Argentina has defaulted on its sovereign debt after the failure of last-minute talks between its government and creditors.
Axel Kicillof, minister of economy for Argentina, gave a statement saying the government would not “sign any commitment to compromise the future of Argentina.”
Shortly before talks failed, Standard & Poor’s placed the country’s credit rating on “selective default” after it failed to make an interest payment on its debt in time.
The country failed to make a $539m interest payment on its debt yesterday (30 July), estimates of claims worth between $15bn to $20bn have been predicted from other bondholders.
The last time the country defaulted was in 2001.
However, despite the ratings agency pegging Argentina down, other reaction to the news has been calm.
Steve Ellis, portfolio manager for the Fidelity Emerging Market Debt fund, said: “We expect contagion to other markets to be fairly limited. This is a highly technical legal case and a selective default.
“However, there will be remaining risks around a longer term default which would have negative impacts on the Argentine economy.”
Adam Samuel, a financial services lawyer and banking expert, said: “In terms of the world’s economy it’s probably relatively harmless. We have got the world coming out of a whopping big recession.
“If institutions are not heavily exposed (to Argentina) then it won’t matter too much.”
Guy Stephens, managing director of portfolio management firm Rowan Dartington Signature, said: “It seems to me this is small-scale relative to the Greece problem or anything in China. It’s not unexpected and not plugged into the global financial system.”
Juliet Schooling Latter, research director for Chelsea Investment Intelligence, warned that it could expose other global weaknesses.
She said: “It will create some nervousness in markets. There was a nervousness around sovereign debt which has been largely washed away by Mario Draghi.
“There is concern around the emerging markets, what with the end of quantitative easing, and a default could cause jitters.”
