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Argentina 2001: The $100 Billion Sovereign Default and the End of the Peso-Dollar Peg
How South America's third-largest economy defaulted, abandoned its dollar peg, and suffered the largest insolvency in history
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MarketPedia Editorial
12 min read·December 20, 2024
In December 2001, Argentina declared a default on $100 billion of sovereign debt. The peso was de-pegged from the dollar. Savers lost their bank deposits due to the 'corralito'.
Convertibility: A Fatal Anchor
In 1991, Argentina introduced the Convertibility Law: 1 peso = 1 US dollar. It worked for a decade, but it created a trap: the country could not devalue to remain competitive.
The Corralito and the Collapse
On December 3, 2001, the government imposed the corralito — limiting cash withdrawals to $250 per week. Street riots followed, and there were five presidents in two weeks. January 2002: default on $100 billion and a 70% devaluation of the peso.
Lessons
- Currency pegs create structural fragility.
- Foreign currency debt is an existential risk.
- Capital control measures destroy trust.
# Argentina# Default# 2001# Peso# Dollar# IMF