MercoPress. South Atlantic News Agency

Wall Street and Fantasyland-Argentina.

Wall Street investment bankers, brokers and money managers who touted Argentina in the late nineties as one of the world's hottest economies, -as they raked in fat fees for marketing the country's stocks and bonds-, ended helping to actively create the most spectacular economic collapses in modern history, claims this Sunday's edition of “The Washington Post”.

"Big securities firms reaped nearly one billion US dollars in fees from underwriting Argentine government bonds during the 1991-2001 decade, and those firms analysts were generally the ones producing the most bullish and influential reports on the country", says TWP adding that the "fantasyland that Argentina represented for foreign financiers came to a catastrophic end early last year, when the government defaulted on most of its 141 billion US dollars debt and devalued the currency", leaving a "wrenching recession with over a fifth of the labour force jobless and throwing millions into poverty".

"An extensive review of the conduct of financial market players in Argentina reveals Wall Street's complicity in those events. Investment bankers, analysts and bond traders served their own interests when they pumped up euphoria about the country's prospects, with disastrous results", underlines TWP, an argument almost in line with the current Argentine administration of President Kirchner.

The "bubble era" according to The Washington Post, left in Argentina's case as injured party not a group of stockholders or owners (such the case of Enron), but rather South America's second largest country.

Not only "optimistic analyses impelled foreigners to pour funds into Argentina with such reckless abandon", but also "Wall Street's system for rating the performance of mutual fund and pension fund managers, who were major buyers of Argentine bonds. Bizarrely, the system rewarded investing in emerging markets with the biggest debts, and Argentina was often number 1 on that list during the 1990s".

Wall Street's optimism and the heavy inflow of money made Argentina's debt rocket to 64% of GDP by 2001 when the country finally defaulted unable to repay. In 1993 debt was equivalent to 29% of GDP. Some of the banks that fiercely fought for and raked fees profits include Credit-Suisse-First Boston with 162 million US dollars; JP Morgan 120 million US dollars and Deutsche Bank 122 million US dollars.

Within the financial fraternity some acknowledge that this behaviour was a major contributor to Argentina's downfall, a country that prided itself of following free market tenets.

Compounding the financial industry sins, Hans-Joerg Rudloff from Barclays Capital admits the sale of Argentine bonds to individual investors, mostly in Europe "when the pros balked at buying them". More ever in mid 2001 as Argentina was heading to default Wall Street promoted an expensive and ultimately futile "debt swap" that gave Argentina more time to pay its debts and jacked up the interest cost. The fees on the deal totalled 100 million US dollars.

Further on The Washington Post quotes a Columbia University professor, Charles W. Calomiris who was one of the earliest prophets of Argentina's financial doom, and wonders why the US government investigators have not intervened, given the danger of the same fate could befall other countries.

"How come we have one standard for private sector deals, where everybody is getting all upset about conflicts of interest, and nobody in Washington has raised an eyebrow over the obvious conflicts of interest involving research and underwriting activities by US financial firms in the area of emerging market sovereign debt?" says Calomiris.

In Buenos Aires some market analysts revealed they had additional incentives to paint a bright future for Argentina at the time. "There's much self censorship in the business; if you have something positive to say, welcome, but if you have something bad, shut up", admitted Federico Thomsen a former economist for INGBarings.

Others analysts confessed that compensations increased significantly, "if bankers managed contracts with government, which naturally influenced their country assessment reports", highlights The Washington Post.