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Argentina petitions US courts to avoid another debt crisis
February 20, 2014, 8:28 pm

Some businesses are liquidating stock on fears the Argentine Peso may further depreciate [Xinhua]

Some businesses are liquidating stock on fears the Argentine Peso may further depreciate [Xinhua]

Latin and South American markets are holding their breath as a major regional economy appears on the cusp of a crisis.

On Thursday, Argentina petitioned the United States Supreme Court to try and revoke an earlier ruling ordering Buenos Aires to repay a $1.3 billion debt to hedge fund creditors.

The move has sparked renewed fears among investors and experts that the Latin American country might fall into a critical economic crisis.


For four years beginning in 1998, Argentina plunged into a depression as it’s economy contracted by at least 25 per cent and it defaulted on its foreign loans.

If the US Supreme court were to now reject the Argentinean government’s appeal, the country risks having to default on its debt, plunging itself into its third debt crisis in history.

On November 18, 2013 the second US circuit court of appeals in New York rejected the Argentinean plea to defer their debt repayment. Argentina, however, has not relented.

Argentinean President Cristina Fernandez De Kirchner said she would only repay those who accepted the country’s offer for a partial compensation, referring to the hedge funds as “vultures” in an earlier statement.

She said the court ruling as it stands risks to destabilize Argentina, its citizens, and its investors, most of whom are American.

Argentinean lawyers argued in a petition filed with the Supreme Court that, “full payment of the holdouts would cut Argentina’s reserves approximately in half.”

“Any sovereign would protest if a foreign court issued an extraterritorial order threatening its creditors and citizens and coercing it into turning over billions of dollars from its immune reserves,” their petition went on to say.

Creditors like Aurelius Capital Management and NML Capital Ltd, divisions of billionaire Paul Singer’s Elliott Management Corporation, refused to accept two debt-restructuring offers, after the country defaulted on a $100 billion debt in 2002 and fell into a serious economic crisis.

Since then they have been immersed in a fierce court battle with Argentina, the second largest economy in Latin America.

The Argentinean peso has fallen by 17 per cent since the beginning of 2014, with the inflation rate standing at 25 per cent.

Decreased demand for exported goods and continuing currency market instability have contributed to slowing the performance of many Latin American emerging economies this year, a report from the Economic Commission for Latin America and the Caribbean (ECLAC; CEPAL in Spanish) has shown.

ECLAC’s Preliminary Overview of the Economies of Latin America and the Caribbean 2013 report emphasises that volatility in European and Asian markets has also contributed to the less-than-forecast GDP growth in the region.

Source: Agencies