After the 30-day grace period for the June 30 coupon payment expired, S&P put Argentina into 'selective default' as a matter of course. The other rating agencies will not be slow to pronounce. The ISDA Determination Committee will decide in the coming days for the declaration of the 'credit event' and will start the procedure for triggering the CDS, i.e. the procedure for settling them at a settlement price which will be determined according to the contractual rules.
The reappearance of a private solution with the 'vulture funds', as the Argentine Minister called them at a press conference, who did not want to settle for a 300% profit by accepting the previous restructuring conditions could contain the market reaction, which will be negative and corroborated by the determination of the Emta on the flat quotations of securities issued under international legislation.
Failure to reach an agreement, even after a technical default at this point, would cause the country to fall back into recession, breaking the fragile equilibrium recovered with the agreements with the Paris Club and the recent support of the Chinese. And therefore the definitive erosion of international reserves... A case of default 'induced by the US' on a country that has shown a willingness to pay the coupons and honor the restructured debt risks becoming a time bomb on the system set up post Argentine default with Cac's added to all government issues.
And how can we explain to the investors who have joined the restructuring that they will suffer the effects of a sentence representing the interests of the 1% of the total investors who did not want to take into account the more than generous offer from the Argentine government? So what protections from now on for investors if a country can influence the fate of another sovereign state? Will the Cac's hold up or are they still sufficient?
The global exposure to Argentina also by the other non-Mercosur markets is limited, the problem is not in fact a contagion effect in the Latam area but rather the regulatory and legal implications that this situation poses on the global efforts of a new financial architecture that legally bears the risks and the management of default cases, adequately protecting the end investors involved and does not distinguish between series A and series B investors.
