Corralito (Spanish pronunciation: [koraˈlito]) was the informal name for the economic measures taken in Argentina at the end of 2001 by Minister of EconomyDomingo Cavallo in order to stop a bank run which implicated a limit of cash withdrawals of 250 ARS per week (at that time 1 USD = 1 ARS). Electronic transfers and credit and debit card payments were not disrupted.
The Spanish word corralito is the diminutive form of corral, which means "corral, animal pen, enclosure"; the diminutive is used in the sense of "small enclosure" and in Argentina also "a child's playpen". This expressive name alludes to the restrictions imposed by the measure. The term was coined by the journalist Antonio Laje.[1]
In 2001, Argentina was in the midst of a crisis: heavily indebted, with an economy in complete stagnation (an almost three-year-long recession), and the exchange rate was fixed at one U. S. dollar per Argentine peso by law, which made exports uncompetitive and effectively deprived the state of having an independent monetary policy. Many Argentines, but most especially companies, fearing an economic crash and possibly a devaluation, were transforming pesos to dollars and withdrawing them from the banks in large amounts, usually transferring them to foreign accounts (capital flight).[2]
On December 1, 2001, in order to stop this draining from destroying the banking system, the government froze all bank accounts, initially for 90 days. Only a small amount of cash was allowed for withdrawal on a weekly basis (initially 250 Argentine pesos, then 300), and only from accounts denominated in pesos. No withdrawals were allowed from accounts denominated in U.S. dollars, unless the owner agreed to convert the funds into pesos.[3] Operations using credit cards, debit cards, cheques and other means of payment could be conducted normally, but the lack of cash availability caused numerous problems for the general public and for businesses.
Immediate effects
Riots in Buenos Aires. December 2001
At the time, the average Argentine did not employ the banking system for daily uses; many did not have a personal bank account, and dealt only with cash. Debit cards were not popular and many businesses did not have the equipment to accept them. Thus the cash restrictions only exacerbated the recession and angered the public. President Fernando de la Rúa resigned on 20 December 2001 after violent riots, but the restrictions of the corralito were not lifted at the time.[4]
The banks and their role in the crisis
It is generally agreed that the banks had a share of the blame for the situation that led to the corralito.[5] In mid-2001, it was probably clear to bank owners and high-ranking officials that Argentina's banking system was going to crash, and some in fact may have spurred this outcome by letting their highest deposit holders know this news. These, mostly large companies, quickly moved their deposits abroad. Meanwhile, they continued to recommend their middle-class customers to enter deposits.
The end of the corralito and the beginning of corralón
After Eduardo Duhalde assumed the presidency, US denominated debt and deposits were forcibly exchanged for argentine pesos at 1.4 pesos per dollar for deposits and 1.0 for debt. The exchange rate spiked to 4 ARS/USD. The corralito was renamed corralón as people could not longer withdraw $250 dollars per week not because of a new limit but because they no longer had any dollars. Protests increased and banks were closed for months.
It is also believed that in the end the corralito ended up being good business for some international banks since they negotiated with the Argentine government to receive compensation bonds for the "missing" money, which in a large proportion had never really left their banks, only moved from one branch to another.[6]
Most banks stayed in the country during the crisis, withstanding a severe damage to their reputation as well as (in certain cases) physical attacks. Others fled as soon as problems arose (for example, Scotiabank's Argentine branch, Scotiabank Quilmes).
^* Reato, Ceferino (2015). Doce noches [Twelve nights] (in Spanish). Argentina: Sudamericana. p. 145. ISBN978-950-07-5203-9.
^"The Man Who Came In from the Crash" 2012-01-12 at the Wayback Machine - Harvard Independent.
^"The crisis in Argentina" January 18, 2007, at the Wayback Machine - socialistworld.net
^"Oxford Analytica Brief: Argentina's Economic and Political Situation" 2006-10-18 at the Wayback Machine -United Jewish Communities
^"The Argentine Crisis: A Chronology of Events After The Sovereign Default" - Standard & Poor's March 15, 2005, at the Wayback Machine
^"Argentina: Program for a Popular Economic Recovery" - Monthly Review.
