Argentina Peg

About Argentina Peg

In 1991, Argentina established a currency board pegging the peso to the US dollar at 1 to 1. The peg ended decades of hyperinflation and was initially successful. The economy grew rapidly in the early 1990s. However, the peg made Argentine exports uncompetitive after the 1997 Asian crisis and 1999 Brazilian devaluation. Argentina could not devalue. The IMF prescribed austerity that worsened the recession. In December 2001, the government froze bank deposits, triggering riots that killed 27 people. Five presidents served in two weeks. The peg was abandoned in January 2002, and the peso lost 70 percent of its value. The Argentine collapse is a cautionary tale about fixed exchange rates.