Argentina is rich in natural resources and has a large and profitable agricultural sector. For all its potential, the economy has been historically blighted by high inflation and a massive foreign debt.
The Menem government of the mid-1990s made an attempt to tackle these through privatisation, free market economics and cuts in public spending. In addition, the value of the Peso was fixed to the US Dollar. The immediate results were reductions in the national debt and the inflation rate. However, the policy of Peso-Dollar parity eventually led to a sharp fall in exports and government tax revenues, as well as a large increase in government debt.
With external debt topping US$130 billion in 2001, Argentina was on the point of defaulting on its overseas debts, potentially leading to a complete economic meltdown. At the end of the year, the government was forced to devalue the Peso and freeze bank accounts.
The government has taken a number of steps to restructure its economy and in 2005 President Kirchner made the bold move of paying off the country's debt to the IMF. The country has battled back from the 2001 crisis and still remains South America's second largest economy, despite suffering a sustained period of stagflation. In 2016, its unemployment rate was just under 10% and inflation as high as 40%.