Argentina’s debt affair: far beyond vulture funds

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Please cite the paper as:
Francisco J Cantamutto, Daniel Ozarow, (2015), Argentina’s debt affair: far beyond vulture funds, World Economics Association (WEA) Conferences, No. 1 2015, Ideas towards a new international financial architecture?, 15th May – 20th July, 2015

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Abstract

In December 2001 Argentina shocked the world when it declared the largest external debt default in history following its catastrophic economic and political crisis. After a decade of debt negotiations, President Fernandez de Kirchner’s government recently boasted of having converted the country into a “serial payer” highlighting its “dis-indebtedness” policy. Yet when the US Supreme Court upheld a successful lawsuit by US “vulture funds” in June 2014, approval of their exorbitant bond repayment demands sent shockwaves through the global financial system and condemned Argentina to a new, „selective‟ debt default. This paper analyzes the origins and chronology of Argentina’s debt. It proposes that the absence of a comprehensive audit of its legitimacy explains why the country has remained trapped in a cycle of debt-dependency since the 1980s. Further, it provides critical lessons for those countries that face the potential impossibility of debt restructurings as a consequence of the case.

Francisco J Cantamutto, FLACSO México/ ONACYT,francisco.cantamutto@flacso.edu.mx
Daniel Ozarow, Middlesex University Business School, D.Ozarow@mdx.ac.uk


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2 responses

  • pasbaxo says:

    Argentina’s place in the world external debt list per capita lays in 2014 between 45th and 55th position from
    190 country notes. It is not the baddest position you can imagine. (Wikipedia).

    • Francisco Cantamutto says:

      Dear pasbaxo,

      No one is saying Argentina is in the worst position posible, by no means. But nevertheless it certainly cannot be proposed as an example of how to deal with debt. In the authors’ view, Ecuador or Greece are better paths to follow.
      In first place, that depends on how you mesure external debt. As the article clearly exposes, there have been some tricks on that matter in the Kirchner administration.
      In secon place, since 2010 the country pays the highest interest rates of the region (one of the highest in the world), certainly something your wiki quote does not catch, everytime this has impacts in the future.
      In third place, it is extremly important not to get lost in poor comparisions such as the one you propose. A fairly accurate macroeconomic analysis of Argentina would let you know that the debt burden is far away of being in “a good position”: since 2010, debt payments have contribute to a coming back of fiscal and current account deficit, both typical features of neoliberal times in the country. This has several negative impacts for the working population, in the form of devaluation and inflation, as ways to gain competitiveness and financing deficits.