Disintegration of Trust

Mar 1, 2002

Confidence in Argentina's government, the judiciary, the currency and the banking system has collapsed. The public sector, banks, companies and individuals are nearly all bankrupt. Employment is becoming even scarcer; currently one-quarter of the labor force has no job. The provision of public services like health, education and security is declining. Crime and poverty are spreading.
The government of President Eduardo Duhalde has tried to soften the impact of the economic disaster by reorganizing the banking system's balance sheet, rewriting bankruptcy laws, rationing access to hard currency and imposing windfall taxes on oil exporters. But all this manic meddling only adds to the disorder.

"It is one thing to default [and] devalue," says Juan Bosch, head of asset management for the Compass Group in Argentina, and quite another "to not respect the rule of law, to violate property rights and arbitrarily [allocate] losses." He says that, "Instead of allowing market forces to become the...

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