Corralito
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| Argentine economic crisis (1999-2002) |
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Economy of Argentina |
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Corralito was the informal name for the economic measures taken in Argentina during 2001 by Minister of Economy Domingo Cavallo in order to stop the draining of bank accounts.
The Spanish word corralito is the diminutive form of corral, which means "corral, animal pen, enclosure"; the diminutive is used in the sense of "small enclosure" and also "a child's playpen". This expressive name alludes to the restrictions imposed by the measure.
In 2001, Argentina was in the midst of a crisis: heavily indebted, with an economy in complete stagnation (an almost three-year-long recession), and the exchange rate was fixed at one U. S. dollar per Argentine peso by law (which made exports uncompetitive). Many Argentines, fearing an economic crash and possibly a devaluation, were transforming pesos to dollars and withdrawing them from the banks in large amounts, usually transferring them to foreign accounts (capital flight). In order to stop this draining from destroying the banking system, the government froze all bank accounts, initially for 90 days. Only a small amount of cash was allowed for withdrawal on a monthly basis, and only in pesos. Operations using credit cards, cheques and other means of payment could be conducted normally, but the lack of cash availability caused numerous problems for the general public and for businesses.
The corralito was ultimately ineffective, since many people ended up appealing in the courts for their right to have their cash, and being granted that right. Moreover, the cash restrictions exacerbated the recession. President Fernando de la Rúa was forced to resign on 21 December 2001, after violent riots, but the restrictions of the corralito could not be lifted at the time.
Argentina's situation worsened for several months, and then gradually began a recovery. The corralito was softened and then officially abolished during the interim rule of President Eduardo Duhalde.