El Correo
"Argentina's crisis revisited" BBC News
January 12, 2023
corralito, confused, with, corralón, 1998, 2002, argentinegreat, depressioneconomy, argentinapeso, currency, convertibility, plancorralóncacerolazo2001, riotsapagóneconomic, emergency, lawdebt, restructuringedit, spanish, pronunciation, koraˈlito, informal, na. Not to be confused with Corralon 1998 2002 Argentinegreat depressionEconomy of ArgentinaPeso currency Convertibility planCorralitoCorralonCacerolazo2001 riotsApagonEconomic emergency lawDebt restructuringeditCorralito Spanish pronunciation koraˈlito was the informal name for the economic measures taken in Argentina at the end of 2001 by Minister of Economy Domingo Cavallo in order to stop a bank run which implicated a limit of cash withdrawals of 250 ARS per week at that time 1 USD 1 ARS Electronic transfers and credit and debit card payments were not disrupted The Spanish word corralito is the diminutive form of corral which means corral animal pen enclosure the diminutive is used in the sense of small enclosure and in Argentina also a child s playpen This expressive name alludes to the restrictions imposed by the measure The term was coined by the journalist Antonio Laje 1 Contents 1 Background and initial measures 2 Immediate effects 3 The banks and their role in the crisis 4 The end of the corralito and the beginning of corralon 5 See also 6 ReferencesBackground and initial measures EditIn 2001 Argentina was in the midst of a crisis heavily indebted with an economy in complete stagnation an almost three year long recession and the exchange rate was fixed at one U S dollar per Argentine peso by law which made exports uncompetitive and effectively deprived the state of having an independent monetary policy Many Argentines but most especially companies fearing an economic crash and possibly a devaluation were transforming pesos to dollars and withdrawing them from the banks in large amounts usually transferring them to foreign accounts capital flight 2 On December 1 2001 in order to stop this draining from destroying the banking system the government froze all bank accounts initially for 90 days Only a small amount of cash was allowed for withdrawal on a weekly basis initially 250 Argentine pesos then 300 and only from accounts denominated in pesos No withdrawals were allowed from accounts denominated in U S dollars unless the owner agreed to convert the funds into pesos 3 Operations using credit cards debit cards cheques and other means of payment could be conducted normally but the lack of cash availability caused numerous problems for the general public and for businesses Immediate effects Edit Riots in Buenos Aires December 2001 At the time the average Argentine did not employ the banking system for daily uses many did not have a personal bank account and dealt only with cash Debit cards were not popular and many businesses did not have the equipment to accept them Thus the cash restrictions only exacerbated the recession and angered the public President Fernando de la Rua resigned on 20 December 2001 after violent riots but the restrictions of the corralito were not lifted at the time 4 The banks and their role in the crisis EditIt is generally agreed that the banks had a share of the blame for the situation that led to the corralito 5 In mid 2001 it was probably clear to bank owners and high ranking officials that Argentina s banking system was going to crash and some in fact may have spurred this outcome by letting their highest deposit holders know this news These mostly large companies quickly moved their deposits abroad Meanwhile they continued to recommend their middle class customers to enter deposits The end of the corralito and the beginning of corralon EditMain article Corralon After Eduardo Duhalde assumed the presidency US denominated debt and deposits were forcibly exchanged for argentine pesos at 1 4 pesos per dollar for deposits and 1 0 for debt The exchange rate spiked to 4 ARS USD The corralito was renamed corralon as people could not longer withdraw 250 dollars per week not because of a new limit but because they no longer had any dollars Protests increased and banks were closed for months It is also believed that in the end the corralito ended up being good business for some international banks since they negotiated with the Argentine government to receive compensation bonds for the missing money which in a large proportion had never really left their banks only moved from one branch to another 6 Most banks stayed in the country during the crisis withstanding a severe damage to their reputation as well as in certain cases physical attacks Others fled as soon as problems arose for example Scotiabank s Argentine branch Scotiabank Quilmes See also Edit Banks portal Money portalPlano Collor a similar measure taken in Brazil Cacerolazo Corralon Fractional reserve banking Third World debtReferences Edit Reato Ceferino 2015 Doce noches Twelve nights in Spanish Argentina Sudamericana p 145 ISBN 978 950 07 5203 9 The Man Who Came In from the Crash Archived 2012 01 12 at the Wayback Machine Harvard Independent The crisis in Argentina Archived January 18 2007 at the Wayback Machine socialistworld net Oxford Analytica Brief Argentina s Economic and Political Situation Archived 2006 10 18 at the Wayback Machine United Jewish Communities The Argentine Crisis A Chronology of Events After The Sovereign Default Standard amp Poor s Archived March 15 2005 at the Wayback Machine Argentina Program for a Popular Economic Recovery Monthly Review El Correo Argentina s crisis revisited BBC News Retrieved from https en wikipedia org w index php title Corralito amp oldid 1065152393, wikipedia, wiki, book, books, library,
