Can Argentina’s Time Bomb Be Defused?

By Eduardo Levy Yeyati

As this year’s election nears, so does the danger of repeating a dynamic where each outgoing government leaves the next with pressing problems to solve.

BUENOS AIRES — In the current economic and political debate in Argentina, a commonly heard metaphor is that of a ticking time bomb. As local financial markets dry up despite tight capital controls, the opposition is warning that the government’s search for costly sources of finance may only be contributing to more fiscal fragility down the road. Recent developments that have put investors on alert include the issuance of “dual” bonds with an implicit exchange rate guarantee, which dollarizes peso debt through the back door before an expected exchange rate correction, or the option...

Read this article on the Americas Quarterly website. | Subscribe to AQ.