Argentina failed to meet its deadline for interest payments on $13 billion of securities bonds due in 2033, resulting in the country’s second default since 2001. Reaction from Atlantic Council experts:

“Nearly a decade ago, Argentina and 93 percent of its bondholders agreed to a deal that Argentina has so far respected. The remaining 7 percent are looking to force Argentina into making large payments on bonds they bought for pennies,” said Peter Schechter, director of the Adrienne Arsht Latin America Center. “While Argentina’s financial behavior has not been stellar, the vulture funds are now the ones thrusting a stick into the spokes of the international financial community’s bicycle wheels. Argentina has been making some slow progress; the small group of holdouts is now going to derail that. This will cause serious financial, political and, most importantly, human pain,” said Schechter.

“Thirteen years have passed since Argentina last defaulted, and the people have suffered tremendously. Job, housing, and investment markets have been reeling since the last debt crisis and the country can’t afford to suffer the same impact,” said Jason Marczak, deputy director of the Adrienne Arsht Latin America Center.  “Argentina bet that it would win the case against the holdout creditors, but that gamble has not paid off. Now it is the Argentine people who will suffer most from the unrealistic expectations of some Wall Street firms and President Cristina Kirchner’s refusal to negotiate,” he said.

“The biggest casualty in this default will most likely be the process of sovereign debt restructuring, which stands to become more chaotic and haphazard after the US court’s ruling. The US may have just inadvertantly set a universal precedent, in which case all foreign law bond restructurings will be affected. Sovereign debt restructurings will become more chaotic and litigious, a worrying development in a global environment characterized by unsustainable public debts,” said Megan Greene, senior fellow in the Global Business and Economics Program.  

The Adrienne Arsht Latin America Center is dedicated to broadening awareness of the transformational political economic and social changes throughout Latin America. Follow the Adrienne Arsht Latin America Center on Twitter @ACLatAm.

The Atlantic Council’s Global Business and Economics Program is a policy center where business and government leaders from around the world exchange ideas and design solutions to today’s most pressing economic issues to advance shared economic prosperity, innovation, and enhance competitiveness. Follow the program’s trade work at @TTIPAction.