The regional crisis of the emergent economies

In the last decade of the 20th century, the world looked stupefied to the sequence of financial and the economic crisis that devastated the emergent economies of Asia and South-Latin America.
There were some people that profited with these crises, but in general the effects were devastating: the population was in poverty and unempolyment.

Argentine crisis

If we analyze carefully the years before the beginning of the crisis, we can see that emergent countries that suffered because of it, adopted and implemented worng policies: the financial liberalization open their markets to investitors and speculators without any rules and a lot of dysregulation.
The infinite economic growth illusion contributed to the increase of the speculative bubble.
And the results emerged in the 90s: high deficits and public debt, and a virtual appreciation of their currencies.
When the burst, who was indebted by the acquisition of the overvalued assets started to loose money.
After the bankruptcy of private agents and banks, the foreign investitors started to avoid these countries, aggravating the economic crisis.

Mexican crisis

The first case if this scenario, was in 1994 in Mexico, in the called "Tequila Crisis". The reasons more pointed are the high increase in the USA's interest rate, wich trailed the mexican interest rate, and of course, the terrible political events: assassination of main presidential candidate, and armed conflict with the rebellion of the Zapatista National Liberation Army.




The foreign investitors withdrawn the money they invested and so, the Government left to control the peso exchange and the currency devaluated a lot. The Government applied for the financial aid of IMF and USA.

The next affected  were in the other side of the world: in 1997 started the crisis of the Asiatic Tigers (already analyzed this blog), marked by an high exit of foreign capitals.

Asiatic crisis

The asiatic firms were highly indebted with american dollars. The national currency devaluations, led them to a very critical situation.
The first country affected was Thailand, followed by Malaysia, Indonesia and South Korea:only Malaysia didin't applied for the IMF inetrvention and adjustment plan.
As in nowadays, many economists think that the IMF intervention only worsened the situation.

The asiatic crisis affected Russia in 1998 and Brazil in 1999, because of the big decrease in the raw-materials price.
In the case of Russia, the government stayed withouth the capacity to get new loans and without money to pay the public debt. So, the government was obliged to devaluate the ruble and to declarate a moratorium to pay the debt to the foreign investitors.
In the case of Brazil, the main problem was the inflation wich led to the devaluation of the real.

But the crisis didn' stop here. Despite of have recession since 1998, the social colvulsion in Argentina that follwed it, led to a run to the argentine banks by the people, to change their deposits to american dollars and to transfere them to outside the country.
As consequence, the Government froze the bank accounts only allowing the removal of small amounts of money.

The consequences were awful: the revolt was enormous and the state of emergency was declared.
The state couldn't pay their debts and entered into default.


Has the world learned anything from these crises?
At least one aspect not memorized: living beyond our possibilities has a huge price to pay.