Every nation in the world is currently experiencing inflation to some degree. However, while some of these countries’ rates are sitting calmly at 1-3%, there are a few whose rates surpass our wildest imaginations. Namely, Argentina. 

While it may seem complicated, inflation is a rather simple economic phenomenon; it describes a period when the purchasing power of money decreases throughout an entire economy. It usually results from the mass printing of money by the government, which puts more liquid cash in circulation and causes the average consumer to have more buying power. When this happens, businesses will increase the costs of their goods since people are able to pay more. Inflation is not limited to low-priced items and can often affect loans, mortgages, and other large long-term investments.

When the price of daily goods and services increases so drastically, consequences tend to follow soon after. Individuals with fixed incomes, for instance, are unable to adjust to raised prices. When the housing market becomes unpredictable with prices that seem to rise every other day, even the people who can adjust to inflation are hesitant to make investments. 

Inflation is a frequent topic of discussion in America, especially since the COVID-19 pandemic. For the past five years, it’s been inflation this, inflation that–price increases in eggs, transportation, oil, it’s all because of inflation. 

It’s true, one dollar in 2021 is worth about sixteen cents more than that today, meaning that prices are on average 1.16 times higher than they were four years ago. It’s also true that inflation has directly affected 93% of American households and that many citizens are worried about their financial futures. It’s harder to buy groceries, pay the bills, send kids to school, and it is undeniably stressful for those living paycheck to paycheck. 

What if I told you that the United States is experiencing an extremely minor case of inflation compared to the rest of the world? The U.S. inflation rate is currently 3%, making it relatively low on the ranking of worst inflation rates worldwide. 

The majority of critical cases are scattered across the southern hemisphere in Africa and South America, in countries such as Venezuela and Sudan. Most of these nations have had struggling economies for decades.

While none of these nations come close to the hyperinflation of the Zimbabwean Dollar, Argentina is a very close second.  

Since 1975, Argentina has been in a uniquely severe economic situation that has caused its inflation rate to reach 249.793% in 2024. To put that into perspective, the next country in line for the worst case of inflation is Sudan, which has a 145.535% inflation rate. 

The current state of the Argentine economy is a culmination of over 40 years of struggle. The first substantial contribution to the conflict was in the 1980s, when the nation was thrust into its first debt crisis. This initially started when the Banco de Intercambio Regional (BIR) failed. As one of the largest private banks of the nation, this instantly pushed the economy into chaos–the savings of millions of people and businesses disappeared into thin air as the bank used them to pay off their debts to creditors and depositors. The Central Bank of Argentina attempted to remedy the situation by intervening with and supporting other banks, but these institutions experienced the same fate. 

Many other factors played a part in this event, the most notable being fiscal imbalances, increased global interest rates, and a sudden drop in commodity prices. The Argentinian government, facing low tax revenue, kept resorting to the central bank and “money creation” to reduce their mounting debt. As a result, the banking system of Argentina became even more unstable  and became unable to balance its budget. With conditions worsening day by day, Argentinian citizens began to flee the nation, taking their money with them. 

The situation only worsened throughout the decade, leading to a 2600% inflation rate in 1989 and 1990. 

The government attempted to take control of the situation when they implemented the Convertibility Plan of 1991 as well as the Central Bank Charter of 1992. The former reverted the exchange rate to one Argentine peso per one U.S. dollar and required the central bank to use international reserves to back Argentina’s monetary base. The latter made the central bank independent from the government and affirmed its purpose to maintain the value of domestic currency. In addition to this, the government also removed many of its restrictions on foreign trade to open up the Argentine economy.

While the plan achieved moderate success at first, it ultimately failed when the country was plunged back into disarray in the early 2000s, largely caused by a crisis in Brazil.

