Argentina's finance minister says wants to resolve all outstanding cases
One of the all-time great finance books is called 'And the Money Kept Rolling In" by Paul Blustein. It details the disastrous series of IMF bailouts and eventual Dec 2001 default in Argentina.
What happened in Argentina foreshadowed the European debt crisis and is a powerful example of how the international financial system works.
After the default, Argentina exchanged defaulted bonds semi-voluntarily, paying out at a deep discount.
Groups of bondholders held out for full repayment because the bonds were written in New York under US law. That set the stage for a nearly 15 year showdown.
Cases escalated all the way to the US Supreme Court as Argentina tried not to pay. Ultimately, they lost and the country was essentially barred from international finance. Successive governments vowed 'never' to pay the holdouts.
One group of bond holdouts, often called vulture funds, seized an Argentine ship in an Africa port as the dispute escalated.
Argentina is throwing in the towel
Argentina finance minister Prat-Gay today reiterated that he wants to resolve all pending sovereign debt cases. The move was expected after a change in government in Dec 10 elections.
All that's left to decide is how much interest the holdouts will be paid because of the bonds were tied up in court for so long. The government argues 70% while bond holders want 95%.
It's good news and bad news for the global economy
The strength of the US financial system was put on display in the dispute. By enforcing against a default, it lowers the risk on all foreign sovereign debt issued in the United States.
The flipside is that if a country runs into a period of wildly irresponsible government (in this case one that was hugely supported by the IMF and US), then there is no to write off those debts.
Overall, I think the liberalizations in FX and handing this dispute is a great sign for Argentina and that it's one of the best place in the world to invest.