The U.S. Supreme Court surprised the financial world Monday by turning down Argentina’s request to hear the bankrupt South American nation’s case against its hedge fund creditors. Whereas many observers expected the Supreme Court to give Argentina more time by referring the case to the U.S. solicitor general for review, today’s ruling effectively put an end to years of Argentine posturing and bluster. Her judicial options now exhausted, Argentina — a country notorious for decades for unwillingness to properly service the massive debts she has incurred as a result of several generations of financial profligacy — faces two options: pay her creditors or default once again on her obligations.
Argentina’s latest financial crisis is the long-delayed consequence of her infamous default in 2001-2002. Then, her options for repayment exhausted, Argentina simply defaulted on her debt, which led to economic collapse and several years of crime, poverty, and civil unrest severe even by Argentine standards. Eventually, Argentina worked out an agreement with many of her creditors, who agreed to accept service of debts at a steep discount. But not all holders of Argentine debt were willing to take a haircut. After the default, a significant portion of the debt was sold to international hedge funds, who have been hounding and harassing Argentina ever since to force the deadbeat nation to pay up, in full.
Argentina’s vitriolic populist president Cristina Kirchner (shown in photo) has been fulminating for years against allegedly wicked plutocrats (“vultures,” she calls them, in the best tradition of over-the-top Latin American political rhetoric) who have the temerity to require Argentina to pay her debts. Since Argentina, unlike Greece and other failed EU economies, cannot rely on stronger regional economies, such as Brazil or Chile, to bail her out of her misery, the unlucky citizens of the republic on the River Plate are staring into the abyss for the second time in little more than a decade. Since Argentina’s addiction to a fiat-currency-and-debt-driven economy has enriched the few at the expense off the many, there is little political support for paying the American-based hedge funds their due. So desperate have been Argentina’s legal and financial contortions to avoid repayment that, at one juncture, an Argentine military vessel was actually impounded in Ghana at the behest of her creditors.
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Photo of Cristina Kirchner: AP Images