Sovereign Report

Dec 1, 2002

Another Argentine Default

Argentina defaulted on a World Bank loan in November when it failed to make the full $805 million payment originally due October 15. Instead, the government made an interest payment of $79.2 million. Non-payment has probably cut off Argentina from all further support from multilateral institutions, its only source of international credit after last year's $144 billion default on its domestic and international bonds.The World Bank says it assesses no penalties on "loan payments made within 30 days of the scheduled due date. If a payment becomes 30 days overdue, no new loans to the borrower can be presented to the Bank's Board." Furthermore, the borrower no longer becomes eligible for reduced interest charges falling due over the following six months. World Bank interest charge waivers are only available to countries that are current with debt payments.

The Argentine government's decision to make only a token payment came as a surprise because the World Bank had already earmarked $600 million in fresh...

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“The crisis has been a setback for reserve diversification."

Jan Dehn, Ashmore Investment Management