A Plan for the Resolution of the Argentine Debt Crisis Essay -- Essays

A Plan for the Resolution of the Argentine Debt Crisis INTRODUCTION: Over the past five years Argentina has suffered from one of the worst economic crises of its history. Mired by currency devaluation, diminished business confidence, contracting GDP, and a large current accounts deficit, the Argentine economy is, at very best, weak. Of its problems, Argentina’s international debt is of greatest concern. Servicing the debt has created a large financial burden for the Argentine government limiting the steps it has been able to take to stimulate economic growth. Since temporarily stopping payment on US$132 billion of debt in 2001 , Argentina has experienced some economic expansion, but this growth has come with large costs. Foreign banks’ condemnation of the default has made Argentina a pariah in the international investment community. Meanwhile, the interest on the outstanding loans is compounding at an astronomical rate increasing Argentina’s debt burden significantly. Unfortunately for Argentina, encouraging international investment and reducing its debt are both essential for a sustained economic recovery. These goals will not be achieved through default, even if it is temporary, as banks are the self-imposed moral authorities on debt and investment and are likely to make Argentina pay a high price. Instead, Argentina must cleverly implement debt reduction mechanisms involving third-party purchase of its discounted debt. It will be the primary responsibility of Argentina’s newly elected president, Mr. Kirchner, and his administration, to stimulate the country’s feeble economy by reducing the public debt. Downsizing its debt will help Argentina to reestablish itself as a creditworthy nation and spur economic... ... and Business, . â€Å"How the debt should be canceled,† Debt & Development Coalition: Ireland, . Krueger, Anne O., â€Å"Crisis Prevention and Resolution: Lessons from Argentina,† International Monetary Fund, 17 July 2002, . MERCOSUR, 6 March 2003, . Moye, Melissa, â€Å"Overview of Debt Conversion,† London: Debt Relief International Ltd., 2001. Powell, James E., â€Å"Time Value of Money,† 1 June 2002, . Rhoter, Larry, â€Å"Argentina Struggles to Meet Debt-Relief Terms.† New York Times, 11 February 2003, . A Plan for the Resolution of the Argentine Debt Crisis Essay -- Essays A Plan for the Resolution of the Argentine Debt Crisis INTRODUCTION: Over the past five years Argentina has suffered from one of the worst economic crises of its history. Mired by currency devaluation, diminished business confidence, contracting GDP, and a large current accounts deficit, the Argentine economy is, at very best, weak. Of its problems, Argentina’s international debt is of greatest concern. Servicing the debt has created a large financial burden for the Argentine government limiting the steps it has been able to take to stimulate economic growth. Since temporarily stopping payment on US$132 billion of debt in 2001 , Argentina has experienced some economic expansion, but this growth has come with large costs. Foreign banks’ condemnation of the default has made Argentina a pariah in the international investment community. Meanwhile, the interest on the outstanding loans is compounding at an astronomical rate increasing Argentina’s debt burden significantly. Unfortunately for Argentina, encouraging international investment and reducing its debt are both essential for a sustained economic recovery. These goals will not be achieved through default, even if it is temporary, as banks are the self-imposed moral authorities on debt and investment and are likely to make Argentina pay a high price. Instead, Argentina must cleverly implement debt reduction mechanisms involving third-party purchase of its discounted debt. It will be the primary responsibility of Argentina’s newly elected president, Mr. Kirchner, and his administration, to stimulate the country’s feeble economy by reducing the public debt. Downsizing its debt will help Argentina to reestablish itself as a creditworthy nation and spur economic... ... and Business, . â€Å"How the debt should be canceled,† Debt & Development Coalition: Ireland, . Krueger, Anne O., â€Å"Crisis Prevention and Resolution: Lessons from Argentina,† International Monetary Fund, 17 July 2002, . MERCOSUR, 6 March 2003, . Moye, Melissa, â€Å"Overview of Debt Conversion,† London: Debt Relief International Ltd., 2001. Powell, James E., â€Å"Time Value of Money,† 1 June 2002, . Rhoter, Larry, â€Å"Argentina Struggles to Meet Debt-Relief Terms.† New York Times, 11 February 2003, .