Where is the Reality Check?
The crisis in Argentina dramatically demonstrates how little the international financial community has learned from the string of crises that have erupted in the emerging markets over the last few years. And there is little sign that Latin America's latest debt crisis will make a difference.
Unless action is taken by the G-7 to make good on its
promise to create a "new financial architecture," the world's
financial system will remain susceptible to future crises of a
similar nature. While there have been recent calls for renewed
attention to the problem, it is most likely that the aftermath
to the Argentine crisis will see renewed complacency and
wishful thinking with the belief that emerging market countries
have learned a lesson and will practice good governance. As
Paul Krugman points out in his book, "The Return of Depression
Economics," the learning process should have begun after the
meltdown in Mexico in late 1994 but was a "warning ignored."
And we now forget that the ensuing Tequila crisis of 1995
affected Argentina more than any other country in the
hemisphere, requiring a $12 billion International Monetary Fund
loan to support the country's banks. Argentina's strong
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