Argentina was once one of the ten most developed countries in the world – and it shows.
Its baroque churches and neoclassical banks leave as much of an impression as the people sleeping on mattresses at their doorsteps. The parks and avenues are lined with blooming Jacarandas yet pedestrians clutch their bags tightly as they rush under the tree boughs as night descends. Buenos Aires has more bookstores per capita than any other city in the world, in spite of two severe financial crises in the past fifteen years.
Argentina became a major fault line in the global economy in 2001. The overvaluation of the Argentinian peso (after being pegged to the US dollar in the late 1990s) and higher utility prices following a wave of privatization raised the cost of doing business in Argentina compared to regional competitors, leading to a depression in foreign investor confidence, the shuttering of domestic companies and mass redundancies. Excessive borrowing by the government from foreign markets through the issuance of sovereign bonds precipitated the rise of domestic interest rates, making credit more expensive for domestic enterprises and further precipitating business closure and unemployment. Public discontent soon reached a boiling point, with runs on banks out of a fear of devaluation and frequent looting of supermarkets (Time). This also contributed to a shortfall in tax revenue, as a consequence of which the IMF refused to extend a previously agreed US$1.3 billion loan, citing Argentina’s failure to meet budget deficit reduction targets (NY Times). These developments eventually came to a head on 23 December 2001, when the President of Argentina declared that the state was defaulting on US$ 93 billion of its sovereign debt (Rabobank), most of which was in the form of bonds held by foreign creditors.
Buenos Aires erupted in a cacophony of clanging pots and pans (cacerolazos) as citizens took to the streets to air their grievances.