Argentina is producing an astonishing number of films, despite the country experiencing the worst economic crisis in its history.

According to Bernardo Bergeret, marketing director of Argentinian film institute (INCAA), so far there have been 156 feature films in various phases of production this year, 50% more than in 2001.

Ironically, the production glut can partly be explained by the country's severe economic downturn. Earlier this year Argentina's five year recession came to a head when the peso lost its parity to the dollar, now valued at 3.46 pesos. Although this has hit most people hard - half of the population now live below the poverty line - wealthy individuals and companies with dollar savings abroad have actually benefited from the peso devaluation.

The stronger dollar has attracted more advertising and feature film productions from abroad including The Motorcycle Diaries, starring Gael Garcia Bernal, and Imagining Argentina, with Antonio Banderas.

In September, the Argentinian Directors Association (DAC) reported that inflation had driven up the average cost of making a film from Pesos 1.2m to Pesos 1.8m. In dollar terms, however, this represents a drop from $1.2m to $514,000. DAC says that local film productions would need to attract an additional 52.3% in admissions compared to earlier this year to recoup their costs.

To counteract this, a growing number of filmmakers are resorting to digital video. Budgets have shrunk drastically as a result. Vampire film Nocturnal (Nocturno) was shot for a mere $50,000. Actors mainly improvised on Teresa Costantini's drama No Intermission (Sin Intervalo), budgeted at $200,000, which was made with a bare bones script. "We've been making Dogma films way before the term was coined," quips No Intermission executive producer Daniel Pueyrredon.

However, some digital video projects have been mired in post-production for lack of additional funds. Shot in July 1999 and February 2000, Oskar Aizpeolea's The Fire And The Dreamer (El Fuego Y El Sonador) is the first ever film shot on digital in Argentina. Aizpeolea is still looking to secure an investor or co-producer to help foot the film transfer bill.

Blue Roses, the first film shot on high definition in Latin America is also awaiting additional funds to complete its transfer. Grieta, also shot on high definition video, recently participated in the Cine En Construccion sidebars (a showcase of unfinished films seeking post production funding) of the Toulouse and San Sebastian film festivals.

Fortunately, because Argentinian cinema continues to win accolades abroad, it has not been too difficult - especially for renowned filmmakers - to find support from Europe. Spain's Tornasol Films backed Adolfo Aristarain's Lugares Comunes, a recent winner at San Sebastian. In the case of Martin Rejtman whose 1999 drama Silvio Prieto was a big hit in Berlin, his latest film The Magic Gloves (Los Guantes Magicos) has a string of European backers including ZDF/ARTE (Germany), Fonds Sud Cinema (France), Hubert Bals Fund (The Netherlands), NWR Filmburo (Germany), Pandora Film (Germany) and ArtCam (France).

According to Magic Gloves producer Hernan Musaluppi, he started casting around for backers once the script was ready in early 2001 and it still took them a good year to piece all the financing together. However, the bulk of the comedy's financing (70%) remains Argentinean, sourced from national film institute INCAA, Rejtman and Musaluppi.

Some projects have managed to break new ground such as Tristan Bauer's Englightened By Fire (Iluminados Por El Fuego) which is the first Argentinian film authorised to shoot in the Falkland Islands since the 1982 war between the UK and Argentina.

Patagonik, a three-way partnership between Buena Vista International, Argentinian media giant Grupo Clarin, and Spain's Admira, has seven films slated to shoot next year. It backed two of Argentina's biggest international hits last year, Son Of The Bride (a Foreign Oscar nominee) and Nine Queens. It also co-produced the top three films at the box office this year: Apasionados, Dibu 3 and Marcelo Pineyro's Kamchatka, the country's official entry to the upcoming Oscars.

According to Patagonik's Octavio Nadal, the company is looking for new ways to finance its projects, including tapping venture capitalists from the US. "While lower ticket prices and admissions have meant reduced earnings at home, our international sales revenues have spiked up in terms of pesos," he says.

Since the late 1990s, INCAA has seen its original subsidy budget of $17.8m (Pesos 60m) halved to $8.9m. Half of this amount goes to its subsidy fund, while $1.9m is allotted for soft loans and $200,000 is set aside for contributions to co-production funds such as Ibermedia. The film institute sources its funds from a 10% tax levied on box office receipts, 10% on home video sell through and rental revenues and five percent of television advertising revenue. "Despite all its good intentions, INCAA has been slow to dole out funds because its revenue sources have dwindled," said Musaluppi.

Setbacks notwithstanding, Argentinian filmmakers have displayed even more gusto in telling their stories. It will take more than a deep recession to stifle their creative output.