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Breaking Bad (The Rules) Argentina Defaults Inflates (And Grows) 1997-2015 Case Solution

Solution Id Length Case Author Case Publisher
1560 518 Words (4 Pages) Rafael Di Tella, Fernanda Miguel Harvard Business School : 714036
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To cover the economic gaps in its structure, the country has to focus on regulating direct and more lucrative channels of investments into the country. In that scenario, a lot of nationalization can be a very defensive act. It should reduce currency swaps and focus on productivity to reduce deficit and appreciation peso through capital inflows as illustrated below.

Following questions are answered in this case study solution

  1. Summary

  2. Conclusion

  3. Recommendation

Case Analysis for Breaking Bad (The Rules) Argentina Defaults Inflates (And Grows) 1997-2015

1. Summary

The article discusses the economic explosiveness in Argentine leading to inflation and other macro and microeconomic phenomenon. It starts by discussing how strict monetary policies were adopted by the Argentine’s government because of the loss in foreign currency reserves. The currency restrictions were surprising, but there was some context to back up the story. Through the 1980’s, Argentina had not been stable, but after some turbulences, it stood up on its feet in the 1990’s. However, the article mentions that the stability was not much of good news because it raised concerns about an overvalued currency that could put a lag in the country’s economic performance.

Menem’s re-entry into the government led to some banking and economic reforms focused on keeping the economy on track. However, along with the pressures of the Asian crisis in 1997, the currency devaluation of Brazil’s real and Russian default in 1998, Argentina didn’t do well either and was pulled into a recession. By 2001, the country was deep down into crisis. However, in 2002, Duhalde became the president and took some emergency financial measures, starting by devaluing the Argentinian peso to improve trade and control inflation.

Kirchner made several popular statements about his economic policies in the country that were expected to take the country towards a boom. The article, then, discusses how the debt renegotiation, taxes and spendings led to a better performance but also invited higher inflation and other conflicts. Later one, Cristina Kirchner focused on fiscal surplus and nationalized private pension funds amid the financial crisis of 2008 to be able to spend more and facilitate the program that was also supported by the opposition.

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