Argentina: Can Kirchner hold out?

Jonathan Gilbert
Published on:

Argentina’s president has tried to circumvent a New York ruling that caused it to default for the second time in 13 years. Can Cristina Fernández de Kirchner sort out the mess before elections in October 2015?

President Cristina Fernández de Kirchner, pictured here belying her combative tone

Argentina’s long-running and complicated default saga has enthralled emerging market bond investors. A dramatic finale is not expected any time soon. 

Argentina has effectively been locked out of global capital markets since 2001, when it defaulted on around $95 billion of debt, then the biggest sovereign default in history. At some point, though probably not until a new president is in office in 2016, Argentina will have to make its way back to the international markets. 

The current administration’s concern about the depletion of the central bank’s hard-currency reserves has led it to take the first steps to regaining access to international financing – retrenchment with the IMF on the dispute over its inflation index and, more significantly, an agreement with the Paris Club.

One hurdle remains: ending a bitter dispute with holdout creditors...