Five Things You Didn’t Know about The Argentine Depression

Falling Peso Closes Stores Forcing Currency Exchange

Argentina’s economic depression, labeled the Argentine Great Depression, began in the third quarter of 1998 and lasted until the second quarter of 2002. Originally due to the Brazilian and Russian financial crises and a number of other economic factors and mistakes, the four year depression saw widespread astronomical levels of unemployment, riots, the collapse of the government, a default on Argentina’s foreign debt, and the rise of alternative currencies. From 1998 to 2002, the country’s economy shrank by 20 percent while over 50 percent of Argentinians were poor and 25 percent indigent. Read on to find out five things you might have never known about the Argentine Great Depression.

5. Argentina’s Government Simply Borrowed Too Much

One of the major reasons as to why Argentina slipped into a Great Depression was the extensive borrowing done by the government of former president Carlos Menem. The government acquired both foreign and domestic debt, sending domestic interest rates up. The more the government borrowed, the more expensive credit became for businesses, forcing many to close.

4. The Peso Was Legally Linked to the Dollar

In 1991, newly elected Minster of the Economy Domingo Cavallo made a disastrous move by legally fixing the value of the Argentine peso to the U.S. dollar. Cavallo hoped this fixed exchange rate would result in hyperinflation, but due to Brazil devaluing its currency in 1999, foreign investors found that their dollars could buy more in Brazil, leading to steady decline of Argentina’s GDP.

3. Citizens Almost Drained the Banks

Towards the end of 2001 in the midst of the Great Depression, Argentines started to believe that their pesos would be devalued. Citizens then rushed to the banks to convert and withdrawal large sums of U.S. dollars from their accounts to send abroad and in effect, caused a bank run. A government measure that froze all bank accounts and limited transactions led to widespread riots.

2. Protests Caused the Economy Minister to Resign

President Fernando De La Rua, the country’s president during the economic collapse, officially declared a state of emergency in 2001. As rioters filled the streets of Buenos Aires, close to 5,000 poor and middle class citizens gathered outside of Domingo Cavallo’s apartment complex banging on pots and pans. After only an hour, Cavallo and the entire Argentine cabinet resigned.

1. An Unemployment Rate of Nearly 25 Percent

Over the course of the Argentine Great Depression, several thousand homeless and jobless Argentine citizens found work as cartoneros, or cardboard collectors. With a nationwide unemployment rate of nearly 25 percent and in many working class neighborhoods, over 50 percent, 30,000 to 40,000 Argentine people were reduced to scavenging the streets for cardboard to sell to recycling plants before the country’s recovery.

Photo by Quique Kierszenbaum/Getty Images

Written by Derrick Krom

Derrick is a recent graduate of Saint Joseph's University in Philadelphia where he received a B.A. in English and Communication Studies. Throughout his life, Derrick has traveled the country and even got to study abroad in London, England for four amazing months. He's a guitar player, avid music fan and lover of literature, film, and all things entertainment.