A Setback for the Reconquista

Jul 1, 2002

Argentina's collapse has meant huge losses for foreign investors, particularly the Spanish, who spent richly to acquire market share in the 1990s. Growing instability in Brazil and elsewhere is adding to the pain.

A few months ago, Argentina was the focus of national attention in Spain when anguished Madrileños from taxi drivers to investors debated whether their country's reconquista of the old colonies in Latin America in the 1990s had been a colossal folly. The angst on the streets has subsided since then but investors continue to express their discontent on the stock market as volatility in the region continues unabated. Spain's companies and banks have put recovery plans in motion but face more turbulence ahead. Nevertheless they remain convinced Latin America offers their shareholders good returns on equity in the long run. Spanish companies are more exposed to political risk in Latin America than those from other countries because their investments typically are concentrated in closely regulated sectors like privatized utilities and banks. But the Spanish are not retreating from the region yet. Instead they are shifting into the region's...

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