From financial opening to financial crisis: An analysis of the Argentine experience of 1977-1982

Abstract

Only in April 1982, due to the South Atlantic conflict, the free exchange market stage brought about by the policies applied since March 1976 came to an end. In the two previous years the net external debt had increased, according to the figures of the Central Bank, at 270%, at the same time that an accelerated fall in the product began, led by the investment rate. The domestic financial system, which played a secondary role in the external debt process, was in fact a vehicle for the socialization of the burdens derived from private debt, starting in 1980. Oversized –given the inflationary erosion of monetary assets and liabilities–, supported by the Central Bank and largely reduced to a financing mechanism for an increased fiscal deficit, the financial system of April 1982 bore very little resemblance to that envisaged in the theories that gave rise to the liberalization experience. The present work aims to investigate the processes that led to results so contradictory to those that were intended to be achieved.

JEL classification: E31, G01, G20, H62, H63