Argentinian Economic Crisis
In a series of arbitration matters related to the Argentinian economic crisis of 2001–2002, Analysis Group was retained by counsel for various banking institutions and corporations that sustained losses due to the devaluation of the Argentine peso. Prior to the crisis, the exchange rate between US dollars and Argentinian pesos was pegged at 1:1. During the crisis, the peg was removed and the peso reverted to a floating exchange rate. To counteract the diminished purchasing power of the peso, the government “pesofied” dollar-denominated contracts at the pre-crisis pegged 1:1 rate – essentially converting the dollar amount owed to an equal amount of pesos. As a result, many foreign firms with significant investments in Argentina incurred substantial losses and turned to their political risk insurance providers for recovery.
An Analysis Group team, including Principal Samuel Weglein and Vice President Rebeccah Filsoof, conducted studies of the devaluation of the Argentine peso during the economic crisis and the asymmetric “pesofication” of contracts in Argentina. The team supported our affiliated expert, Professor Sebastian Edwards, who opined that the pesofication was not a typical tool that policymakers had at their disposal, but rather a political act to placate the electorate, and thus covered under the political risk policy. Professor Edwards's view was adopted by the various tribunals that adjudicated these claims, and Analysis Group's clients prevailed in each of these cases.