The Day After Default
The debate over how to deal with countries that go bust heated up as Argentina's finances disintegrated. But the idea of establishing a formal mechanism to process sovereign debt faces many obstacles, starting with investors.
Two Latin American sovereign defaults in two years have enraged
lenders and jeopardized the health of the emerging markets
asset class. What's more, Argentina's collapse and the 1999
Ecuadorian default have placed monumental strains on the
negotiation process between markets and governments.
Weighing in: The
IMF supports codifying
Years of debate over crisis mitigation has yet to provide
the world with a quick and clean debt restructuring that gives
creditors a reasonable deal and allows sovereigns to return to
the capital markets quickly and resume normal borrowing.
The discussion gained further impetus as Argentina sank into
default last year and investors hardened their opposition to
the government. Anne Krueger, the International Monetary Fund's
first deputy managing director, had earlier proposed a
negotiation and rehabilitation procedure for insolvent
sovereign governments that would work rather like Chapter XI of
the US bankruptcy code.
Her suggestions made the headlines in...
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