Buenos Aires went from being one of the most expensive cities in the world to one of the cheapest—cheap, that is, for foreigners. Argentineans, on the other hand, had to face the high prices of an import economy with drastically reduced buying power. The country's large middle class—once the envy of Latin America—suffered the worst, with large swaths of it simply disappearing. Take for example one man I met, Claudio Escariz, a principal officer in the Federal Police's first precinct. Before the devaluation, he was solidly middle-class, making 22,000 pesos a year, or $22,000. After the devaluation, he still made 22,000 pesos, but it was worth approximately $7,300. For him, he says, it was like going to bed in the First World and waking up in the Third. No one escaped the effects of the crisis. Stores shuttered. Banks were vandalized. The opera played to an all but empty house.

Today, five years later, Argentina's economy is growing at a rate comparable to China's. But what is perhaps more remarkable about the city's financial bounce back is its collective response to the disaster. "Argentina paid a huge price to achieve its current level of competitiveness," says Joydeep Mukherji, a credit analyst at Standard & Poor's. "But now there's lots of pent-up demand, pent-up entrepreneurship. Many people quickly became creative once the economic context around them had changed." In other words, the Porteños had to innovate as if their lives depended on it—and in many ways, they did.

As you stroll through Palermo Viejo, evidence of this innovation is everywhere. "We could no longer look outside for ideas," says Josefina Ferroni, a designer who lives and works in Palermo. "We had to look within." We're sitting above her store on a blue quilted ottoman in the loft where she designs shoes, many of which appear to have been inspired by those worn by a tango dancer—thick, elegant heels with sturdy but sexy straps and tiny buckles. For Ferroni, the crisis was a transforming moment. Five years ago, she worked at a small advertising agency. When the crisis hit and she lost her job, she asked herself what she should do next and thought of her father—when she was little, he used to call her a centipede ("I've always loved shoes!"). The crisis literally forced her to create.

Before the currency devaluation, imports were artificially cheap because of the propped-up peso. Monetary policy was so screwed up that it made more economic sense to import than to manufacture at home. Many of the fashion cognoscenti considered local designers déclassé, and jetted off instead to Paris, New York, or Miami for their shoes and clothes.

That all changed after the crisis. Today, if you ask anyone in Buenos Aires's creative fields why their city has rebounded so spectacularly, most will tell you that it's because they finally started looking to their own culture for ideas. This was a country of imports, but there was no more money to import anything. No longer could people afford to envy everything European, to ask someone else to define their style for them. Louis Vuitton may have remained in Buenos Aires, but such global brands are joined, increasingly, by local designers: Pablo Ramírez, who makes sleek, highly constructed black-and-white couture inspired by historical themes such as immigration and the tango; Nadine Zlotogora, known for her unexpected mixings of local fabrics such as wool, cotton, gauze, and broken tweed; and Fabian Zitta, an anesthesiologist-turned-designer whose current collection is a romantic vision of butter silk and black organza.