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It's looking more and more like Argentina will not be able to find a way to avoid paying bond holders through the American judiciary system.
So now it has two options — to pay "vulture funds" like Paul Singer's Elliot Management $1.3 billion in sovereign debt next month, or not to pay.
It sounds like a simple decision, but it has massive consequences. We like how one hedge fund manager and former co-chairman of Argentina's bond holder committee after 2001, Hans Humes, put it to the FT:
“When you have been so disrespectful of the courts, what did they expect [Judge] Griesa to do? . . . If problems arise in the sovereign debt world, then tough . . . Argentina should be called to task for being a rogue debtor and country,” he said. “Cristina will either throw in the towel or go scorched earth. One way or another she is done.”
Scorched earth is, of course, not paying Argentina's debt as ordered by the Court, triggering default and having a crazy economic death spiral that would be 2001 all over again.
The other option is (perhaps) equally distasteful to Fernandez de Kirchner. It would be standing down in the face of pressures that she, ideologically, believes are encroaching on her country's economic sovereignty by telling it how to pay its debt.
That flies in the face of everything she and her late-husband Nestor Kirchner built since he became President in 2003 (more on that here).
From this perspective, Argentina's in a lose/lose situation.
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