After the sustained growth that had characterized most of the nineties of the 20th century, the Argentina it was going through a profound financial and currency crisis in the period 1999-2002. Its causes included the collapse of the Asian and Russian markets of 1997-98, the loss of competitiveness of Argentine products following the depreciation of the Brazilian real and the appreciation of the dollar against the euro, limited domestic demand and the worsening of public accounts. The government authorities were forced to face the recession and unemployment with economic policy interventions bound by the stringent conditions dictated by the International Monetary Fund at the same time as the debt renegotiation. In 1999 a fiscal squeeze was therefore implemented, achieved by reducing social contributions and raising the tax burden on both households and businesses. Thanks to extraordinary revenues deriving from the privatization of public enterprises, the Argentina managed to stem the state deficit. The new administration that took office at the end of the year carried out, among other things, the cut in public wages, the restructuring and reorganization of the state apparatus, the reforms of the health and social security system. The authorities also started a slow process of fiscal decentralization in order to encourage greater managerial responsibility of local authorities.
According to localcollegeexplorer, the delicate situation in the labor market pushed the government to launch a reform that leveraged the negotiation agreements reached at the level of individual companies, in order to favor the decentralization of trade union negotiations. In 2000 the recession continued. The generalized pessimism that spread among households and businesses, aware of the reduction in real terms of income received, as well as among foreign investors and the Argentine political class itself, had a negative impact on the performance of the markets. The economic policy pursued during the year prioritized the adjustment of public accounts and the promotion of entrepreneurial activity through fiscal measures. The authorities also worked to achieve greater stability for the monetary system. In order to promote competitiveness, the economy minister D. Cavallo, who took office in 2001, launched targeted sectoral interventions; it also promoted fiscal measures to adjust distortions and increase taxes on higher incomes, proposed a plan for the development and construction of infrastructures, decreed measures to encourage consumption and, in agreement with the main international organizations, national private banks and pension fund managers, was involved in reforming the social security system. The most significant intervention, however, concerned the exchange rate regime, which in summary was pegged at a fixed rate against the dollar for transactions relating to foreign trade (excluding those relating to oil) and at a fixed rate against the dollar. a basket consisting of dollar and euro for all other transactions. Nonetheless, the effects of the crisis persisted.
Finally, there was a problem with solvency caused by the protracted recession: the growing exposure of financial institutions caused a bank run that caused a liquidity crisis. At the end of 2001 the authorities were therefore forced to announce a moratorium on foreign debt. In 2002, in a climate of absolute economic and political uncertainty, the exchange rate regime collapsed. New president EA Duhalde suspended dollar convertibility and the national currency rapidly depreciated by more than 70 %. With the intention of stopping the collapse of the currency, the government imposed the conversion into pesos of bank deposits in dollars (pesificación) and froze numerous financial transactions, provoking a generalized protest from the population. The critical situation on the domestic monetary and financial market and the oversupply of government bonds in dollars, issued to meet the huge public debt, contributed to the decrease in stocks in foreign currency. However, the drastic reduction in imports ensured the Argentina the surplus in the current account of the balance of payments. The level of prices and wages tended to rise, but the recession, high unemployment and the restrictive economic policy adopted by the government limited the inflationary pressures. To address the stagnation of banking operations, in the second half of the year the government lifted restrictions on deposits and controls on foreign exchange markets. set just a few months before. National and international economic operators gradually regained confidence in the weight, and in the last months of the year there was a modest increase in fixed-rate bank deposits. In 2003 the economy emerged from the crisis. The government, still heavily burdened by the huge public debt and by the persistence of economic inefficiencies of a structural nature, could finally begin to count on greater fiscal resources, which were partly transferred to the provinces. The debate on the attribution to local authorities of greater management autonomy remained however heated, and in 2004 the national government presented a law to encourage greater control of spending by the provincial governments. As regards monetary policy, 2003 it was characterized by a phase of monetary expansion. The trust of Argentine and international operators facilitated access to bank credit for the business world. Finally, the authorities reaffirmed their strategic interest in pursuing the process of economic integration within MERCOSUR (Mercado Común del Sur). (v. tab.).