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Calm amid Argentina crisis
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December 20, 2001: 8:22 a.m. ET
Impact of Argentina's debt crisis limited to banks, currencies
By CNN's Gordon Isfeld
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LONDON (CNN) - Investors reacted calmly on Thursday to Argentina's latest economic crisis, as the impact on emerging markets appeared to be limited.
As Argentina's crisis widened, the government declared a state of siege to deal with rioters and Economy Minister Domingo Cavallo announced his resignation, according to Reuters. Other cabinet ministers are expected to follow his lead.
But the financial impact has so far been limited to Spain, where companies have a large exposure to Argentina. South Africa's currency has also become a victim of the crisis, amid concerns it could spark a global aversion to emerging markets.
Madrid's main index, the Ibex 35, slipped 1.1 percent, with Spanish banks, which are heavy lenders to Argentina, seeing the biggest declines.
Santander Central Hispano, Spain's biggest bank, and rival Banco Bilbao Vizcaya Argentaria fell 2.0 percent each, while Telefonica, Spain's dominant phone company, which earns about 10 percent of earnings before interest, depreciation, taxes and amortization in Argentina, slipped 0.6 percent.
In South Africa, the rand fell to historic lows against the dollar, British pound and euro in midday trading in London. The rand hit a low of 13.55 against the dollar.
While most experts agree this new crisis is a serious blow for Argentina, they believe its impact on emerging markets will be minimal.
"Most markets have priced it (the crisis) in, with the exception of the South African rand, which I think people are using it as an excuse to sell," Frank Gill, an emerging markets analyst at IdeaGlobal, told CNN.
Gill said the Argentine government will now move to devalue the peso, which has been pegged to the U.S. dollar since 1991, and unfreeze deposits at banks. Argentina has been rocked for months by fears a deepening recession, now in its fourth year, could lead it to devalue its currency or default on $132 billion in public debt.
"As far as a financial crisis, this one is first rate," Harvard University Professor Jeffrey Sacks told CNN. "Argentina has a banking crisis, it has a debt crisis, it has a currency crisis and it has a social crisis."
But the current crisis does not come as a surprise, he said, so it will have little effect on emerging markets.
"The impact on financial markets will be wide as far as Argentina is concerned, of course, but limited as far as contagion," he said. 
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