Has investor protection been rendered obsolete by the Argentine crisis?

Abstract

Unlike the train of events in previous crises, when the negotiations between the parties–creditors and debtors, investors and host countries– were played out within some kind of institutional framework, the crisis of 2001 portrayed Argentina as a country abandoned to its fate, not just once, but twice. But although investors had initially been able to alter the rules in their favour to secure better protection and enhanced legal certainty, ultimately they came out of the situation worse off. The Argentine experience suggests that, as the influence of the international financial institutions declines, asymmetric solutions cannot last and, at the end of the day, democratic governments will put their electorate before their investors. But is the Argentine case an exception to the rule or does it reflect a more general weakening of foreign investment protection?