In December 2001, Argentina’s economy collapsed and the streets of Buenos Aires erupted in riots. The government abandoned an experiment called “convertibility” (in which the value of the Argentine peso was made equivalent to that of the U.S. dollar), froze millions of bank accounts, and fell back on foreign debt. Tens of thousands flocked to European embassies to flee the country, groceries became bereft of food, and the government went through five presidents in only ten days. Today, this kind of chaos may ensue in another country: Greece.
So what does the situation a decade ago in Argentina tell us about what may happen in Greece today? An interesting New York Times article argues that, first of all, Argentina has still not recovered in all respects — it has still, for example, not been able to enter back into the global credit market. Second, Argentina was no longer considered a serious economic power in the aftermath of 2001’s economic crisis. The same will likely happen for Greece.
Furthermore, Greece’s crisis may actually be more severe than Argentina’s. Greece, unlike Argentina in 2001, perpetually runs a trade deficit. The European country does not rely on exporting agricultural products like Argentina traditionally has, but rather on services such as tourism. Greece’s fiscal deficit is far larger (by almost 7 percent) than Argentina’s was at the time of its recession. And perhaps most significantly, because Greece shares the euro with the rest of the European Union, it cannot devalue its currency as Argentina did.
While in many respects, Argentina may have been better-suited to deal with a recession than Greece, the Argentinian example does prove that an economic crisis does not doom a country to failure.
“A lot of people were saying that Argentina would never recover, that the peso would never regain value, that this country was damned,” an analyst told the New York Times. “And it didn’t happen.”