SAN ISIDRO, Argentina — More than any other developing nation in the 1990s, Argentina embraced the free market and the global economy.
For top officials at the International Monetary Fund and economic gurus of the American right, Argentina was a star pupil. It sold off most government enterprises and loosened banking restrictions and controls on foreign investment. The IMF backed the strategy with billions of dollars in loans.
For a few years, people lived better than ever. Many Argentines believed that their country, already the most prosperous in Latin America, was finally graduating into the First World.
Then, in December 2001, the bottom fell out, causing a run on the banks that wiped out billions of dollars in deposits.
Nearly six months later, on a May morning that happened to be her 59th birthday, Norma Albino stepped into her bank branch in this Buenos Aires suburb of cobblestone streets, famous for its affluence and the tall spires of its 100-year-old church. She asked -- for the third or fourth time since December -- for her family's money. When the teller told her that he couldn't help her, she blurted out: "I'm going to kill myself."
As horrified bank employees looked on, she poured a bottle of rubbing alcohol over her head and snapped at a cigarette lighter.
Albino became, at that instant, a symbol of the rage and hurt smoldering inside millions of Argentines. Rushed to a hospital, she survived with third-degree burns. Months later, she has found that the best therapy is simply to forget.
"The politicians robbed us," she said. "But I don't care anymore. I try not to think about it."
Argentina's official unemployment rate stands at 22%, about the same as in the United States during the Great Depression. Poverty afflicts 53% of Argentines, triple the rate of just five years ago.
"We're not the poorest country. There are places that are much worse off," said Raul Queimalinos, an unemployed economist and writer. "What's hard for us is that we've known something better. We've lived well."
How Argentina came to suffer such a fall is an emblematic tale of the global economy's power to spur sudden prosperity in developing countries, and then, even more swiftly, to bring disaster.
It is never easy to apply the formulas of free markets to struggling countries, each with its own mix of politics and economic vulnerabilities. Some of the best candidates fail. In Argentina, corruption, political wrangling and a baroque system of public spending meant that reforms demanded by the IMF were never fully implemented. Over the course of a boom-and-bust decade, about $17 billion in IMF loans went largely to waste.
Several economists -- including Nobel Memorial Prize winner Joseph Stiglitz -- believe that the IMF based its policies on unrealistic expectations of Argentina's ability to reform and that it knew trouble was coming. Still, for a decade, the IMF endorsed Argentina's economic policies, giving a seal of approval that built confidence in its institutions.
"The IMF is the Arthur Andersen of Argentina," said Congressman Mario Cafiero, referring to the U.S. accounting firm that was at the center of the Enron scandal. "They saw the crash coming, and they had the obligation to warn us."
Argentina has been mired in financial limbo since Dec. 23, 2001, when President Adolfo Rodriguez Saa -- who held the office for only a week -- declared that he would default on the government's $141-billion foreign debt, the largest sovereign debt default in history.
Ever since, Argentine officials have said that only a new, multibillion-dollar IMF bailout can get the economy on track again. Over more than a year, five economy ministers and other officials have made more than a dozen trips to the IMF's Washington headquarters to negotiate such a deal, without success.
On Jan. 16, the IMF agreed to defer the deadline on $6 billion in payments on previous loans but granted no new funds. The deal will keep the government from entering into default for a few months longer.
"The IMF is in a process of change," Horst Kohler, the agency's top official, said at its most recent annual meeting in September, reflecting on the crash in Argentina and a similar crisis that is looming in Brazil. "The fact that it was not possible to avoid the current difficulties in Latin America shows we still have a lot to learn."
Back to the Future
Domingo Cavallo, a politically ambitious economist with a mercurial personality, was the architect of Argentina's reforms.
In 1991, he staked the future of his country on a set of ideas he had first encountered as a young man. Growing up in provincial Cordoba, Cavallo devoured the writings of Adam Smith and other early economists. It was, he says, a form of youthful rebellion against the left-leaning ideas prevalent in Latin American academia. As a doctoral student at Harvard, Cavallo found mentors who encouraged his views.