Argentinean Debt Crisis 2000-2003

One of our supporters, Ms Alejandra Culleton, has shared with us her first hand experience with the debt crisis in Argentina in 2000-2003. Read about what it is like when the payment system isn’t working and about an alternative system that helped lots of people to overcome the crisis:

Positive Money has given me the opportunity to relate some of what happened from 2000 to 2003 in Argentina, when the default and crisis took place. The economy found another way to survive, overcoming some of the problems of the time.

The crisis took place with the collapse of Convertabilidad—where the Argentine Peso was fixed 1:1to the US Dollar. This policy and many others like it were masterminded by the Argentine economist, Domingo Cavallo.

Argentina’s many resources and professional skills, which had always helped it to overcome crises in the past, were  found to be insufficient in the 2000 default, since the banks played such a huge role in the economy.

The whole economy spiraled out of control when the defaults on loans started; to avoid bank runs, the banks kept as much capital as they could by preventing customers from taking money out of their accounts, a policy known as the corralito.

The new government and the banks were trying to work together, although poverty and stress were increasing every day with feelings of anger, depression, and hopelessness in people everywhere.

After a few weeks of indignation, despair and dispute, there finally appeared a kind of solution where bank’s ‘clients’ savings could be taken out during a period of 180 days by a promise of payment such as a postdated cheque which was created by the government—the so-called patacones and lecops. (There were some other names used by varying banks and in different parts of the country).

However, on 1st of May 1995 – National working day – in Bernal, Buenos Aires, an amazing idea emerged called “Red Global de Trueque – RGT”. The founder Carlos de Sanzo implemented this new currency with 15 people and some ecologists in their backyard. By the end of 1997 there were 100,000 people in the whole country working for it.

De Sanzo’s system helped lots of people to overcome the crisis that was still badly hitting the country by providing a medium of exchange in an inner market amongst several professional services.

Immediately many businesses and trading companies were exchanging again using this different currency — home-made designed paper money, used for buying and selling all products and services within the system.

It was not a normal currency, but it could be saved in bank accounts if people wished.

The different groups joining the RGT were free to organize, create, and control inflation or deflation, since they were themselves an MCC (Money Creation Committee).

I do remember well presenting the RGT as an innovative way of overcoming the crisis in tax related subjects in my university assessments for Accountancy. Among the country some people were for it and others against the new way of operating the economy.

One professor commented with despair over my assessment and said, “Oh, where we have reached.”

I answered, “It is where we have only begun.”

The RGT remembered that bartering or exchanging were the primitive ways of sharing things, and it created a self-controlled way of accomplishing that.  Complying with the country norms and health regulations there was a rule set in order to be able to join the currency.  The rule was: “what could I give in order to exchange?”

The lack of general work in the country helped those find out something (a product or service) they could provide to someone, it was the key starting point for joining the RGT, thus generating much needed work.

In other identical groups there was a joining fee besides an enrolment form with the data of the participant and the kind of product or service to be provided the franchised idea was passed to others as a non-periodical publication which under Argentine law and remained 0% taxable.

Many private health clinics joined in, immediately creating a Health service from RGT, they would accept as much as currency or money from the RGT; also Tourist products were available, which I heard were known to be really good.

While in London studying a course of book keeping, I came across a Latin-American newspaper relating how Paraguay was beginning to trade with Argentina, using RGT.

The crisis brought upon the Argentine people will always be difficult to forget, as well as the overwhelming lack of trust in banks that came from the experience. When the peso was devalued and the system restarted, the RGT system disappeared into memory, though in some sectors in Argentina it remains alive.

Truly RGT brought to myself and many others a deeper conscience and understanding which inspired a sense of union, of ecology by exchange, recycling, enhancing the possibility of becoming a more creative person as well as a contributor—by having an incentive to develop inner talents and thus skills directly for people that needed them. On the whole, one got to know other people using this medium of exchange, rather than the main, anonymous market.

The simplicity of the real economy (essentially people) will always be accomplished through interaction and trade. When people compromise themselves into mere expenditures, incomes, and savings, people (and therefore the economy) become stuck in a thoughtless system. RGT was a way to liberate them in their time of need.