The final countdown: How to avoid the default

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The final countdown: How to avoid the default

Julio 2014

The Supreme Court decided not to take Argentina’s case on Monday June 16th, a decision that took the market by surprise and the Government without a contingent plan. This decision left Argentina without any further legal options and it now has to choose between two costly alternatives: either it reaches some type of agreement with the holdouts regarding the amount it has to pay and on the terms of the payment or alternatively it faces once more a default on the debt.

The Government looked lost at the beginning. During the first days the official announcements were on a rollercoaster and the markets moved accordingly. Cristina’s initial reaction that Monday was to say that the country was a victim of the US judicial system and that Argentina was being extorted. The next day Minister Kicillof took a hawkish stance, when he said that the Government was considering to exchange the global bonds for others that would be issued under domestic legislation and to make the payments in Argentina, a decision that would have led to a default. Judge Griesa quickly warned Argentina not to take that route.