Argentina and How to Avoid Global Financial Catastrophe
If handled with care, this year’s debt-service payments can and should be recapitalized at low interest rates to avoid a financial pile-up. If not, 2020 will mark a devastating new chapter of global financial crisis.
NEW YORK – When a single car skids on an icy highway, the result can be a 50-car wreck. So, too, with international financial markets: Mexico’s default in 1982 led to a pile-up of dozens of countries. Thailand’s devaluation in July 1997 triggered the Asian financial crisis. The Lehman Brothers bankruptcy in September 2008 set off the Great Recession around the world.
International financiers should know better than to start the COVID-19 collapse of 2020. Their wisdom will soon be tested.
Even before COVID-19 threw the world economy into the worst downturn since the Great Depression, Argentina was in debt distress, again. As so often has happened in Argentina’s default-ridden history, a half-baked agreement with recalcitrant creditors in 2016, followed by a quick return to the bond markets, proved to be wishful thinking both for Argentina’s then-president and the country’s creditors.
We hope you're enjoying Project Syndicate.
To continue reading, subscribe now.
Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.
Already have an account or want to create one to read two commentaries for free? Log in