Argentina's Economy
The Corralito and the 2001 Collapse
How Argentina froze bank withdrawals in December 2001, defaulted on its debt, abandoned the dollar peg and suffered a deep depression.
Argentina’s economic crisis peaked in December 2001.
The corralito
- Fearing a bank run, the government froze bank withdrawals, allowing only small weekly amounts. This was called the corralito (“little fence”).
- Protests and riots followed; several presidents resigned within days.
Default
In late December 2001, Argentina defaulted on around 100 billion dollars of debt, then the largest sovereign default ever.
Devaluation
- In January 2002, the peg ended.
- The peso lost around three-quarters of its value.
- Pesification: dollar deposits were converted to pesos at unfavourable rates, angering savers.
Depression
- GDP fell around 11 percent in 2002.
- Poverty rose above 50 percent.
- Unemployment soared.
Recovery
A weaker peso and high commodity prices (soy) helped a rapid recovery from 2003.
Legacy
Distrust of banks and the peso deepened.
The frozen savings
A retired teacher's dollar savings in a bank are frozen, then converted to pesos worth far less. She never trusts banks again.
Thinking bank deposits are always safe
Argentina froze and converted deposits in 2001-02.
Key takeaways
- The corralito froze bank withdrawals in December 2001.
- Argentina defaulted on about 100 billion dollars.
- The peso lost about three-quarters of its value in 2002.
- GDP fell around 11 percent in 2002.
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