Argentina’s Tale of Debt Struggle

Argentina has been the center of global discussion for the past 14 years. No, it’s not because of its amazing soccer players or its spectacular waterfalls. The reason that Argentina has been the topic of debate is due to its decision to simply not pay back it’s debt of $100 billion. Argentina saw it could not provide the government services that their people needed, so they told the world they were going to sweep their debt under the rug. How do global entities and foreign lenders deal with a country that refuses to pay back their loans? Well, Argentina’s investors tried to accomplish this for 14 years and finally found a solution to this problem.

Initially Argentina knew that it had to cut some sort of deal with it’s lenders that was only about 30 cents to the dollar. Obviously only getting 30 percent of their investment back left many of the lenders angered and outraged, but most of the lenders agreed to the deal. Argentina was seemly in the clear until a group of rebel investors decided that they weren’t going to give in. Among these lenders were Paul Singer of Hedge fund Elliott Management, Mark Brodsky of Aurelius Capital Management, as well as Davidson Kempner and Bracebridge Capital. These investment firms began a decade and a half of back and forth struggle between Argentina and themselves.

This whole story might be sounding like J.J. Abram’s next Hollywood action packed film, but this is real life. This group of rebellious lenders went to such lengths to recover their investments that they actually captured Argentina’s prized ship, the Libertad. They demanded that Argentina pay their debts and then the ship would be returned. This group went from rebels to now pirates. But soon the U.N. tribunal for the law of the sea stepped in and told the group to release the ship. After this adventure, the lenders turned to less drastic measures and read the fine print of the bond contracts. The contract said that Argentina agreed to submit to the jurisdiction of a small court in New York.

The court ruled that Argentina should have been paying its debts and threatened to freeze all of Argentina’s money that was flowing through New York’s banks. Argentina eventually caved in and agreed to make a deal with the lenders. $4.65 billion cash payment is to be paid to its these main holdout creditors. This exciting tale of lending, borrowing, rebellion, debt, and old timey ships is coming a finish. But to push all the exciting details to the side, what is the take away from this story? Who are the good guys and who are bad guys?

Argentina went against its word and never payed back its loan, but did so because it was faced with difficult time and needed to help its citizens. The lenders made an investment and was told that they were not going to see any sort of returns to these loans. They were just trying not to lose the money that they were promised. Both sides were put in difficult positions and the outcome was this mess of a story. Both Argentina and these lenders experienced how risky investment and borrowing is, especially when there aren’t institutions in place to enforce a platform of mutual respect. This story shows the world that there is such a thing as too much debt for a sovereign nation. For us Americans the US national debt is at about $19 trillion, according to We have to ask ourselves: Will there come a time when things get tough and the United States government suddenly realizes it can’t pay off its own debt either?

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