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Argentina had a record-setting default in 2001, and was able to reach a settlement to issue new bonds this year. There is no such thing as "permanent" in the i

Argentina had a record-setting default in 2001, and was able to reach a settlement to issue new bonds this year. There is no such thing as "permanent" in the international debt markets. Someone will eventually be willing to lend you money, at the right price.

Alupis 10y ago
> Argentina had a record-setting default in 2001, and was able to reach a settlement to issue new bonds this year 15 years later (and arguably not in a much better condition than before). We shouldn't pretend a nation-state default has few/zero negative ramifications. > Someone will eventually be willing to lend you money, at the right price. You are right... but money gets a lot more expensive. It could very well be more expensive than riding out the temporary slump (which is largely tied to the petroleum markets from my understanding).
- dublinben 10y ago
  The government of Argentina voluntarily took the position that they would not settle with the outstanding debt holders. They could have settled 15 years ago and regained access to international debt markets right away.
  - Alupis 10y ago
    Doing so would not have made the situation much better. To an outside investor, Argentina is a lot more risky now that they've proven they're willing to default when things get rough. That kind of risk isn't impossible to overcome, but it's very expensive. For a struggling nation without a strong economy, foreign investments can be lifeblood.
    - roymurdock 10y ago
      Or a noose. Debt is a double-edged sword - it all depends on if it's structured in a reasonable fashion, and if it used in a productive manner that can pay down promised future payments.
      - Alupis 10y ago
        > it all depends on if it's structured in a reasonable fashion And the ability to structure reasonable debt is contingent on perceived risk to outside investors. If Venezuela defaults and becomes very high risk, it's unlikely future debts will be favorable towards Venezuela, impacting Venezuela's ability to climb out of the hole, so-to-speak.
        ptaipale 10y ago
        Markets tend to think ahead of that. At least I think Venezuelan debt is already now very high risk; after a default, I would not necessarily think it were higher - I would look at the policies adopted by the government and think whether they are consistent and responsible. In other words, with the current government, it doesn't really matter whether they default or not. They are not very believable in any case.
- nhaehnle 10y ago
  The real question is, as usual, what's the counterfactual in the case of Argentina? If they hadn't defaulted, would they actually be better off today? It's possible that, had they tried to avoid default at all cost, the lacking fundamentals would have locked them into a downward spiral. Sometimes, a default can be a liberating blow. (I'm not saying that default was right for Argentina back then. The point is that you haven't presented any evidence that it was wrong, either.)
mc32 10y ago
Didn't some creditor hold-out hedge-funds fare better than those who initially settled for pennies on the dollar? What was the resolution to that?
- mikeyouse 10y ago
  It's still being drawn out, Matt Levine's had a few great articles explaining the current happenings, one such: https://www.bloomberg.com/view/articles/2016-02-22/argentina-s-new-attitude-pays-off-in-bond-fight https://www.bloomberg.com/view/articles/2016-02-22/argentina...
- Analemma_ 10y ago
  That's kind of a special case that doesn't apply anymore: Argentina didn't have a collective action clause on its debt, meaning they could not force the holdouts to take the haircut even though 93% of the bondholders agreed to it. Virtually all debt issued by developing countries, and even a lot of developed ones, now has a strong CAC specifically because of the Argentina situation.

Alupis 10y ago

> Argentina had a record-setting default in 2001, and was able to reach a settlement to issue new bonds this year 15 years later (and arguably not in a much better condition than before). We shouldn't pretend a nation-state default has few/zero negative ramifications. > Someone will eventually be willing to lend you money, at the right price. You are right... but money gets a lot more expensive. It could very well be more expensive than riding out the temporary slump (which is largely tied to the petroleum markets from my understanding).

dublinben 10y ago
The government of Argentina voluntarily took the position that they would not settle with the outstanding debt holders. They could have settled 15 years ago and regained access to international debt markets right away.
- Alupis 10y ago
  Doing so would not have made the situation much better. To an outside investor, Argentina is a lot more risky now that they've proven they're willing to default when things get rough. That kind of risk isn't impossible to overcome, but it's very expensive. For a struggling nation without a strong economy, foreign investments can be lifeblood.
  - roymurdock 10y ago
    Or a noose. Debt is a double-edged sword - it all depends on if it's structured in a reasonable fashion, and if it used in a productive manner that can pay down promised future payments.
    - Alupis 10y ago
      > it all depends on if it's structured in a reasonable fashion And the ability to structure reasonable debt is contingent on perceived risk to outside investors. If Venezuela defaults and becomes very high risk, it's unlikely future debts will be favorable towards Venezuela, impacting Venezuela's ability to climb out of the hole, so-to-speak.
      - ptaipale 10y ago
        Markets tend to think ahead of that. At least I think Venezuelan debt is already now very high risk; after a default, I would not necessarily think it were higher - I would look at the policies adopted by the government and think whether they are consistent and responsible. In other words, with the current government, it doesn't really matter whether they default or not. They are not very believable in any case.
nhaehnle 10y ago
The real question is, as usual, what's the counterfactual in the case of Argentina? If they hadn't defaulted, would they actually be better off today? It's possible that, had they tried to avoid default at all cost, the lacking fundamentals would have locked them into a downward spiral. Sometimes, a default can be a liberating blow. (I'm not saying that default was right for Argentina back then. The point is that you haven't presented any evidence that it was wrong, either.)

mc32 10y ago

Didn't some creditor hold-out hedge-funds fare better than those who initially settled for pennies on the dollar? What was the resolution to that?

mikeyouse 10y ago
It's still being drawn out, Matt Levine's had a few great articles explaining the current happenings, one such: https://www.bloomberg.com/view/articles/2016-02-22/argentina-s-new-attitude-pays-off-in-bond-fight https://www.bloomberg.com/view/articles/2016-02-22/argentina...
Analemma_ 10y ago
That's kind of a special case that doesn't apply anymore: Argentina didn't have a collective action clause on its debt, meaning they could not force the holdouts to take the haircut even though 93% of the bondholders agreed to it. Virtually all debt issued by developing countries, and even a lot of developed ones, now has a strong CAC specifically because of the Argentina situation.