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Death of a stock market

Brokers in Buenos Aires are in despair. Delistings by foreign companies of their Argentine subsidiaries have cut the market in half and trading has dwindled to a fraction. Despite this, a badly needed restructuring of the bolsa is being held up by conservatives who fear increased competition. While they argue, Argentine investors are clicking their mice and buying US mutual funds. Local companies are voting with their feet and listing on Nasdaq. By the time the traditionalists come to their senses the market could be dead.

Small unprofitable brokers in Buenos Aires are playing a waiting game. They know their days are numbered and that they have neither the skill nor the capital to survive in the global era. When the trading floor of the exchange is finally closed, as everybody agrees it some day must be, many small firms will go with it.

But in the meantime they are in a position to hold up reform of the Argentine stock market and prevent it from responding to change. The fear is that they could be so successful that they kill the entire market in the process. Buenos Aires has been hit by a wave of delistings reducing its market capitalization by half and daily trading volumes to $20 million or $30 million from $50 million a few years back.

Globalization has also taken its toll on the market, with foreign companies busy delisting their Argentine subsidiaries (Repsol/YPF, Telefónica and BSCH/Banco Rio are the most high-profile), but the exchange's antiquated institutions have so far failed to respond. Whenever an attempt at reform is made, the old-fashioned and conservative members in the majority are able to block reforms.

What the little firms would like is for the reformers, perhaps backed by government funds, to buy them out.

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