Argentina Avoids IMF Default…
…at least for now:
Argentina agrees to meet IMF debt deadline
FT.com: Argentina on Tuesday agreed to make a $3.1bn payment to the International Monetary Fund, narrowly avoiding what would have been the biggest single default in the fund’s history…
Details of how the IMF and Argentina broke the impasse were unclear on Tuesday afternoon. But people close to the negotiations told the Financial Times that Argentina had agreed to several IMF demands over the country’s treatment of its private creditors. The most important of these is that Argentina should agree to enter formal negotiations with its private creditors to restructure the country’s defaulted sovereign debt. Until now, Argentine authorities have gone out of their way to avoid using the word “negotiation” and, according to creditors, have done everything possible to delay the process.
It’s a messy, messy situation with no easy way out. The choice for the IMF is to: a) let Argentina default, thereby losing the money that they’ve already lent them, but cutting off the risk of losing more money; or b) keep letting Argentina string things along, hoping that things will get better. The choice for Argentina is to: a) default, thus saving billions of dollars in loan repayments but losing the ability to borrow any further, thus potentially making the recovery much, much harder; or b) keep struggling to send payments to the IMF, thereby preserving the ability to borrow further to help get the economy back on its feet. Unless some Good Samaritan comes along with outright gifts of several billion dollars to Argentina, there are no good choices in this situation.