From Poster Child to Basket Case

Abstract

Several years ago, during the heyday of Argentina's market restructuring, a prominent local economist was interviewed about the country's long-term prospects. Despite a backdrop of rapidly expanding output and low inflation, he was surprisingly pessimistic. has always been a country with mediocre growth, believing that spectac ular growth and riches are right around the corner, he warned. And when a good year comes, Argentines say, Ah, here comes the life we've been waiting for and so deserve.' The good life seems to have eluded Argentina once again. Unable to shake a deep recession triggered by Brazil's currency devaluation in January 1999, a country that once enjoyed emerging-market status is looking more like the same old underachiever. Three years of recession have led to an unemployment rate of nearly 17 percent, adding misery to a labor force already hard hit by deep economic adjustment in the early 1990s and rising joblessness after Mexico's 1994-95 currency crisis. Despite bailouts from the International Monetary Fund (imf)? comprising a $40 billion package in December 2000 and an $8 billion package last August?acute financial stress is the order of the day.