When former Argentinian soccer ace Diego Maradona suffered a heart attack last year, few believed he could survive a condition brought on by his recurrent cocaine habit and a runaway weight problem. Scepticism increased when he chose a drug rehab clinic in Fidel Castro's Cuba over the Betty Ford centre in California and when he chose to have a gastric belt operation in Colombia, better known for leftist guerrillas and drug barons than for surgeons.

But Maradona has confounded accepted "capitalist" wisdom. He is not only slim and fit again, but he has bounced back from a 300lb caricature of his former self to a new life as a drug-free television presenter. He has become a fiery anti-Bush critic with a likeness of Castro tattooed on his left leg.

In tune with Maradona, Argentina has made a similarly startling comeback from economic chaos and decline through the application of an unorthodox prescription that has more in common with an anti-globalist manifesto than with Washington-IMF guidelines.

As if to prove the point, Argentina last week cancelled its $9.8bn (£5.5bn) debt facility with the IMF, symbolically and effectively liberating itself from IMF-imposed constraints, which many here see as responsible for a long economic malaise that ended in massive unemployment and rocketing poverty.

Stunning

"With this payment, we are burying a significant part of an ignominious past," said Argentina's Peronist president, Néstor Kirchner, when he announced the final repayment last week. The centre-left Kirchner is commanding a stunning 80% approval rating in opinion polls, thanks in part to his hard-nosed attitude towards the IMF and his friendly ties with anti-Bush Latin American leaders such as Fidel Castro and Venezuelan president Hugo Chávez. In a recent address to the nation, Chávez described the new close ties between Kirchner's Argentina and oil-rich Venezuela as the "Axis of Good", a description that may not sit well with Washington officials, especially given Argentina may be considering the transfer of some of its advanced nuclear power technology to Venezuela.

Argentinians may be excused for holding a dim view of IMF-approved "globalisation" recipes. IMF reforms under the previous Peronist administration of Carlos Menem started off well enough in the early 1990s, when Argentina was touted as a shining success story for the application of free-market economics. That experiment ended in disaster four years ago, when a country that once stood head and shoulders above its poorer South American neighbours descended into frightening chaos. Much of the Argentinian middle-class plummeted below the poverty line as their life savings were swallowed by an unprecedented banking collapse. The banks shuttered their branches and customers camped outside demanding their savings back, hammering on the doors with pots and pans.

The television news started transmitting scenes of starving Argentinian children. When cash became scarce, barter clubs sprouted overnight in school yards and community centres. Hairdressers traded their services for home-baked cakes, fruit was swapped for nappies. The political cost was soon felt: five presidents succeeded each other in office in two weeks and Argentina was forced to default on foreign debts that ran to more than $100bn.

Having fallen so low, Argentinians wondered if they had hit rock bottom and whether they could resurface. Salvation came sooner than most dared to hope. Today, even if poverty and unemployment rates remain worrying and inflation doubled to 12% last year, on the streets of Buenos Aires glum faces and empty pockets have been replaced by broad smiles and runaway spending boosted by healthy investment and a surge in tax receipts.

On the streets of Palermo Viejo, once a sleepy lower middle class district in the capital, barter clubs have been replaced by trendy boutiques and the neighbourhood has been redubbed Palermo Hollywood. Swarms of American and European tourists, attracted by the favourable exchange rate, struggle down its sidewalks under the weight of heavy bags from the seemingly endless lines of new shops opened by young Argentinian clothes and interior designers.

"There's a new kind of tourism arriving," says Paul Azema, a chef who recently opened his Azema restaurant in the "Palermo Hollywood" area. "They are mostly well off Americans between 35 and 55 who are asking, why go to Europe when you can get the same quality of life in Argentina for much less? Many are staying to live here."

The trend is confirmed by Buenos Aires estate agents who say 20% of their sales last year were to Americans and Europeans buying up property for investment or to take a sabbatical here, especially in Palermo Viejo or the colonial neighbourhood of San Telmo.

Even the real Hollywood is taking notice. Steve Levitt, a Hollywood scriptwriter responsible for films such as At First Sight starring Val Kilmer, recently spent a month in Argentina fine-tuning a script with an Argentinian-related theme. Bosnian film-maker Emir Kusturica is here filming a documentary on Maradona. German film makers are also working on Argentinian-related movies.

Not all is rosy on the economic front. An inflationary surge threatens to cut into the president's standing in the polls even if he can boast uninterrupted economic expansion since his arrival in office in 2003. "This is the government of economic growth," the country's new economy minister, Felisa Miceli, declared last week, promising to maintain the sound fiscal policies of her predecessor to keep inflation in check. The first woman to hold the post, Miceli replaced the more orthodox Roberto Lavagna, who steered Argentina through its delicate recovery of the last four years but lost his seat after disagreements with Kirchner. Some observers feel his departure signifies a drift further to left and an attempt by Kirchner to personally control economic policy.

Miceli has said she will not resort to "orthodox methods" such as tightening the money supply or increasing interest rates to control inflation, which, at 12%, is a hard blow especially to blue-collar workers and to Argentina's sizeable middle class, which barely started to climb from below the poverty line last year.

So far Kirchner has preferred populist methods to control inflation, such as cajoling supermarket chains to accept voluntary price controls, accusing supermarket owners of blackmailing his government, or personally leading a boycott against Shell last November when its petrol stations raised their prices.

'La crisis'

1991 Argentina pegs currency to dollar to bring inflation under control

1991-97 Economy grows at average 6.1% per year, but debt also rises

April 1998 Following financial crises in Asia, IMF warns Argentina it may be vulnerable to external shocks. Argentina ignores warning

Mid-1999 Slides into recession leading to political turmoil

2000 IMF approves rescue package including $14bn IMF loans and $6bn from other official lenders

October 2001 IMF approves $8bn increase in loans

December 2001 Government announces largest sovereign debt default in history, adding up to $132bn. Restrictions on bank withdrawals are followed by riots (below). Government forced to resign

January 2002 Argentina abandons peso's peg to the dollar

April 2003 Economy shows signs of recovery, with GDP growth of 8.8%

September 2004 Default on $2.9bn payment to IMF

January 2005 $82bn of debt restructured

June 2005 Debt burden declines to 72% of GDP, from 147% in 2002.