Argentina is in a race against time to head off its second debt default to its international creditors in 12 years.
Underscoring the seriousness of the situation, Economy Minister Axel Kicillof rushed to negotiations in New York hoping to cut a deal with “holdout” investors who are suing his government before a Thursday deadline.
The man in the middle is mediator Daniel A. Pollack, presiding over talks with the hedge funds who are demanding full repayment on bonds they bought cheap after the country defaulted in 2002.
Ninety-two percent of bondholders accepted Buenos Aires’ take-it-or -leave-it offer, under which they would get back 30 to 50 percent of the money owed.
Eight percent rejected that, but the legal wrangling is centred on the one percent held by what Argentina calls “vulture fund” bondholders.
The hedge funds were awarded $1.33 billion plus interest by a New York court.
Another option was for the Argentine government to win more time from a US court to reach a settlement.
‘Strange things happening’
In Argentina people are reconciled to, rather than frightened about, another default.
Buenos Aires butcher Ruben Menyulu said: “Things won’t be better or worse. When Argentina has defaulted before it was really hard for us.”
Antonio Lencina, a building supervisor, concluded: “The default is going to happen, but strange things have been happening to us for a while now, the economy is not doing well and we don’t have much money.”
A default would bring more pain to Latin America’s third largest economy, which is already in recession, though not the economic collapse seen 12 years ago.
Unlike the debt crisis in 2001-2002 when the country was bankrupt and could not pay its civil servants, this time Argentina is solvent but prevented by a judge in New York from paying off its bonds until the battle with the holdouts is resolved.
The government has insisted a default would not create any problem, but business leaders disagreed.