Argentine Crisis 2001
Argentina’s 2001–02 collapse ended the convertibility 1:1 peg with default, corralito, and a violent real devaluation — a political-economy crisis of an overvalued peg.
Definition
The 1991 convertibility law fixed the peso to the dollar. After Brazil 1999 and a strong USD, Argentina was uncompetitive, fiscally strained, and deposit-dollarized. Bank controls (corralito), default, and a float followed. Holdout litigation lasted a decade.
Why it matters
It is the warning about hard pegs without fiscal and labor flexibility. Also the warning about local-law vs foreign-law debt and holdouts.
Case
December 2001 default, 2002 GDP collapse, and a later recovery under a cheap real exchange rate. The 2014–16 holdout fight was the legal tail.
How to read it
Real effective exchange rate, bank dollarization, and rollover of foreign-law bonds. A ‘currency board’ is only as hard as politics.