el corralito

Argentina watched in horror as its economy destabilized in the early 2000s. With foreign investors removing capital from the country and the consequences of a dollarized economy, there seemed to be no way out. President Carlos Menem’s “uno a uno”, an economic policy meant to bring stability to the country, was doing the opposite. One Argentinian Peso for one American Dollar. That was the promise Menem campaigned on. To do so, the austral was discarded and the peso emerged as Argentina’s new currency. La Ley de Convertibilidad del Austral (The Law of convertibility of the Austral), introduced in 1991, established that Argentina’s Central Bank would back every peso with a dollar. Growing privatization and the debt relief given by the Brandy plan allowed Argentina to lower its IPC from over 2000% to 0% in 5 years. Economic prosperity was finally within Argentina’s grasp. 

But as soon as it appeared, it crumbled once again. Several external factors shook the Latin American world, from an increased interest rate in the US to the devaluation of the Russian ruble. And yet, it was one of Argentina’s closest trading partners that dealt the final blow. Brazil’s devaluation of the real led to a drastic decline in Argentinian exports. Rather than devaluing the peso, Argentina’s government clung to the promise of “uno a uno.” It led to record-high unemployment: 3 in 10 adults desperately looked for a means to survive. A lack of trust in the economic system among the population also led citizens to store their dollars abroad, lowering the government’s reserves. President Fernando de La Rúa saw one way out: the money should not leave the banks. He wanted to stop Argentina from being bled dry. Now, people cannot access the money they stored in banks, waiting hours in line, hoping to get enough money to afford their next meal. The markets that were finally opened are now stuck because buying anything becomes a race against the clock. Argentina is in flames. 

Members of this committee will have to navigate a nation on the brink of collapse. International banks are demanding their dues, citizens cry out against the conditions imposed, and someone has to pay. A balance has to be struck between appeasing those at home and abroad. The future of this Latin American giant is in your hands. Delegates will have to choose: will you help mend this broken economic system, or fan the flames?