The Argentine Debt Default: Why It Matters

 

In late 2001, the government of Argentina initiated what would eventually become the single largest sovereign debt default ever recorded. The actions of the Argentine government since that time have deeply unsettled global bond markets, broken international financial norms, and violated U.S. laws. The consequences have been grave, and the need for a response from the United States government grows.

Why Argentina’s Default Matters to Educators

The Argentine 2001 Debt Default and 2005 Restructuring:

  • Caused America’s largest higher education pension fund to lose over $100 million due to investments in Argentine bonds affected by the default
  • Enabled America’s largest higher education pension fund to file a legal judgment against Argentina in US District Courts in response to Argentina’s bond term violations and its ceasing of bond payments
  • Endangered pension fund benefits of America’s largest higher education pension fund pensioners and caused educators to lose their retirement savings

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Why Argentina’s Default Matters to Rural America

The Argentine 2001 Debt Default and 2005 Restructuring:

  • Created an unfair subsidy for Argentina’s agricultural exports
  • Hurt the American food industry, which exports similar produce to countries around the world
  • Destabilized international debt markets
  • Drove down the value of the Argentine Peso, creating an export incentive for domestic exporters

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Why Argentina’s Default Matters to American Taxpayers

The Argentine 2001 Debt Default and 2005 Restructuring:

  • The Argentine default hurt American taxpayers who provide financial support for Argentina through multilateral lending institutions such as the World Bank, IMF and IDB.
  • Argentina has collected nearly 300 loans amassing $25 billion from the Inter-American Development Bank (IDB), funded in part by American taxpayers.
  • U.S investors and taxpayers lost $9 billion because of the default, taking into account capital losses, defaulted interest payments and foregone investment returns.

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