Public service privatisation and crisis in Argentina

Overview

This article discusses the privatisation of public services in Argentina in light of the severe crisis that afflicted the country between 1999 and 2002. An inadequate regulatory framework and the absence of effective regulatory agencies resulted in the exercise of monopolistic power over public service fees. The emergence of a series of external shocks, starting in 1997 with the SE Asia crisis, weakened the country’s external accounts. In the context of a strict fixed exchange-rate regime, rising public service fees and overseas obligations contracted by the privatised firms placed growing pressure on the balance of payments. Although privatised firms were not directly responsible for the four-year recession or the balance-of-payments crisis, their actions contributed to the onset and prolongation of the difficulties faced by Argentina.

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