However, during the late 1990s, the Argentine economy was hit with four external
shocks: the appreciation of the dollar, which had the same negative effect on
Argentine export- and import-competing industries that it had on similar industries
in the United States; rising U.S. interest rates that spilled over into the Argentine
economy, resulting in a decrease in spending on capital goods; falling commodity
prices on world markets, which significantly harmed Argentina’s commodityexporting
industries; and the depreciation of Brazil’s real, which made Brazil’s
goods relatively cheaper in Argentina and Argentina’s goods relatively more expensive
in Brazil. These external shocks had a major deflationary effect on the Argentine
economy, resulting in falling output and rising unemployment.