One study concerning the causes of the Argentine economic crisis noted several major issues leading up to economic collapse. First, the fiscal policy was deemed inappropriate because “the consolidated fiscal balance was in deficit, equal to nearly 6 percent of GDP. The largely dollar-denominated public debt aggravated the problem for 2002 after the peso devaluation.” (Murphy, 23-24) Even though Argentine officials reported a slight surplus, a deficit plagued the economic structure and transparency in government would become an important issue. Another cause of the crisis was a lack of flexibility due to “an insufficient exposure of the Argentine economy to foreign trade...[an] anti-export bias limited exports to a mere 10 percent of GDP, despite strong economic growth during the 1990s.” (Ibid, 26) Certainly, a lack of exports is a detriment to the Argentine economy, which was already fragile due to corruption in government. Political problems including interference with pension and retirement funds, budget constraints being ignored, and government borrowing from bank reserves are associated with the economic crisis because “misconducts aggravated the credibility gap and fueled a run on bank deposits that led to a compulsory freeze, default, and devaluation.” (Ibid, 28) Bank freezes and loan default would quickly coalesce and ignite a grassroots movement against governmental policies. Due to these factors and many other political or economic issues, the Argentine government owes private bondholders approximately 100 billion dollars. (Protests at IMF Argentina Talks, BBC News) Loan default was a major factor in the economic crisis and the nation struggles to pay even the accrued interest on loans, let alone the principal.
