Argentine Economic Crisis of 2001
Argentine Economic Crisis of 2001
However, the ease of convertibility led to capital flight as people would transfer their pesos to dollars and then send them out of the country. It also made imports cheap and led to unemployment, as companies preferred to import into Argentina rather than produce items domestically. Corruption was commonplace and the government's debt increased steadily.
All of this came to a head in 2001 when investors and ordinary people began a bank run, withdrawing their pesos to convert them to dollars and take them offshore. The government responded by effectively freezing all bank accounts, only allowing small amounts to be withdrawn. This led to riots. Eventually the government defaulted on its debt and ended convertibility to the dollar. It eventually ended the peg. At first, this caused inflation and unemployment, but the devalued peso encouraged exports while discouraging imports, which promoted growth in Argentina. Economic growth returned in 2003.