According to the 2002 World Bank assessment of Argentina's insolvency and creditor rights system, the legal framework for enforcement of both secured and unsecured rights and the Argentine corporate insolvency regime are largely consistent with the World Bank's Principles and Guidelines for Effective Insolvency and Creditor Rights System. Nevertheless some improvements are needed. Due to the lack of appropriate incentives for debtors and creditors, the legal framework for informal workouts is rarely used. Also, years of economic recession have significantly increased the number of insolvencies, overburdening the insolvency courts in most jurisdictions. As a result, the World Bank has recommended the adoption of a new legal mechanism instituting a consensual, out-of-court, corporate workout framework. This mechanism should incorporate urgently needed reforms to the insolvency system, leaving less-urgent amendments for a later time. In the medium term, Argentina should focus on changes to the legal and institutional framework for creditors' rights and further amendments to the insolvency regime.

General Overview

Regardless of the need for several improvements, the Argentine corporate insolvency system and the application of the legal structure for both secured and unsecured rights are mostly compatible with World Bank Principles and Guidelines for Effective Insolvency and Creditor Rights System. As stated in the 2002 World Bank report, some of the needed improvements involve the legal framework for informal workouts. This option is rarely used, in part because of the absence of an adequate set of incentives for debtors and creditors. In addition, insolvency courts are overloaded in almost all jurisdictions. This is the result of a steep rise in the number of bankruptcy cases filed since the implementation of a unified insolvency regime in the 1980s and an increase of corporate insolvencies due to the economic recession following the 2001-2002 financial crisis.

The World Bank's 2002 report describes Argentina's legal and institutional deficiencies as: "(1) corporate workouts are difficult in practice; (2) the unified insolvency regime causes severe problems in judicial interpretation of many legal provisions, causing court congestion with insolvency cases; (3) an uneven playing field discourages rehabilitation; (4) a lack of insolvency specialization among judges impedes efficiency and uniformity in large commercial centers; and (5) "síndicos" are perceived as lacking objectivity, and sufficient expertise to manage complex restructurings" (p.i). The World Bank suggests that Argentina introduce a new legal mechanism to deal with out-of-court corporate workouts as soon as possible. In the medium term, Argentina can address other, less urgent aspects of the legal and institutional framework. In February 2002, Law No. 25.563 was introduced as an emergency measure to stabilize the corporate sector, imposing a six-month moratorium on creditor actions to recover debt. However most of the measures of this Law were revoked 3 months later by Law No. 25.589. This law reinstated the previous creditor-rights legal framework, restoring a fair relationship between debtors and creditors. Moreover the new law provided interesting new rules although more amendments are needed.

The 2002 World Bank report affirms that the overall insolvency structure is well integrated into the national legal and commercial system. The core of the insolvency legal framework is based on Bankruptcy Law No. 25.589. Other laws, such as the Financial Institutions Law No. 21.526, the Insurance Companies Law No. 20.091 and the Special Regime for Managing Sports Organizations in Financial Difficulties Law No. 25.284, provide a particular insolvency and liquidation framework applicable to those institutions, respectively. Moreover, financial trusts and private pension funds are excluded from the regulatory framework established by Law No. 25.589.

The 2006 U.S. DoC report states that although domestic investment conflicts can be resolved through local courts, foreign investors prefer to go to private or international grounds to deal with disputes. Independent surveys disclose little confidence in the Argentine judiciary system. The Argentinean bankruptcy law is similar to the one followed in the United States, but bankruptcy proceedings are more difficult to initiate. There is a similar procedure to U.S. Chapter 11. Even though company directors can be criminally prosecuted, the likelihood of this happening is low.

According to the 2004 IMF report, private corporate debt restructuring is being improved within a largely adequate legal and regulatory framework. A survey completed by the authorities indicates that the market-based and voluntary framework for private debt restructuring implemented is generating good outcomes. For instance, approximately 27% of the debt of the companies analyzed and said to be in need of restructuring have finished negotiations with their creditors. The pre-packaged bankruptcy process, a new element of the insolvency system, has been used to complete restructurings in several situations. This procedure allows a court to join nonconformist unsecured creditors to a restructuring plan. A review on the legal framework for corporate debt restructuring has concluded that the insolvency system offers an efficient outline for the restructure process. According to Rouillon, writing in 2003, Argentina developed its Cross-Border Insolvency Bill in 2003 and it intends to ratify the UN Commission on International Trade Low (UNCITRAL) Model Law.

The World Bank's "Doing Business" guides for 2009 assess performance in closing a business for a wide array of countries worldwide. The report focuses on three key factors: time required to complete the process (in years), cost of the procedure (as a percentage of the estate), and creditor recovery rate (stated in cents on the dollar). Argentina was found to require 2.8 years to complete closing a business, at a cost of 12% of the debtor estate, yielding an average recovery of 29.8 cents on the dollar. By comparison, the regional averages are 3.3 years, 15.9%, and 26.8 cents on the dollar. Among the member states of the Organization for Economic Co-operation and Development, the averages are 1.7 years, 8.4%, and 68.6 cents on the dollar.