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The Decline of Latin American EconomiesGrowth, Institutions, and Crises$
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Sebastian Edwards, Gerardo Esquivel, and Graciela Marquez

Print publication date: 2007

Print ISBN-13: 9780226185002

Published to Chicago Scholarship Online: February 2013

DOI: 10.7208/chicago/9780226185033.001.0001

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PRINTED FROM CHICAGO SCHOLARSHIP ONLINE (www.chicago.universitypressscholarship.com). (c) Copyright University of Chicago Press, 2020. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in CHSO for personal use.date: 29 March 2020

The True Measure of Country Risk

The True Measure of Country Risk

A Primer on the Interrelations between Solvency and the Polity Structure of Emerging Markets, Argentina 1886–1892

(p.195) 5 The True Measure of Country Risk
The Decline of Latin American Economies

Gerardo della Paolera

Martín Grandes

University of Chicago Press

This chapter looks into the heterogeneous effects that the process of financial integration with the world capital market had on different government bodies in Argentina, covering the period from 1886 until the run-up to the Baring Crisis in 1891. It argues that the nature of emerging capital markets is far more complex than the arbitrage parity conditions in the conventional goods and services markets. The asymmetric havoc wrought by the Baring collapse was reflected by a credit crunch for the provinces and the municipal entities, leading them to a default on their obligations by the end of 1891. Unlike other developed countries at the time, whose financial markets at different levels were well integrated into the world capital markets—meaning their borrowings were regarded as perfect substitutes—Argentina's experience suggests an opposite fate.

Keywords:   capital markets, Argentina, Baring Crisis, arbitrage parity, credit crunch, financial markets

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