Final answer:
The structural fragility that increased Argentina's default risk during currency depreciation was maturity mismatches. Maturity mismatches occur when debt repayments are due sooner than the assets or revenue streams meant to cover them. This, alongside high inflation, can precipitate a crisis, impacting investor confidence and leading to economic downturns.
Step-by-step explanation:
One structural fragility that increased the likelihood of default for the Argentine government in the event of a depreciation was maturity mismatches. Maturity mismatches refer to the situation where the government's debt obligations have a shorter maturity than the assets or revenues streams meant to pay for them. This can create a situation where the government may struggle to meet its debt obligations as they become due, especially if it faces a depreciated exchange rate which increases the local currency cost of repaying foreign debt.
When countries like Argentina face high inflation or a risk of default on repaying international loans, it can lead to concern among international investors. Such economic instability can result in less investment, a depreciated exchange rate, widespread bank failure, and deep recession.
One structural fragility that increased the likelihood of default for the Argentine government in the event of a depreciation was maturity mismatches. Maturity mismatches occur when the maturity of the government's debt does not align with the maturity of its revenue sources. In the case of Argentina, if the government had borrowed a significant amount of short-term debt but had long-term revenue sources, a depreciation could have made it difficult for the government to repay its debt obligations, leading to a default.