The Sources of 2001's Debt Crisis: 

• In 1991, the government decided to lunch its Convertibility plan, a restriction was then placed on the Central Bank. In order to destroy any fiscal deficit, it could not make loans to the government (except for short-term limited amounts). Given the reluctance by foreign lenders at that time to become involved in Argentina, it was taken for granted that the constraint was practically equivalent to excluding the possibility of running a fiscal deficit. During the transition, the government would resort to the proceedings from privatizations while leveling expenses with revenues. In fact, in 1993—for the first time in decades—the nonfinancial public sector had no deficit.[1]
• However, exactly at that time it was decided to reform the social security system. The main effect of this reform was to transfer most of the system revenues to the private sector while keeping most of the expenses within the public sector. This meant that since 1994 the federal budget was again continuously in deficit, even in years of good economic growth. New debt was added to old debt year after year, and debt plus interest grew much faster than the economy. At the end of 1994, the federal government’s gross debt was $75 billion, while GDP in 1994 was $257 billion. By the end of 2001, debt was almost twice as large, $140 billion, while GDP was only $271 billion, just 5 % higher than in 1994. Thus, what in 1991 was unthinkable did happen: since 1994, Argentina had recovered access to international capital markets. Therefore, the constraint placed on the Central Bank became nonbinding. Capital markets were willingly available to finance Argentina’s public sector debt.[1]
• How could all this happen? Since 1992 Argentina was under the umbrella of an IMF-supported program; second, it enthusiastically adhered to the Washington Consensus and its principles; third, the Currency Board was a guarantee of no devaluation; finally, high interest rates were a significant attraction. From 1994 on, what has been called a “bond festival” took place until the 2001 default put an abrupt end to it. [2]
• How can we explain the increase in the nominal and real interest rates? Damill and Frenkel (2003) give a clear explanation: the interest rate in local currency can be expressed as the sum of the international rate in dollars paid by the country plus the devaluation rate established in the exchange policy rules (zero in the case of fixed exchange rates), plus a residual that responds to the exchange risk and the local financial risk. The sum of the exchange risk premium and the country risk premium—the aggregate price of the risk of devaluation and the risk of default—is the main variable whose increase causes the local interest rate to rise. A steady increase in the current account deficit and—after a certain point—the trend toward shrinking reserves undermines the credibility of the exchange regime on the one hand and, on the other, increases the probability that the debt will not be served in due time and form. Consequently, the risk premiums tend to rise. The continuous support by the IMF to the Argentine program, even after the Tequila crisis showed its high sensitivity to external flows, allowed the government to pile up a huge debt, long after it was evident that the Currency Board was unsustainable. [1]

[1] Victor A. Beker Chapter 2 Argentina’s Debt Crisis: University of Belgrano and University of Buenos Aires, Buenos Aires, Argentina
[2] Frenkel 2012
[3]Krueger A (2002) Crisis prevention and resolution: lessons from Argentina. Paper presented at the conference “The Argentina Crisis”. National Bureau of Economic Research, Cambridge. Available via http://www.imf.org/external/np/speeches/2002/071702.htm