dismantling what took 12 years of a balanced government to build.

    Reply

  17. Make a video on Indian economy which has slipped in ranking economically and banks don't have money to pay to there citizens…

    Reply

  18. in argentina we do not ask if we are heading toward a economic crisis, we ask only when ?
    our country works this way :
    4 to 5 years of stability (no grow just status quo) ,
    2 grow maybe 3 if lucky ,
    after that 4 or 5 of falling a part , repeat.

    The reason is pretty simple we have 2 main political groups one is political and depends of keeping people happy to win so they help a bit (not that much they win during crisis usualy)
    they keep status quo and then a bit of grow(only in areas they need votes),
    after that people change for another because they dont fix core problems , and they try other politics .
    Sadly all others dont need votes they represent economic powers so they rebuild the sistem to help those economic powers.
    Then we fall into economic crisis usualy people gain less and less money , stop buying stuff , the economic internal market fall .
    Lately the energy company was clearly one of the winners, and financial bancarian movements. Most produccion , selling products to people lost money.

    My bet: (2019) next 1 or 2 economy will keep going down , stop there for 3 years and then 2 slow growing, after that depend of the popularity of the big money politicians.

    Reply

  19. … – again?
    What do you mean? Argentina has been and still is in an economic crisis. Wasn't Macri supposed to have rescued Argentina with a Wall Street playbook? Didn't work, huh?

    Reply

  20. Argentina is living a perpetual economic crisis for the past 70 years The reason? Socialism and corrupted politicians

    Reply

  21. This is false. Argentina was only rich before 1930. After that, Argentina has lived from one crisis to another. Every decade becoming worse.

    Reply

  22. Problem with ARGENTINA is pride. I have never met an Argentinian who admit it to me that there is anything wrong with Argentina. To an Argentinian, Argentina is the best, the NUMBER ONE, the most European nation of the Americas, the best of the best. So "best" are they that they have become the shithole of LATIN AMERICA.

    Reply

  23. I really loved the way you simply tips to the yesterday to today
    I feel sorry for those, guys they will be both by who knows?

    Reply

  24. As an argentinian I can only say:
    We never learn from our mistakes, we choose the same useless and corrupt politcians over and over again (Unsurprinsingly leftist politicians) They destroy our economy, and we struggle for years to get out of the crisis, only to fall again in another one in a few years.
    So, who is to blame? Corrupt politicians, and our culture of choosing them, this election a party that promoted free market economy and capitalism appeared after many years, guess what happened, they ended up in the last place with less than 2% of votes.
    This crisis is just one more of the many that will come…

    Reply

  25. Do one on India. This is one of the most screwed up counties in the world. It figures at the bottom of every socio economic index as well as per capita income. World Hunger Index was published a week back and India stood at 112 out of 117. All sectors of the economy have been registering negative growth and yet the government claims the GDP is growing at 5%. We feel numbers are being fudged and this need to be brought to light.

    Reply

  26. Peronismo = Cancer…

    Unfortunately, the marjority of people there love Peronistas.

    Peronistas do not respect any existing contract with other nations…they aways want to renegociate..just as long as they don't have to pay it rightaway.

    Reply

  27. Argentina has gone to shit since Macri made his neoliberal bullshit but somehow you're talking about it now that they've elected a leftist candidate? Media manipulation is getting so fucking cheap, try harder

    Reply

  28. What this moron forgot to mention is that the problems in Argentina started with the imposition of neoliberalism.

    Reply

  29. Argentina is a drug addict, and the IMF only lends cocaine, allowing Argentina to be lazy and not face reality until the next crisis.
    Without the IMF, Argentina would had be obligated to implement much better governance.

    Reply

  30. Probably, Argentina is selling its resources to China to feed the huge Chinese appetite. Fisheries is one of them.

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  31. Then again, the people continue to vote for those who bring them nothing but poverty and recession so they deserve everything they get

    Reply

  32. Due to huge Debt. Maybe they can't pay it back. That is why you should never borrow money if you can't pay it back.

    Reply

  33. Economic crisis fucking USA made things worst for each of their counterpart, every country is struggling with economic crisis

    Reply

  34. White Flight since the 1930's will do that to you. These Whites are replaced by massive waves of lower skilled Mestizos and Amerindians from surrounding nations like Bolvia and Peru everyday. Take a good look at Argentina because this is the future of the United States.

    Reply

  35. MIX OF CAPITALISM,SOCIALISM,BEST.DO COMMANDMENTS,DO LOTS OF GOOD DEEDS,LOVE FREEDOM,JUSTICE,INNOVATION,START BUSINESS..LOVE KING OF JEWS , JESUS CHRISTOS,LOVE ALL GOOD NON VIOLENT COUNTRIES.ARGENTINA IS GOOD WITH FARMING,CATTLE,SOYA,FISH,OWN CELLPHONE,YES THEY ARE DOWN,BUT ALMITY WILL HELP THEM TO DO COMMANDMENTS SO THEY CAN PROSPER PERMANENTLY,ONLY ANSWER FOR ALL WORLD,AND BUILD 3RD TEMPLE,MUST LOVE JEWS..MESSI IS REASON ARGENTINA FALL,HE WAS PROMOTING ANTI JEWISH SENTIMENT..EG REFUSED SOCCER TEAM TO PLAY ISRAE..VERY BAD IDEA..WHAT HAPPENED..ALL INVESTORS WITHDRAW MONEY..ECONOMY COLLAPSE..IF U TOUCH ISRAEL U TOUCHING APPLE OF G-D , ALMITY S EYE..ITS LIKE JUMPING OFF A CLIFF INTO LAKE OF BOILING SULFUR , VOLCANOC FIRE..LOOK WHAT HAPPENED TO SYRIA..HATING ISRAEL…BOOM..RUINEOUS HEAP..PREDICTED 4000 YEARS AGO..ISIAGH 17 IS YOUR PROOF..LOVE U ALL..DONT FORGET YOUR COMMANDMENTS..613..MAKE SOUP KITCHEN ALL TOWNS,CITIES,TO HELP POOR,HELP WIDOWS,DO CHARITY..GIVE ALL POOR A PIECE OF LAND NEAR CITY , TO PRODUCE FOOD..WORLD FAMINE,PESTILENCE INCREASING..1 CHILD PER FAMILY LIKE CHINA AND WEST , ONLY ANSWER..WORLD OVERPOPPULATED BY 4 BILLIONS..LETS WAKE UP GUYS..

    Reply

  36. It's happening in most countries down there in South America. People pretend that nothing is happening until nothing is happening.

    Reply

  37. Fake!
    A couple spin on reality. In Argentina, the left has dominated economics. To the point that even center-right politicians as Macri have the same economic policies as the left.
    Argentina has not have a liberal government in many, many, many decades. And CAREFULLY! Read this, liberal has a very different meaning in Latin America and Europe than in the USA.

    Reply

  38. Everybody today is obsessed with what happened with nations that were once great and today just totally awashed with problems like Argentina, China, India and Islamic nations. One day these nations too will sit down and discuss what happened to Europe and America… Things are changing lad

    Reply

  39. Argentina needs to stop acting as a "big father" and overprotecting the population and its outdated system, but I don't think they realize this.

    Reply

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