Talk to any Argentine pundit, and he will quickly complain that foreign investors have overreacted to his country's problems. But by the end of the conversation, after listening to a litany of economic forebodings and complaints about the government, the visitor is tempted to believe that it is the locals who are exaggerating. Such is Argentina's perplexing paradox. By most reasonable standards, the economy seems sound: the fixed exchange rate is not under pressure, the banking system is solid, exports are up 13% so far this year and the fiscal deficit, at 2.8% of GDP, looks manageable. But unemployment stands at 15%, many of those in work have suffered wage cuts, and investment has slumped. After two years of stagnation and deflation, and two months of political infighting within President Fernando de la Rua's coalition government, the nerves of investors have snapped.
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