The BONEX Plan was a forced conversion of bank time deposits to Treasury bonds performed by the Argentine government in January 1990.
[5][1] Its high debt made the Central Bank lost most of its capacity to carry out independent monetary policy.
However, as the main price anchors of the program were relaxed,[9] inflation began to rise again, contributing to the government defeat in the 1987 midterm elections.
This opposition's (Justicialist Party) legislative strength would make any public expenditure cuts or tax increases required difficult.
[1] As the economy went off control, Alfonsín —whose party had lost the Presidency in the snap May elections to the Justicialist Carlos Menem — had to turn power five months in advance of the constitutional transition date, amid riots.
[1] The plan worked, lowering inflation to a single-digit monthly rate, until December 1989, when a second hiperinflationary episode emerged.
Price and wage de facto indexation was common practice, enhancing the effects of any inflationary shock.
This ended the Bunge & Born Plan, forcing Minister of Economy Néstor Rapanelli to resign.
[1] Only 1 million ₳ (about US$500) per account would be given back in cash to the public, following several days of bank holiday, with the remaining funds being converted to bonds.
[18][19] Additional amounts could be exempted from the conversion, only if the depositor could prove that the funds were to be used for tax or payroll payments.
[11] Time deposits were temporary disallowed, and the Treasury converted most of its own outstanding domestic debt into BONEX.
[4] The public initiated lawsuits to the Argentine State and the Central Bank, questioning the constitutionality of the forced conversion, but in December 1990 the Supreme Court —on the Peralta, Luis Arcenio y otro c/Estado Nacional case— validated the presidential decrees, stating the measures were a proper response to a severe social risk situation.
In February 1991, a new run against the Argentine currency took place, triggering a big devaluation and fueling the comeback of inflation.