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With Argentina teetering on the verge of a collapse, the only way out of the mess is to bring in swift macroeconomic reforms together with active participation of the common Argentine. Any further delay, the country will go past the point of no return.
A few months ago, Argentina was merely suffering from a common cold. And then pneumonia set in, followed by a severe attack of Ebola and with this, the country is now virtually on its death bed. If the country is to survive, all the bad blood needs to be drained and fresh blood pumped in, fast. But the moot question is: How?
A lot of water has flown under the bridge since the last time we took a look at Argentina's flailing economy (See article: `Dark Shadows', Analyst, February 2002). In the aftermath of the collapse of the country's fixed exchange rate, the Argentine President Eduardo Dulhade had devalued the peso and set a new exchange rate on January 6, 2002, at 1.4 pesos to the dollar as against the previous rate of 1-to-1.
When it became clear that the fixed exchange rate was no longer helping the economy, the Economy Minister Jorge Remes Lenicov unveiled a new plan on February 3, 2002 that floated the peso, with the hope that the move would stop the country's economic and political implosion. The plan also forced banks to convert all their dollar loans into pesos at the old rate of one-to-one while dollar deposits were converted at 1.4 pesos per dollar and then indexed to inflation.
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