Latin America After the Argentine Crisis: Diminishing Financial Market Integration.

The article discusses economic conditions in Latin America after the Argentine financial crisis. Immediately after abandoning its currency board in January 2002, Argentina suffered a severe currency crisis. Financial crises of this kind always generate profound uncertainty for international investors and therefore result in the withdrawal of international capital. This was particularly evident in the period following the Asian crisis of 1997-1998, which led to a withdrawal of capital in almost all emerging economies. After the Argentine crisis, both international bank loans and capital inflows in Latin America declined. International financial flows to Latin America have declined substantially since the crisis in Argentina, and the currencies of many countries have come under downward pressure. These are phenomena that concern almost all the Latin American economies, but by no means all emerging economies. In actual fact, the level of foreign debt is extremely high in all the large Latin American economies. Measured as a share of exports in 2002, it amounted to over 400% in Argentina, to around 280% in Brazil and to 170% in Chile. In Mexico, too, the country with the lowest level of foreign indebtedness as a share of exports, this value amounted to over 90%.