Today marks the deadline for bondholders to report their identities and holdings to Argentina’s economy ministry as the country attempts to restructure its substantial foreign debt.
Argentina has been buffeted by financial turmoil since 2018, with bondholders increasingly losing confidence in Buenos Aires’ ability to repay over $100 billion in foreign debt, including $44 billion to the International Monetary Fund (IMF). The country has a history of economic crises due to poor financial planning—it has faced eight sovereign defaults in its history, two of which have come in the last twenty years.
President Alberto Fernandez hopes to restructure Argentina’s debt, postpone debt payments for several years and invest savings into social programs to avoid the steep increase in poverty that afflicted the country after austerity measures were imposed after the 2001 crisis. However, as Argentina’s economy mired in recession and the IMF is refusing to take a loss on its biggest ever loan, there is little common ground in the negotiations.
Depleted foreign currency reserves and bondholders’ diminished confidence in Buenos Aires means Argentina is likely to default on its debt payments by the end of the year. A default would lock Argentina out of capital markets, as occurred after the 2001 crisis, depleting foreign investment in the country and undermining economic growth.
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Kevin is an editor and analyst for the Current Developments Team, contributing regularly to the Daily Brief. He specializes in political and security issues in Asia, particularly with respect to China.