The Austral plan was an Argentine economic plan devised by minister

Juan Vital Sourrouille Juan Vital Sourrouille (13 August 1940 – 21 July 2021) was an Argentine economist. He is the author of ''El Complejo Automotor en Argentina''. Sourrouille was born in Buenos Aires. He was the Minister of Economy of Argentina during the gover ...

during the presidency of

Raúl Alfonsín Raúl Ricardo Alfonsín (12 March 1927 – 31 March 2009) was an Argentine lawyer and statesman who served as President of Argentina from 10 December 1983 to 8 July 1989. He was the first democratically elected president after more than ...

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became president of Argentina in 1983 through democratic elections, receiving high inflation rates and a significant external debt taken on by the outgoing Military government. His first minister of economy,

Bernardo Grinspun Bernardo Grinspun (1925-1996) was the minister of economy of Raúl Alfonsín Raúl Ricardo Alfonsín (12 March 1927 – 31 March 2009) was an Argentine lawyer and statesman who served as President of Argentina from 10 December 1983 to 8 ...

, attempted to negotiate regular increases in wages to keep up with inflation, which did not work. The country was close to a

sovereign default A sovereign default is the failure or refusal of the government of a sovereign state to pay back its debt in full when due. Cessation of due payments (or receivables) may either be accompanied by that government's formal declaration that it wi ...

in late 1984, and prevented it with foreign funding. Grinspun resigned the following year, as the debt was even higher and the IMF would block further credits. Alfonsín said that democracy had little to offer "unless the economic question is definitely resolved".Rock, p. 398

Characteristics

The Austral plan was designed by the new minister,

. It froze prices and wages, stopped the printing of money to mitigate inflation and enacted spending cuts, even higher than those required by the IMF to enable its funding. This plan was similar to the 1975's ''

Rodrigazo Rodrigazo is the name given to a group of economic policies announced in Argentina on June 4, 1975, and their immediate aftermath. The name is from the fact that the policies were announced and implemented by Celestino Rodrigo, the Minister of Eco ...

''. The

Peso argentino The peso (established as the ''peso convertible'') is the currency of Argentina, identified by the symbol $ preceding the amount in the same way as many countries using peso or dollar currencies. It is subdivided into 100 ''centavos''. Its ISO 42 ...

currency was replaced by the Austral, according to a rate of 1000 pesos to 1 austral. The plan was an instant success, as inflation dropped immediately. This caused a boost in Alfonsín's public image, leading to a victory of the Radical Civic Union in the 1985 midterm elections. The economy, however, took a turn for the worse. Export prices dropped, international debt increased, and the government was consistently opposed by both Peronism and the labor unions. The unions rejected the wage freeze, and asked for increases. The government soon started to print money again to deal with the increasing debts. As a result, inflation became a problem again in 1986. The government was defeated in the 1987 midterm elections, and inflation eventually became

hyperinflation In economics, hyperinflation is a very high and typically accelerating inflation. It quickly erodes the real value of the local currency, as the prices of all goods increase. This causes people to minimize their holdings in that currency as t ...

in 1989. Alfonsín resigned that year, amid riots, and was succeeded by elected president

Carlos Menem Carlos Saúl Menem (2 July 1930 – 14 February 2021) was an Argentine lawyer and politician who served as the President of Argentina from 1989 to 1999. Ideologically, he identified as a Peronist and supported economically liberal policies. H ...

six months before his due date. The

Convertibility plan The Convertibility plan was a plan by the Argentine Currency Board that pegged the Argentine peso to the U.S. dollar between 1991 and 2002 in an attempt to eliminate hyperinflation and stimulate economic growth. While it initially met with cons ...

replaced the Austral with the Peso convertible, thus ending the Austral plan.

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