Argentina faces potential collapse


Argentina is on the brink again. Earlier today, I wrote about doubts regarding the country’s official inflation statistics. The official statistics showed 9.1% inflation when many believe inflation is running 25% and more.

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Now, it emerges that the country is on the verge of a cataclysmic debt default. In 2001, Argentina had a massive default and was forced to de-link its currency from a 1:1 peg with dollar. The Argentine Peso fell to 3:1 on the dollar and the country was thrown into turmoil.

“Argentina’s debt levels are now higher than they were when it crashed into the biggest sovereign debt default in history in 2001, and a worsening crisis of confidence in the government has brought the spectre of a new default closer, a report to be published next week says.”
The Financial Times, 12 Jun 2008

But, after renegotiating its sovereign debt agreements, Argentina seemed on the road to a quick recovery. With agricultural prices skyrocketing, they seemed like a can’t miss nation. That dream has ended and we must now wonder if there are other time bombs lurking in the emerging markets.

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