Despite Deal, Setbacks Ahead for Argentina
By Maya Moritz
In what appears to be a sign of hope for the ailing region, South America’s second largest economy (by GDP) has ended a lengthy, cumbersome legal battle after nearly fifteen years of fighting.
According to Patrick Gillespie for CNN Money, the country has settled with NML Capital, the hedge fund groups that have closed much foreign trade between Argentina and its former partner nations, for $4.6 billion (£3.2 billion).
That sum equals approximately three quarters of what was owed to the multiple hedge funds after they purchased the country’s defaulted debt in 2001. Since then, the funds have sought to block Argentina from trading in an effort to force the country into paying back the funds.
The drawn-out negotiations have further crippled the Argentinian economy, which faces inflation, various attacks on the credibility and character of government through corruption scandals, and a spiraling crisis.
In South America, many are critical of the hedge funds, often nicknamed vultures, for having no mercy on an already strained economy. In fact, Argentina’s president has passed several laws during his time in office that would interfere with the country’s ability to pay back the loans.
One of the main criticisms against the hedge funds focuses on their lack of appreciation for Argentina’s struggles, especially after the United State’s housing bubble burst. The debts were bought a mere seven years before the crisis, and the debt-holders continued to hold Argentina accountable even as the American recession adversely affected Argentina’s economy (and the world economy).
Even now, with Argentina working to break out of a continent-wide downward spiral, the country now must attempt to continue building their own economy while sending money out of the economy for these debts. Some fear that the deal will prevent Argentina from achieving economic success for a considerable length of time.
Still, the road to paying back the debts is long and includes repealing a host of laws, congressional approval, and crafting an effective and functional payment plan for the large sum.