Element of international business Essay Example | Topics and Well Written Essays - 2000 words

Element of international business - Essay Example xcess money, so much so that inflation rate soared to 200%.2 In 1989, prices were galloping at the rate of 5,000 per cent a year, prices were being adapted almost daily, and panic-stricken people were getting rid of their currency as though it was scalding them.3 Carlos Menem, who became president of Argentina in 1989 tried to rectify matters by cutting red tape in a determined effort to rejuvenate industrial development, liberalising trade, throwing open state run enterprises to privatisation.4 Privatisation witnessed Argentina disposing off, what Argentines now remorsefully refer to â€Å"las joyas de miabuela† (grandmother’s jewels): Vivendi of France won the privatised water sector, while U.S giants Enron and Fleet were successfully allocated the gas and banking sectors respectively.5 Menem’s ambitious plans did not succeed even after giving it time until March 1991, mainly due to apprehensions over the amount of state deficits.6 The first incident occurred on April 1991. Due to the strong recommendations of Carlos Menem and Minister of Economy Domingo Cavallo, the Argentine Congress passed the Convertibility Law, officially adopting a currency board.8 This move ensured that the peso and the U.S. dollar both circulated freely and in conformity with the law at a 1-to-1 exchange rate.9 In a bid to prevent the government from printing excessive money, the total currency flowing inside the country was rigorously indexed to the number of dollars in the custody of the central bank. The currency board succeeded in bringing back public confidence in the economic system. Secure in the confidence that their monetary possessions (assets, savings and investments) could be converted into U.S dollars at a one-to-one rate, the peso began to be used freely and without apprehension by both Argentines as well as foreigners working in Argentina.10 The second incident took place in May 1995. Carlos Menem, one of the architects of the currency board, was re-elected as