When Argentina cancelled a domestic bond auction last month
- its government refused to pay the interest rates the market
demanded - fears about the country's ability to meet its debts were
revived. The government, mired in recession for almost three years,
has debt of at least $125 billion. Argentina would need to cut
imports in half or boost exports by half to service that overhang.
"Everything coming out of the country right now is aimed at
avoiding the double-D, by which I mean default and devaluation,"
says Morris Goldstein of the Institute for International Economics
in Washington. "I hope they make it, but so far it doesn't look as
if they will. They're not putting forward enough to do the job."
Few expect contagion on the scale that knocked out Long-Term
Capital Management almost three years ago. "We're not likely to see
any balance-sheet-based fire selling," predicts Michael Gavin, head
of...
