Argentina and the global capital roller coaster of the 1990s

ABSTRACT This essay analyzes the Argentine “currency board” experiment during the 1990s, both from a theoretical and historical point of view. It finds that earlier failed attempts to control inflation with a quasi-fixed exchange rate in a highly politicized environment should have been a lesson to heed. While detailing the various shortcomings of the domestic economic policies, ample space is devoted to ex- amine the gyrating international capital markets and their impact on the Argentine program. Moreover, it is maintained that the Argentine political environment, the stability of which was crucial for success in the early years, deteriorated to such an extent after 1996 that it significantly contributed to the breakdown of the economic program and the system itself. The essay concludes with a short consideration of the Chilean economic policies, which were characterized by a great degree of pragmatism and prudence and consequently succeeded to escape the dire fate of its neighbor.