Notably, the one creditor that was paid back in full — in 2006 — was the International Monetary Fund, to which Argentina owed $9.8 billion dating to the 1990s.A lesson for Greece is “whereas the commercial creditors are expected to take a haircut, the official creditors like the I.M.F. are not willing to,” said Robert S. Koenigsberger, chief investment officer with Gramercy, an emerging markets investment manager.“That is how commercial creditors get subordinated and bear the brunt of these failed bailouts,” Mr. Koenigsberger said.Since paying off the International Monetary Fund, Argentina has not borrowed from the fund. That has enabled the Kirchner governments to avoid the agency’s typical prescription of cutting state spending.[emphasis added]
For one thing, a decade later, Argentina has still not been able to re-enter the global credit market.“A default is not free,” said Jaime Abut, a business consultant in Rosario, a city north of Buenos Aires. “You have to pay the consequences, and for a long time. Argentina is no longer considered a serious country.[emphasis added]
Krugman responds: Don't Cry for Argentina
I was really struck by the person who said that Argentina is no longer considered a serious country; shouldn’t that be a Serious country? And in Argentina, as elsewhere, being Serious was a disaster.
Bill Mitchell elaborates on Argentina in Defaulting on public debt as a way to progress (September 7, 2010). Scroll down to Case study: Argentina 2001-2002 …
To reiterate, none of this discussion applies to truly sovereign nations who never face any solvency risk.I think the best thing a non-sovereign government can do in terms of advancing the interests of its people is to move towards sovereignty as soon as possible. That might involve jettisoning a currency arrangement (such as in Latvia, for example).It might require exiting a monetary union that has taken the currency-issuing monopoly away (such as the EMU nations). In this instance, that might necessitate a formal default on all debt that was incurred in the currency that the nation is exiting (such as Greece at present).The reality is that a sovereign government holds all the cards in this situation. Please read my blog – Why pander to financial markets– for more discussion on this point.There would be short-term costs but by re-establishing the currency sovereignty the nation will always be able to advance the best interests of its domestic economy.This doesn’t mean that a nation that is short of real resources etc will be able to establish a high material standard of living by moving to sovereignty. The real standard of living is always determined by the access a nation has to real resources. Fiscal policy does not create these resources but can ensure they are more fully utilised and thus more effectively deployed. A poor nation will not become rich just because it is sovereign.