Over the past decade Argentina has been hailed as an economic success story where privatisation, fiscal austerity and liberal economic reforms were complemented by a solid banking system and a currency tied to the dollar through a currency board. These factors combined to lure record foreign investment to the South American nation.
The macroeconomic successes of Peronist president Carlos Menem (1989-99) were eclipsed by widespread corruption, high unemployment and a fiscal deficit twice as large as predicted, leaving a poisoned chalice that was inherited by President Fernando de la Rua, whose centrist Alliance coalition took office last December.
Mr de la Rua's approval ratings have plummeted to 34 per cent as unemployment hit a three-year high of 15.4 per cent in May, spending dries up and corruption continues, with one recent scandal forcing two cabinet members and several senators to resign their posts. Analysts speculate as to whether Mr de la Rua will complete his five-year term as he negotiates next year's budget with the opposition.
Mr de la Rua's woes have been exacerbated by a series of external shocks, among them the fall in the prices of its commodity exports, such as wheat and soya. The dollar has also strengthened, the euro has weakened and international interest rates have risen - all of which have further undermined the country's competitiveness.
The country's currency board arrangement reduces the ability of the Government to make economic adjustments - such as a devaluation - to compensate for the loss of competitiveness or the spiralling cost of financing. The result was that the economy contracted by more than 3 per cent last year.
However, a ray of hope for the nation's future has emerged in the shape of Jose Manuel de la Sota, the dynamic governor of Cordoba, Argentina's key industrial province. Mr de la Sota, who was in Dublin last week, launched his own recovery plan on taking office last July.
"The economists told me I should levy more taxes on those who were already paying," he explained.
The governor, who belongs to the opposition Peronist Party, ignored this advice, cutting provincial taxes and cracking down on tax evaders.
The results have been encouraging. Tax revenues have risen, evasion has halved and unemployment is 2 percentage points below the national average. The governor's approval rate stands at more than 60 per cent.
Critics argue that Mr de la Sota's success is exaggerated, as increased revenues have been achieved through a moratorium allowing past tax evaders to pay. Mr de la Rua tried the same recipe on a national level but the Cordoba governor achieved better results because his new, lower rates apply only to those who owe no taxes.
The governor's tax initiative has placed him at the centre of a debate on Argentina's growing financial difficulties.
In recent weeks investors have sold Argentinian bonds, fearful that the country may have trouble raising nearly $20 billion (€23.3 million) needed next year to service its foreign debt, which doubled under Menem.
The result has been a flurry of meetings between members of Argentina's economic team, the International Monetary Fund (IMF) and the US Treasury. On Monday, the IMF confirmed it was putting together an international aid package for the country, expected to be between $15 billion and $20 billion.
Argentina's problems could spread to other Latin American countries, beginning with neighbouring Brazil, where the real is at its weakest in more than a year.
Mr de la Sota is already touted as a possible Peronist candidate in the next presidential election, but his hopes will depend on Mr Menem, who remains party chief and has already begun putting up posters for the distant presidential race.