Carlos Zipilivan, President of Plus Mobile Communications and a citizen of Argentina, explains that, “when Brazil, [Argentina’s] number one commercial trading partner, is not doing well, it’s really bad for Argentina.” In the case of the 1990’s, Brazil was experiencing its own high inflation rate. Oftentimes, two main issues are associated with an unstable currency: for one, it’s difficult for emerging markets like Brazil to attract foreign investors; second, high inflation makes imports more expensive and exports less competitive. The problems tend to lead to accumulated debt (just like in Argentina), which only worsens the situation. When a country is in a crisis like this, its trading partners must also suffer consequences–they are no longer receiving as many goods and are no longer able to sell as many goods. These nations try to compensate for this in a number of ways, but this often ends badly.  

“During the second half of the nineties, the government adopted a policy where they spent a lot more money than they had,” Zipilivan explained. “It wasn’t consistent with keeping the one peso to one dollar exchange rate.”

On November 30th of 2001, the Argentine peso suddenly experienced a significant devaluation and interest rates all over the country rose drastically. Citizens then began withdrawing their money from banks in a national bank run, worried that these institutions would collapse like they had just over a decade prior. 

On December 5, 2001, the International Monetary Fund (IMF) announced that it would suspend financial aid to Argentina after the nation imposed a partial deposit freeze (prevents the transfer or withdrawal of certain funds in banks), which was in violation of the IMF’s conditions for their support program of Argentina. 

The country was left to fend for itself. 

With investor confidence plummeting, a renewed bank run intensified as people rushed to withdraw their deposits. In response, the government imposed the “Corralito”—a freeze on bank accounts—to prevent further capital flight.

The government took similar measures as before to address this issue, promoting domestic deflation and the increase of fiscal accounts, but these attempts were fruitless. Multiple factors contributed to this: first, limitations imposed by the convertibility law made it difficult to depreciate the value of the peso, not to mention that there was insufficient room for these depreciation in price and wages around the country. Second, many banks had short-term liabilities in dollars that they were unable to pay back due to financial dollarization–reliance on U.S. currency–since they had no last-resort lenders of U.S. dollars. 

As weeks passed and the conditions remained severe, so did the bank run. To stop the constant withdrawals of money, the government implemented a “fence” on money flow. This fence prevented citizens from moving money out of their banks and instead allowed only for money to be transferred within them. Citizens were also prevented from collecting large amounts of cash at once. These measures were once again ineffective, as citizens couldn’t access enough liquid money to pay for daily necessities and other goods in the informal sector, causing economic activity to decrease significantly. The increased poverty and unemployment rates also caused a wave of social unrest in the nation. 

Zipilivan confirms that the government was not taking proper measures to address the economic situation. “In 2003, Argentina had a populist government that took all of the money from the reserves,” he said. “They paid back international debts, limited access to U.S. dollars, and just kept printing pesos…they made local currency completely independent from foreign currency.” Isolating a currency in this way can have multiple consequences. The most notable is that it makes it harder for the economy of a nation to integrate into those of other countries, therefore making international trade and investment more difficult.

The Argentine economy suffered its worst crisis of its entire existence during this time, often being referred to as the Argentine Great Depression. In a matter of weeks, the economy was turned upside down and the daily lives of civilians changed drastically. Not only did the “fence” affect people’s purchasing power and inhibit their ability to act as consumers, but it also incited so much frustration that people began protesting and rioting. 

However, the nation did not stay in this state for long. Soon enough, the government determined that the only way to fix the issue would be through pesification, converting debts denominated in dollars to pesos at a rate of 1 U.S. dollar per 1 peso. This was hypothesized to work, since most individuals and businesses had their debts in the form of U.S. dollars (because of dollarization), and since the exchange rate between pesos and dollars was fluctuating greatly, converting the debts into pesos could reduce the cost of repayment. 

The pesifcation strategy was ultimately effective and reduced bankruptcies nationwide, giving the Argentine economy the opportunity to grow. 

The country stayed in a relatively stable condition for years until the global financial crisis in 2008. This conflict originated in the United States when a housing bubble–a period of instability in the real estate industry–consumed the nation. In the early 2000s, low interest rates and easy credit access led to a bustling housing economy. Home purchasing was also facilitated by mortgage lenders and bankers, who gave out loans to people with low credit scores. When banks made these risky investments, they bundled them together into mortgage-backed securities (MBS) and sold them to investors, banks, and pension funds. MBSs are attractive to these investors because even though they are associated with a high amount of risk, they offer a chance for very high returns. 

