For the second time in 13 years, and the eighth time in its national history, Argentina is defaulting on internationally held bond payments. The default has been accompanied by negotiations in New York between Argentina’s economy minister, Axel Kicillof, and U.S. bond holders, raising considerable disagreement concerning hedge funds, external bonds and what the word “default” actually means.

No agreement has yet been reached, and the Republic of Argentina is now considered to be in selective default, having failed to pay interest on some of its debt.

Attorney Daniel Pollack, the court-appointed mediator during the proceedings in New York, outlines what this means for the various parties involved:

“Default is not a mere ‘technical’ condition, but rather a real and painful event that will hurt real people: these include all ordinary Argentine citizens, the exchange bondholders (who will not receive their interest) and the holdouts (who will not receive payment of the judgments they obtained in court).”

Pollack goes on to observe that “the full consequences of default are not predictable, but they certainly are not positive.”

These economic decisions made by South America’s third largest country certainly have noticeable effects on the pockets of its citizenry.

Argentina’s 2001 default involving $95 billion worth of failed payments on internationally-held debt triggered a nationwide recession and sparked deadly violence. It was during this period of economic hardship that cartoneros started filling the streets of Argentina’s cities.

The cartoneros spend their days pulling large carts through city streets, collecting paper, cardboard, glass and other recyclable materials. Each evening they exchange their harvest at a wholesaler, receiving 6 pesos, equal to about 75 cents, for every 10 kilograms of material they collect.

The cartoneros have become a symbol of economic crisis in Argentina. Their presence is a reminder that the country’s national debt crisis does have consequences for its citizens – in the case of Argentina, financial blows over the past two decades have cast many middle class families into poverty and made life even harder for those already struggling to make ends meet.

– Kayla Strickland

Sources: Deutsche Welle, Financial Times, Business Week, Business Week 2
Photo: Treehugger