Argentina went through an economic crisis since the mid-1990s; though it is debatable whether this crisis has ended, the situation has been more stable, and improving, since 2003. (See Economy of Argentina for an overview.) See Economy of Argentina. ... // Events and trends The 1990s are generally classified as having moved slightly away from the more conservative 1980s, but keeping the same mind-set. ... 2003 is a common year starting on Wednesday of the Gregorian calendar. ... Argentina benefits from rich natural resources, a highly literate population, an export-oriented agricultural sector, and a diversified industrial base. ...

Argentina defaulted on part of its external debt at the beginning of 2002. Foreign investment fled the country, and capital flow towards Argentina ceased almost completely. Argentina was "left out of the world". The currency exchange rate (formerly a fixed 1-to-1 parity between the Argentine peso and the US dollar) was floated, and the peso devalued quickly, producing massive inflation. In finance, default is what occurs when a party is unwilling or unable to pay their debt obligations. ... 2002 is a common year starting on Tuesday of the Gregorian calendar. ... Seen in Asian markets in the 1990s capital flight is when assets and/or money rapidly flow out of a country. ... The Argentine peso (originally established as Argentine new peso, or convertible peso), (ISO 4217: ARS) is the currency of Argentina. ... The United States dollar, or American dollar, is the official currency of the United States. ... Devaluation is reduction in the value of a currency. ...

Large-scale debt restructuring was needed urgently, since the debt had become unpayable. However, the Argentine government met severe challenges trying to refinance its debt. The IMF (whose part of the debt was not included in the default) became uncooperative, hypercritical and unwilling to recognize their share of blame. Other creditors (many of them private citizens in Spain, Italia, Germany, Japan and other countries, who had invested their savings and retirement pensions in debt bonds) denounced the default; the Italian government lobbied against Argentina in international forums. Vulture funds who had acquired sovereign debt bonds during the critical moments, at very low prices, pounced on the Argentine state asking to be repaid immediately. Debt restructucing is a plan for business, which is made to make possible to continue business operation without danger of debts. ... Refinancing refers to applying for a secured loan intended to replace an existing loan secured by the same assets. ... The flag of the International Monetary Fund (IMF) The International Monetary Fund (IMF) is the international organization entrusted with overseeing the global financial system by monitoring foreign exchange rates and balance of payments, as well as offering technical and financial assistance when asked. ... A vulture fund is an financial organization that especializes on buying securities in distressed environments, such as high-yield bonds in or near default, or equities that are in or near bankruptcy. ...

The state had no spare money at the time, and the Central Bank's foreign currency reserves were almost depleted. (Moreover, whatever amount left was needed to control the availability of dollars in the local market, in order to prevent further devaluation of the peso.) For four years, Argentina was a pariah, effectively shut out of the international financial markets.

Even as the economic situation improved, the amount of the debt was still the largest defaulted debt in history (about 93,000 million USD), and Argentina was in no position to pay without sacrificing essential parts of its budget.

The Argentine government kept a firm stance, and finally got a deal by which 76% of the defaulted bonds were exchanged by others, of a much lower nominal value (25-35% of the original) and at longer terms. Among these bonds, some are indexed based on the future economic growth of Argentina.

The terms of the debt exchange were not accepted by the rest of the private debt holders. Argentina will continue to face challenges from them and from the IMF for years.

References

• Argentina Didn't Fall on Its Own (GlobalExchange.org)
• Argentina's debt restructuring: A victory by default? (Economist.com)

External links

• Banco Central de la República Argentina (Argentina's Central Bank website, with various economic statistics available on the fly)
• Interessengemeinschaft Argentinien e. V. (non-profit-association of creditors involved in the restructuring, based in Germany)