Introduction

In the sad economic history of Argentina since the 1950s, the 1990s encompassed a remarkable transition. Rising from the ashes of yet another episode of economic chaos and hyper-inflation at the end of the 1980s, the surprisingly orthodox policies of the new Perónist President, Carlos Menem, brought a decisive end to decades of monetary instability and launched the Argentine economy into four years of unusually rapid expansion. Those economic policies featured a hard peg of the Argentine peso at parity to the US dollar, backed by the Convertibility Plan, which strictly limited domestic money creation under a currency board-like arrangement. Many doubted whether the new policy regime would survive, especially as tensions rose during the ‘tequila crisis’ initiated by the Mexican devaluation of December 1994. But it did survive; and after a sharp recession in 1995, the Argentine economy resumed rapid growth from late 1995 until the spillover effects of the Brazilian crisis hit Argentina in late 1998. Indeed, with most of the economies of emerging Asia collapsing into crises from mid-1997 to early 1998, Argentina became the darling of emerging-market finance – able to float large issues of medium- and longer-maturity debt on world credit markets at comparatively modest spreads over US Treasuries. And, in the official international financial community, especially the International Monetary Fund (IMF), many of Argentina's economic policies were widely applaudedand suggested as a model that other emerging-market countries should emulate – international approval that was dramatised by President Menem's triumphant address to the IMF/World Bank Annual Meeting on 4 October 1998.