Sir, In pointing out that, even after the huge haircut creditors are getting, Argentina's post-default debt to gross domestic product ratio will still be an uncomfortably high 75 per cent, Martin Wolf forgets to mention that one of the main reasons for that is the government issued about $25bn in new debt after the default. Most of that new debt was issued to compensate banks and savers for a devaluation scheme that favoured debtors.
This points to another lesson of Argentina's restructuring. As default starts to look like a better option than continuing to pay, a country may be tempted to wire its exit strategy in a way to favour certain (read domestic) classes of creditors and debtors. That is what Argentina did.
What many outside Argentina fail to realise is that for all the hardship the economic crisis imposed on ordinary Argentines, a messy devaluation and default was a boon to the country's political and business elite. And their interests continue to be advanced by an administration that has made a habit of blaming foreigners for all of the country's problems.
Ironically, income inequalities in Argentina today are more pronounced than they ever were during the reviled 1990s. The Kirchner administration may be winning the battle against the International Monetary Fund, globalisation and the Washington Consensus, but the Argentine people are losing the war.
Dan Krishock, Managing Editor, Buenos Aires Herald, Argentina
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