I’m looking less for a list of proximate causes (inflation, corruption) and more for an explanation of what is different about Argentina compared to neighboring countries like Chile and Brazil, which don’t have the same level of currency instability.
In: Economics
Argentina was plagued by very unstable and then inept government.
Having several military coups (decades ago), followed by Peronists didn’t help. It ran into huge debt issues and continued their unsustainable policies (too long to ELI5). The problem for Argentina is that it “should” be a very wealthy country.
It has features that should allow it to achieve an economy not unlike Australia’s – it has very good agricultural lands and huge mineral reserves. The education system and infrastructure (at least in the past) was relatively good. It had good connections to Europe (and US) where it can export to. In that sense, it can attract investment.
But political instability and poor economic management has made it where it stands today. Exporters are indirectly taxed by the government by fixing unrealistic exchange rates. This makes it hard to invest in and domestic companies find it harder to grow. People who are politically connected get access to preferred exchange rates (essentially free money), while others have to resort to the black market.
While ostensibly politicians preach the message “we do this to protect Argentinians”, it can be seen time and time again that these policies just reduce growth, make the people dependent on government welfare, reduce investment and results in unsustainable debt.
Latest Answers