Question

How would you characterize the potential default of Argentina on the rest of the world?

Answer 1

The world is a global village. A small disturbence in one part of the word affects the entire world directly or indirectly. The potential default of Argentina is also going to affect the the rest of the word. The avoidable default that can be solved became a world disaster. Now it is going to affect the entire world.Actions taken by the Argentine government have imposed enormous and unnecessary costs on investors, shareholders and taxpayers in the United States, Europe and Latin America. In 2001, Argentina defaulted on around $100 billion of debt. It triggered the worst economic crisis in the country's history and resulted in millions of middle-class citizens falling into poverty — a consequence many in Argentina blame on the fiscal policies enforced by the IMF at the time.

If Argentina’s leaders had heeded the International Monetary Fund and applied more discipline to their domestic fiscal and monetary policies, the IMF would not have suspended its emergency loans – and the default might have been avoided entirely, or at least it could have been considerably smaller. Moreover, if the Argentine government had offered a restructuring plan that respected the norms of international finance and provided an exchange that would have satisfied all of its lenders, the direct costs for those lenders and the indirect costs imposed on everyone else would have been much smaller.Furthermore, if the United States and other nations permit Argentina to pursue these policies, they could establish a new and dangerous standard in international lending which ultimately would impose large, future cost on investors, shareholders and taxpayers in the U.S. and worldwide. Such a development also could inflict huge costs of millions of other people in developing nations by eventually reducing access by their governments and businesses to the capital and technologies they need to modernize. The United States government has a responsibility not only to American investors, shareholders and taxpayers but also to the global system to persuade or require the Argentine government to change these policies. The United States government also cannot permit Argentina’s leaders to shift the costs of their irresponsible policies from their own taxpayers to Americans. The administration and Congress should prepare to suspend Argentina’s benefits under the General System of Preferences until it agrees to provide terms for rescheduling the foreign debt and past due interest payments repudiated in the 2004 restructuring. • Until the Argentine government offers reasonable terms to those American, European and Latin American lenders, and extends the same concessions to those forced to accept the original terms for restructuring under threat of repudiation, it should be denied access to the normal channels of international lending. The affects of the default of Argentina have different effects on the economy of various Nations. The mistakes of the Argentina are going to have a serious impact on the economy.