For the second time in just thirteen years, South America’s third largest economy has defaulted. This time, Argentina’s president has actually chosen to default.
Following Argentina’s historic default in 2001, 93 percent of its bondholders accepted a loss and settled. The remaining bondholders refused and have continued to demand full repayment. These creditors have U.S. law on their side. In 2012, a federal judge in New York ruled in favor of the holdout creditors and the U.S. Supreme Court declined to hear Argentina’s appeal. The law clearly states that Argentina owes the holdouts their money, and furthermore, that Argentina cannot repay the renegotiated bondholders without also paying the holdouts. Despite having the ability to pay, President Kirchner has ignored the U.S. court injunction and devised a work-around to pay only holders of the renegotiated bonds.
President Kirchner’s actions could hold grave consequences for Argentina and the rule of law. What happens when a democratically elected leader of a G-20 nation arguably defies national law, U.S. courts, and international treaties by refusing to pay her country’s bills? On September 23rd, Hudson Institute hosted two expert panels to analyze the implications of this second default and discuss whether Argentina can survive such policy decisions.