Argentina Alone
The country's fall need not spark a regional crisis — but there will be consequenses
By PETER KATEL
Will the Argentine debt default send an economic shockwave through the rest of Latin America? Probably not, since the catastrophe, years in the making, came as a shock to no one.
In Mexico, the biggest challenge won’t be some "tango effect" but the recession in the U.S., since the vast majority of Mexico’s exports go north of the border.
Argentina’s immediate neighbors in Peru and Brazil, meanwhile, have avoided the uncontrolled public spending that led to the crisis in Buenos Aires, and foreign investors so far appear to recognize this.
The real legacy of Argentina’s fall will be political: many Argentines ask why the International Monetary Fund and U.S. and other foreign banks were so quick to lend to a country where corruption was rampant.
The question resonates throughout the region, where disillusionment with the pro-market "Washington consensus" is growing.
On second thought ... Latin American economies depend on capital from the same banks that got burned in Argentina. There could yet be a delayed impact.
Latin America Loses a Lifeline
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