Argentina 2001 Is Not a Model for Greece 2011

To many observers, with its agonizing lurch toward default accompanied by crippling street protests, Greece in 2011 begs comparison to Argentina in 2001. Facing insolvency and 20 percent unemployment a decade ago, Argentina has mounted a strong recovery since defaulting on its international loans, leading some to think it can offer lessons for Greece's turnaround. The comparison is misleading, however, for a variety of reasons. More importantly, prescribing policy based on Argentina's recovery would be disastrous for Greece.

Argentina's economy rebounded from its 2001 collapse primarily thanks to demand for goods that were devalued by 70 percent when Argentina was forced to float its currency, the peso. Since then, Argentina's government has relied on a weak peso to generate foreign exchange, stifle imports and grease a commodity boom in soybeans, grain and corn. ...