Should We Cry for Argentina - Case Study Example

Should We Cry for Argentina? Question Argentina’s economical upheavals have continued into recent time after reportedly defaulting in payment of debts for the second time in 12 years. This follows years of economical instability triggered by the nation’s default in debt in 2002 (Agren). The peso has continued to devaluate through the years leading to rising inflation. Cutting ties between the peso and the dollar resulted in a downward spiral of the value of the peso. This stimulated the government to seize citizen’s savings accounts and impose restrictions on frequency of withdrawals.

This led to violent protests and attacks targeting politicians and banks. The peso had initially been pegged to the dollar to increase the popularity of the domestic currency following a hyperinflation that had led to demand of payments in dollars back in the 1990s.Question #2Local companies blamed their defaults on new requirements that all money sent abroad had to have the central bank’s authorization, a process that proved to be too slow. Increased taxes on exporters and cash-rich firms, and inability to obtain money to pay foreign suppliers intensified the local companies’ struggles.

International companies faced rising debts and losses from their Argentine operations as the peso continued its decline. Aerolineas Argentinas, an Argentine airline company, was forced to cancel all of its international flights due to the economical crisis that saw it barely escape bankruptcy in 2002.Question #3The rising inflation resulted in a significant increase in commodity prices thus making lives of ordinary difficult. People opted to spend on much cheaper goods than before. It is however reported that the inflation prompted the Argentines to spend rather than save and see their money depreciate in value (Agren).

Rates of unemployment soared and poverty ensued too and by the 2012 purchasing power was at an all time low.International aid might have initially helped but it led to accumulation of debts by the government and a further acceleration in inflation.Works CitedAgren, David. “Argentina Inches Towards Economic Crisis, Again.” USA TODAY, 1 April. 2014. Web. 30 October 2014.