New York Times
June 19, 2011
Defaults by large national economies have occurred many times in history, Argentina being the most memorable recent example. Financial crisis often precipitates these defaults. A number of countries were forced into International Monetary Fund programs when Argentina was under stress early last decade. Of those countries, Argentina is arguably the worst example for today’s I.M.F. aid recipients to follow.
Argentina suffered a significant downturn in 1998 in the turmoil after Russia’s default. After a painful three years, Argentina was forced to ask for an I.M.F. loan. But this was not enough, Argentina unilaterally defaulted on its financial obligations to foreign creditors in early 2002. That is to say, the country stopped paying its creditors without having reached mutual agreement to do so. The result was a large currency depreciation and high inflation that impoverished the country’s people and made Argentina a pariah in international credit markets. The country was able to recover economically and eventually regain access to credit markets, but it took a decade.
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