In Argentina, Another Default Looms Ever Larger

In a Feb. 19 public statement, the International Monetary Fund said Argentina's debt was unsustainable, and that the primary surplus required to reduce its public debt was neither "economically nor politically feasible." By recognizing the country's economic reality, the IMF is setting the stage for what could eventually be a large-scale debt restructuring, provided Argentina also takes actions to stem the fiscal deficits driving its debt problem. Creditors have likely been preparing for major losses in their Argentine investments, given that the country's debt was already priced at distress levels in secondary markets. But the IMF's new sobering assessment announcement has likely put Argentina's bondholders on official notice that a full-scale reorganization of debt is coming -- and with it, a substantial cut to their investments....