implicit or explicit deals with paramilitaries and thugs.
E L C ORRALITO
Argentina was in the grip of an economic crisis in late
2001. For three years, income had been falling,
unemployment had been rising, and the country had
accumulated a massive international debt. The policies
leading to this situation were adopted after 1989 by the
government of Carlos Menem, to stop hyperinflation and
stabilize the economy. For a time they were successful.
In 1991 Menem tied the Argentine peso to the U.S.
dollar. One peso was equal to one dollar by law. There was
to be no change in the exchange rate. End of story. Well,
almost. To convince people that the government really
meant to stick to the law, it persuaded people to open bank
accounts in U.S. dollars. Dollars could be used in the shops
of the capital city of Buenos Aires and withdrawn from cash
machines all over the city. This policy may have helped
stabilize the economy, but it had one big drawback. It made
Argentine exports very expensive and foreign imports very
cheap. Exports dribbled to a halt; imports gushed in. The
only way to pay for them was to borrow. It was an
unsustainable situation. As more people began worrying
about the sustainability of the peso, they put more of their
wealth into dollar accounts at banks. After all, if the
government ripped up the law and devalued the peso, they
would be safe with dollar accounts, right? They were right to
be worried about the peso. But they were too optimistic
about their dollars.
On December 1, 2001, the government froze all bank
accounts, initially for ninety days. Only a small amount of
cash was allowed for withdrawal on a weekly basis. First it
was 250 pesos, still worth $250; then 300 pesos. But this
was allowed to be withdrawn only from peso accounts.
Nobody was allowed to withdraw money from their dollar
accounts, unless they agreed to convert the dollars into
pesos. Nobody wanted to do so. Argentines dubbed this
situation El Corralito, “the Little Corral”: depositors were
hemmed into a corral like cows, with nowhere to go. In
January the devaluation was finally enacted, and instead of
there being one peso for one dollar, there were soon four