What would be the international implications of an Argentine debt default?
That depends on how it’s handled. A negotiated write-down of Argentina’s debt, rather than an outright default, might limit the damage. But time is running out. Since Argentine paper represents one-fifth of the entire stock of emerging-market bonds, any kind of default is likely to affect other nations. Neighboring Brazil already is feeling Argentina’s pain: The real has lost more than 20% of its value this year. For some countries, the contagion could be short-lived. Others could find themselves shut out of capital markets for months, jeopardizing their own ability to pay their debts. Of course, holders of Argentine bonds will take a hit. And foreign companies with on-the-ground assets will also suffer. Spanish business, which has plowed some $30 billion into the country, will be particularly affected. Argentina is still capable of producing some nasty surprises.
