A Future or a Fall?

Sep 1, 2001

The Argentine government is taking a stab at reviving the country's feeble capital markets but it has tremendous, perhaps insurmountable, hurdles to overcome.

Argentina's capital markets have wilted away. Loss of liquidity, delistings, internal bickering and years of recession have almost killed off the Buenos Aires Stock Exchange. The corporate bond market barely exists. There is no futures or derivatives platform. Companies still borrow mainly from banks, instead of accessing the capital markets. The drop in market capitalization means international fund managers hold hardly any Argentine stocks, because they have such a low weighting in the MSCI and IFC indices. Trading volume on the Buenos Aires stock market has fallen 23% this year and on some days, turnover is as low as $8 million. The Merval index has fallen by half in the same period.

This is not what Domingo Cavallo intended in the early 1990s when he privatized state-owned companies by selling them to...

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