The recent years have witnessed a spate of crises in emerging economiesBrazil, Mexico and South East Asia immediately spring to mind. The classic example that can be quoted today in this regard is that of Argentina, which ended up with the largest ever sovereign debt default of $155 bn in December 2001. Let us have a look at how the crisis in Argentina unfolded.

In today's world of increased interdependency among the various economies in the world, a crisis in one part, however small, is bound to have serious repercussions on some other parts of the globe. Naturally, it is in the interest of all the economies to see that the world gets along without any major crisis at any point of time. However, when Argentina finally defaulted upon its debt of $155 bn, making it the largest sovereign default ever, there were hardly any eyebrows raisedit was long expected. Indeed! Argentina had been literally living on "borrowed" time for nearly two years now.

Argentina is a classic case of how the gross mismanagement of a government can lead to disaster. The conditions that prevailed in the country, prior to the crisis, is similar to that of any emerging market economy. With quite a few emerging economies getting themselves into trouble in recent years, a study of the Argentine situation will undoubtedly enable them to fathom the depths of the crisis that can plague an economy if the government itself goes wrong.

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