What is a playpen?

A playpen is a restriction on the free disposition of fixed-term cash, current accountsand other economic activities. This restriction is decreed by the government in question, and consists of preventing banks from opening their doors to prevent citizens from withdrawing their money at the same time. All of this is done to prevent the financial system from collapsing.

Goals of the corralito

The main reason for using this corralito system is to prevent a panic situation from spreading in terms of banks, from what we have said before. Specifying a little more in the definition of corralito, this consists of applying restrictions on the extraction of money kept in the accounts in the bank. The goal is to prevent a mass departure of deposits system that can lead to bankruptcy of banks. The situations in which this restriction occurs is a country, it is usually associated with a crisis, with very high amounts of debt, times of economic recession and therefore, total loss of citizens' confidence in the financial system.

Its duration is determined in relation to the time it takes for citizens to regain this trust. The term corralito has its origin in Argentina, when people were prohibited from going to get money. The difference with respect to the corralito in other countries is that Argentina had at that time two currencies, the peso and the dollar. As people had two bank accounts, one for each type of currency, there was a very bad economic management of the respective governments, which were several. This is how the government decided to devalue the peso, and scare people, who decided to take all the money out of the banks to go and buy dollars.

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