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Wednesday, 12 February, 2003, 18:54 GMT
Q&A: Argentina's economic crisis
In the mid-1990s Argentina was lauded as an economic miracle. Today, after four years of stagnation, it represents one of the world's most intractable economic trouble spots. Why? BBC News Online maps the country's fall from grace.

What's the latest?

Argentina has failed to make a debt repayment to the World Bank that fell due on 14 November.

It has repaid the interest - about $80m - but not the entire debt, which stands at more than $800m.

This means the country will be considered to be in default, a situation likely to damage its chances of winning fresh, much hoped for funds from the International Monetary Fund.

Argentina has already defaulted on its debts to private lenders but this looks like the start of a default with so-called multilateral credit organisations.

Analysts say the default's impact on the Argentine economy is likely to be limited in the short term, as too for the economies of surrounding countries with economic worries such as Brazil and Uruguay.

The damage is to Argentina's already battered reputation and to its chances of making quick progress in longer-term restructuring of the economy with IMF help.

How did it all go wrong for Argentina?




This was a boon in times of hyperinflation.




How did the 1997-99 currency crisis affect Argentina?

While Argentina was able to sidestep the fallout from the Mexican currency collapse of 1995, the so-called Asian currency crisis, which began two years later, provided a more troublesome beat.




Decling industrial activity has denied the government the cash to balance budgets, while levels of unemployment and "underemployment" top 30%.

How will devaluation help?

The new Argentine government has now devalued its currency and ended the fixed link with the dollar.

The peso has now fallen about 70% against the dollar, making Argentine products much cheaper for those paying in foreign currencies.


But it will hurt businesses that have invested in Argentina, by making their investments in the country less valuable, and their profits smaller.



But that could be expensive for the government.


What about Argentina's debt?


The country went on borrowing on international financial markets, until debt reached about $140bn.

Now the government has defaulted on this debt, and is desperately negotiating with the IMF in the hope of securing a new flow of funds.








How did the country escape that particular crisis?







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