All this could have significant ramifications for the international system, by making future crises more likely, some policymakers and economists fear. Because the Argentine restructuring is likely to set a new benchmark for investor losses on loans to governments in Latin America, Asia and other "emerging markets," the deal may make markets more prone to bolt from those areas when the global financial environment turns sour.
Some on Wall Street see an even more dangerous precedent: Won't countries with large debt loads such as Brazil, Turkey or the Philippines look at the Argentine case and wonder whether they should default too? Walter Molano, head of research at BCP Securities LLC in Connecticut, wrote in a Feb. 22 note to clients that, thanks to Argentina's example, "finance ministers across the emerging markets are having second thoughts about making fiscal sacrifices in order to continue servicing their external obligations."
A boy plays soccer at a Buenos Aires shantytown. The population of slums just a few blocks beyond fashionable waterfront steakhouses and hotels mushroomed after Argentina's economy collapsed four years ago.
(Marcos Brindicci -- Reuters)
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_____Special Report: Argentina_____
_____Photo Gallery_____
 • A Road to Ruin: The economic crisis in what was once Latin America's richest nation ravaged Argentina's middle class, forcing millions into poverty. (Flash required)
_____Story Archive_____
• IMF Says Its Policies Crippled Argentina (July 30, 2004)
• Argentina Didn't Fall on Its Own (August 3, 2003)
• Scrap by Scrap, Argentines Scratch Out a Meager Living (June 7, 2003)
• Gulf Between the Rich and the Poor Grows in Argentina (May 16, 2003)
• As Crime Soars, Argentines Alter Outgoing Ways (January 27, 2003)
• Despair in Once-Proud Argentina (August 6, 2002)
_____Timeline_____
• Argentina's Economic Collapse
_____Graphics_____
• Biggest Underwriters of Argentine Government Bonds; The More Argentina Borrowed, The More Investors Bought
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Maybe so, but the idea that Argentina provides a model to follow is hard to square with some of the country's gritty realities.
Street Scavengers
The competition is fierce among the unemployed Argentines who descend on this city's streets at night, sifting through trash bags for recyclable items and castoff appliances.
"Are you working this block?" a woman with a young girl in tow asked a short middle-age man who was squashing a plastic bottle for sale to recyclers. Told that he and his children scavenge in the area every evening, the woman and the girl moved on forlornly in search of unclaimed garbage.
The ranks of these cartoneros (cardboard men) swelled into the tens of thousands after the default. To be sure, most Argentines have not been forced to join them. But the cartoneros' plight is emblematic of the fate that befell the country.
The rebound of the past couple of years has failed to improve the lot of ordinary Argentines to the point that they have recovered all of what they lost. Even for salaried workers who kept their jobs, real earnings -- that is, adjusted for inflation -- are still well below the 2001 level. Compared with the peak level of 1998, real wages are down 20 percent, according to data compiled by IDESA, a private think tank.
The problem stems in large part from the depreciation of the peso. With the Argentine currency now trading at about three to the dollar, instead of the one-for-one exchange rate that prevailed before, many goods tied to the dollar -- real estate, cars, electrical appliances -- are out of reach for many Argentines.
On the plus side, the cheap peso is one of the major factors attracting foreign manufacturers such as Volkswagen, which pays its workers an average of less than $6 an hour, including all fringe benefits -- just about the lowest wage in Volkswagen's operations worldwide, according to Klima.
But the diminution in living standards is all too perceptible to Antonio Delgado, who has worked as a nurse in public hospitals for 20 years and supplements his modest salary by working weekends at a private clinic, earning about 2,600 pesos ($870) a month.
