In addition to the effects of import substitution policies, the post-World War II Argentine economy further struggled because of military rule and internal conflict. From the late 1940s to 1980s bad economic policies and political turmoil resulted in a stagnating economy. The government would run fiscal deficits because of irresponsible spending and low tax revenues from the poor economy, and to fix this problem would print new money, resulting in variable rates of inflation. By 1989 the inflation rate became so out

With exception to the Mexican crisis of 1995, where the Mexican peso was devalued and Argentina suffered a recession, from 1991 to 1998 the “Convertibility Law” was a relatively successful policy and the Argentine economy grew at a stable rate. However, the 1998 currency crises in East Asia and Russia made foreign investors weary of investing in developing countries, and, consequently, Argentina suffered a recession. What began as a recession, would, through other external shocks and bad macroeconomic policy, eventually turn into the devastating economic crisis of late 2001.

In response to the recession, in 2000 the government, which was then under the control of the successor of Menem, President Fernando De la Rua, believed that balancing the budget deficit would lower interest rates and promote economic growth. Monetary policy could not be used as a recessionary aid because inflation would overvalue the peso even more, and they government did not want to abandon the “Convertibility Law”. Forced to choose between a reduction in government spending and an increa

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