When an investor defines the characteristics of a future investment abroad, they always take into account the legal security that the operation will have.
In light of what happened in Argentina with the fall of President Fernando de la Rúa in December 2001 and the breakdown of the legal order that this political event entailed, in terms of the deterioration of the contractual relationships of those who had invested in different areas of the economy, including public services, a new and profound reflection on what happened was indispensable.
The Elcano Royal Institute for International and Strategic Studies held an international seminar on December 11 and 12 in Madrid, attended by many of the key figures involved in the events in Argentina. These included current and former Argentine government and business officials—among them, former Economy Minister Domingo F. Cavallo—economists, and, of course, legal experts. The presence of Spanish Economy Minister Rodrigo Rato, along with the president of the organizing institution, Eduardo Serra, at the opening ceremony underscores the importance the Spanish government attaches to this issue. Argentine Ambassador to Spain, Abel Parentini Posse, addressed the audience, speaking about a new phase in investment.
The fall of De la Rúa represented a failure of democratic institutions and the rule of law. No contractual provision could withstand the tremendous impact of the peso devaluation and the resulting economic consequences across all sectors of the economy; the financial default being one of the most significant.
The lessons from crises are many and varied. I'd like to highlight one in particular. The international organizations that closely monitored the Argentine economy fell short of expectations. This isn't about blaming outsiders, but given their role, especially that of the International Monetary Fund, I believe they should have been more rigorous in pointing out the errors they perceived the Argentine government was making. I'm referring, for example, to the high level of provincial debt incurred during President Menem's second term. Furthermore, the much-discussed Convertibility Law (between the peso and the dollar) was the subject of numerous criticisms in its final years. However, its abrupt repeal lacked the necessary debate in the Argentine Congress, as Cavallo was keen to point out. He also maintained that the IMF openly obstructed the financial restructuring program he was implementing at the time of the crisis, prior to his resignation as Minister of Economy.
Corruption among officials, a lack of independence in the judiciary, and a vacuum in oversight bodies contributed to weakening an institutional system that finally collapsed when taxpayers lost confidence in the banking system, bringing the crisis to an end.
President Kirchner's government currently enjoys high popularity, although significantly lower in the business world. The agreement with the International Monetary Fund recently reached under his administration is promising, but there is still a long way to go to restart the productive sector and, among other things, stabilize relations with public utility companies.
Any questions about this news?
Talk to Coexia, the AI of the foreign trade
