When Carlos Saul Menem was elected Argentina’s president in May 1989, the economy was already under the punishing throes of hyperinflation. To salvage investor confidence and stabilise the economy, the government resorted to a desperate measure. In March 1991 the Congress passed the “convertibility law” establishing the convertibility of the austral (the Argentine currency since 1985) at a rate of 10,000 australes per U.S. dollar. In January 1992, the peso replaced the austral (1 peso for 10,000 australes). Under this arrangement (a form of a currency board system), outflows of foreign currency reserves had to be matched by reductions in the domestic monetary base. The domestic currency could be issued only in exchange for a specified foreign currency at a fixed rate. The convertibility plan allowed the use of either U.S. dollars or Argentine pesos in any transactions except wage and tax payments. Most importantly, the peso/dollar exchange rate was pegged at one to one with full convertibility between the two currencies. This meant that the public could go to the Argentine central bank and exchange a peso for a dollar, or vice-versa, at any time.