Seeing that the demand for housing was at an all-time high, realtors began increasing the prices for these homes in such a way that could not be sustained by the general population. American citizens became unable to afford mortgages, leading the demand for housing to go back down. This resulted in an imbalance between the amount of available housing and people looking to purchase houses, causing homeowners and lenders to increase the mortgages and rents for then current occupants. 

Between 2007 and 2008, an alarming number of people defaulted on their loans. With that, the value of MBSs plummeted and investors experienced massive losses. After Bear Stearns, Lehman Brothers, and other financial institutions involved with MBSs collapsed, global credit markets began to freeze and people were unable to get loans. 

The economic recession was in motion. 

With the U.S. as its second biggest trading partner, Argentina was instantly impacted by the global credit market changes. The Argentenian peso started to deflate in value for what seemed like the hundredth time, causing imports to become increasingly more expensive. As an emerging market, American investors were reluctant to place their capital in Argentina (especially with its history of economic instability), which made foreign direct investment drop significantly. 

The government responded to this crisis by implementing many capital controls–such as withdrawal limits and limited foreign ownership–across the nation and restricting access to foreign currencies. Moreover, the then-current President Cristina Fernández de Kirchner implemented stimulus spending to keep businesses running, raised taxes on exports to increase revenue and keep local businesses alive, and promoted social welfare programs to reduce poverty and prevent social unrest. 

These efforts generated a mixed success. On a positive note, most businesses stayed alive and employment remained stable. However, the Argentine economy isolated itself from the rest of the world, and its protectionist policies–restriction of imports and raised taxes on exports–made things more expensive for local consumers. 

Since the 2000s, Argentina has not experienced any especially severe economic crises, but the nation remains unstable.  Its inflation rate is still amongst the highest worldwide, a significant portion of the population still suffers from poverty, and a host of other issues continue to plague the country. 

However, Argentina has been receiving more help than in the past. In 2018, the IMF gave its largest ever loan of 50 billion dollars to Argentina to support the falling peso and encourage inward foreign investment, but this did not turn out as intended. The government immediately put a significant portion of the money into the central bank to stabilize currency exchange rates by providing foreign currency reserves, and another large percentage of it was devoted to paying off Argentina’s foreign debts. The loan did little to help the poor or address inflation, instead imposing many austerity measures onto the country that stirred social unrest. Today, Argentina still has the extreme financial burden upon it of paying back the IMF. 

As the government tries to pay off the debt, citizens are also suffering. According to Zipilivan, “Today’s policy is very hard because the government wants to pay the loan back but they can’t, so they stopped printing as much money,” he explained. “Facilities like education and other local industries struggle because of that.” 

It’s hard to know whether Argentina’s economy will ever be stable. “I’m always concerned,” Zipilivan admitted. “Maybe by miracle the government can come up with a solution, but it’s not easy, and it’s a shame because Argentina has so much potential.”

After some of the most intense economic crises of the past few decades, recovery feels unattainable. The current president Javier Milei has promised to implement radical economic reforms as a significant focus in his campaign, which he has made clear efforts to follow through with so far. Some of his plans include the elimination of the central bank, replacement of the peso with the U.S. dollar, decrease in public sector spending, and a simplified tax system that reduces the burdens on businesses. 

But, even with all of these changes, history cannot be undone and the struggles that families experienced continue to affect them today. Even if the government can promise progress, we can’t blame people for having doubts and fears for their future. 

As Jorge Lanata–a prominent Argentine journalist–often says, “In Argentina everything ends bad, and everything ends worse.” 

“Maybe by miracle the government can come up with a solution, but it’s not easy, and it’s a shame because Argentina has so much potential,” said Carlos Zipilivan, President of Plus Mobile Communications and a citizen of Argentina.