Argentina has face d deca des of problems with its currency. Frequently, during

Question

Argentina

has face

d

deca

des of problems with its currency. Frequently, during a debt crisis,

the country in question comes to

s

ome agreement with its creditors and pays off a small fraction

of its debt, the rest being forgiven. US hedge funds decided that they would not accept th

is loss

(from 2001) and sued in US courts to recover the money. Earlier this year, the hedge funds won

the cases. Argentina refused to pay and defaulted on its external debt. Its currency was devalued

in January this year, and is currently near a 52 week l

ow against the dollar. Argentina has no

access to international credit markets because of its default and is in a recession.

Juan Carlos

Fabrega

, the head of Argentina

Explanation / Answer

Agentina has defaulted on the external debt and unable to honour the verdic of court it has exacerbated the economic proble of Agerntina. It is facing the recession as external entities are not interested in Agentina.

Value of currency is at low ebb. Main cuse of bad economic conditions is the falling foreing exchange with Agentina. Agentina can correct such situation by increasing the export earning the decreasing the import bills. In this way sufficient amount of foreign exchange can be earned and that can be used to settlle the international liabilities payable in the dollar. Further Agentina can invite the foreing investment and must provide the business friendly environment to the business houses and investors.

To sum up, Agentina can pursue the policy of export drived growth and minimal role govt in economic activities and giving the fillip to the investors and business houses.

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