No deal: Argentina in default as talks fail
After frantic last minute talks failed to produce a deal late Wednesday, Standard & Poor's deemed the country to be in selective default. The change in credit rating is likely to hike Argentina's borrowing costs, and put even more pressure on the country's already-struggling economy, CNN reports. The crisis stems from a legal battle with a small group of "holdout" creditors that have demanded payment of about $1.5 billion on bonds they bought after the $144 billion default in 2001. That standoff has blocked payments to other creditors. Economy minister Axel Kicillof met the "holdouts" for the first time in New York this week but said Wednesday that they rejected an offer he made. Now, the country may have to devalue its currency to preserve foreign currency reserves, and that could trigger a dangerous rise in inflation that is already projected to hit 40%. The peso has fallen by about 25% against the dollar this year. "It's the worst moment for Argentina to go into default ... because they need fresh sources of funding, and that is only possible if they sort out in a positive way their dispute with the holdout creditors," said Carlos Caicedo, senior analyst for Latin America at IHS.
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