The Strange Story of Bush and the Argentine Debt Crisis

Abstract

When the government of Argentina declared itself unable to pay its debts in December 2001, the world witnessed the largest sovereign default in history. While international investors were predictably upset, the response of the USA was more unusual. Instead of supporting foreign private creditors as it had during most sovereign debt crises of the 1980s and 1990s, the US government did very little. Indeed, since the initial default, US policy makers even went out of their way to express support for the Argentine government's tough negotiating stance vis-à-vis these creditors and the imf. The Argentine government's stance culminated in early 2005 in the most dramatic private debt restructuring of recent years, under which investors took a cut of roughly 70% on the value of their bond holdings. Although US policy towards the Argentine debt default and restructuring contrasted sharply with the Bush administration's aggressive broader foreign policy since September 2001, this article shows that it reflects familiar influences: strategic goals, neoliberal ideology and conservative anti-internationalist sentiments. The article concludes with a brief discussion of the implications of this US policy for the broader politics of international debt.