Argentina Marks 20 Years of Latin America Debt CrisesBoris Korby
Argentina, prevented from servicing its debt until holdouts from a previous restructuring are paid $1.5 billion, defaulted again this week on foreign-currency bonds.
The country is hardly the first from Latin America to fail to meet its obligations to creditors. The following is a 20-year timeline outlining the region’s most significant debt crises.
December 1994, MEXICO: U.S. rate increases helped spark a peso devaluation that fueled capital flight and caused the so-called Tequila Crisis. The country, in danger of missing payments on $30 billion in mostly foreign-held notes, avoided default by tapping part of a $50 billion bailout package led by the U.S.
August 1999, ECUADOR: Plunging oil prices contributed to a crisis that led about 30 banks to fail, prompting the country to drop its currency, the sucre, in favor of the dollar, and leading to the ouster of President Jamil Mahuad. The country missed payments on about $6.6 billion of debt. Over 90 percent of the bonds were restructured in a distressed exchange, according to Moody’s Investors Service.
September 2000, PERU: Peru missed interest payments on Brady bonds as it sought to renegotiate commercial loans with Elliott Management Corp. After Elliott blocked an $80 million debt payment with a court order, the country paid the firm $58 million to avoid defaulting before the expiry of its grace period.
November 2001, ARGENTINA: The peso’s peg to the dollar and a heavy debt burden contributed to the country missing payments on $95 billion. The government subsequently froze savings accounts, a measure dubbed the “corralito,” sparking violence that killed at least 27 people. Early the next year, it forced banks to convert dollar-denominated deposits into pesos. The 2001 default triggered Argentina’s deepest recession. Almost 100 companies stopped payments on their obligations after being left with dollar-denominated debt and revenue in pesos.
April 2003, URUGUAY: The South American country of 3.3 million people had an investment-grade credit rating before the default in neighboring Argentina rattled Uruguay’s economy. Creditors agreed to swap $4.9 billion of bonds for new debt with longer maturities and the same interest rates. About 93 percent of investors participated in the exchange.
April 2005, DOMINICAN REPUBLIC: The Caribbean nation had been struggling to meet debt payments since 2003, when the government was forced to assume control of Banco Intercontinental SA after the bank lost more than $2 billion through fraud and bad loans. In April 2005, the country’s rescheduling of $1.1 billion of debt was deemed a default by ratings companies.
November 2008, ECUADOR: Less than 10 years after defaulting, Ecuador missed interest payments again, this time on $510 million of 12 percent bonds due 2012 in a bid to force bondholders to restructure despite having the funds to keep making interest payments. By February the country had stopped servicing its $2.7 billion of notes due 2030, with President Rafael Correa deeming the securities “illegal.” A May 2009 restructuring plan saddled investors with a 65 percent cut in the face value of the bonds.
February 2010, JAMAICA: The Caribbean nation, hurt by a drop in tourism and remittances, announced a local debt exchange that gave creditors bonds with longer maturities and lower interest rates. The debt exchange, which didn’t involve foreign securities, concluded with a 99 percent investor participation rate. Three years later Jamaica announced another exchange to extend maturities.
September 2012, BELIZE: Belize missed a $23 million interest payment on its $547 million “superbond” after Prime Minister Dean Barrow won re-election on promises to restructure borrowings. After a March 2013 restructuring, estimated investor losses were about 35 percent, according to Moody’s.
July 2014, ARGENTINA: The South American nation missed a deadline to pay $539 million in interest after two days of negotiations in New York failed to produce a settlement with Elliott and other hedge funds that won a court order for full repayment on the securities they own. The ruling prevents Argentina from servicing its debt until the holdouts settle or are paid the $1.5 billion judgment. The country’s foreign-currency bonds issued overseas totaled $29 billion, according to data compiled by Bloomberg.