Coasting on low inflation and solid growth rates, Argentina was a favorite of emerging-market investors in the 1990s. But the glory days ended in 1999 after the economy of neighboring Brazil took a nosedive. Argentina's policymakers have since failed to revive the prosperity the nation once enjoyed. The result is a cautionary tale of how even the best-intentioned market reforms can miss their mark.
South America's Triple Frontier, where Argentina, Brazil, and Paraguay meet at a bend in the Paraná River, has long served as a hub of organized crime and narcotics, weapons, and other contraband smuggling. For decades, these borderlands have been home to a large and thriving Arab merchant community. The area first came to Washington's attention following the 9/11 attacks when security experts suspected jihadists were taking safe harbor there. U.S. officials jumped in, with programs to combat criminal activity, improve intelligence, and strengthen rule of law. But they failed to turn up any terrorists. In fact, their interventions did little to curtail the broader lawlessness that plagues the region.
But now, because of an economic downturn, the very group suspected of harboring terrorists might be the one to finally clean up the Triple Frontier. The 965-square-mile area is a landlocked, porous border-zone that combines impressive natural beauty with haphazard urban sprawl. It consists of three main cities -- in addition to Puerto Iguazú in Argentina, the two larger towns are Ciudad del Este in Paraguay, which has population of 300,000, and Foz do Iguaçu in Brazil, which has a population of 260,000. Connecting the two is the "Friendship Bridge," a three-lane motorway with pedestrian walkways on both sides. It spans the tumultuous Paraná River just nine miles south of Itaipú Binational Hydroelectric Dam, the largest operating hydroelectric dam in the world.