When Argentina defaulted on their debt without consequence a moral hazzard arose. Would other highly indebted/impoverished nations follow their example and play the default card? After examining the process and background surrounding Argentina's situation (http://americas.irc-online.org/am/755), it's clear why worry has risen. "Argentina’s economic recovery since the crisis in 2001 has been extraordinary, as GDP grew 8.8% and 8.7% in 2003 and 2004 respectively, while unemployment has declined from 20% to 13%.7 Remarkably, all of this has occurred without any new money from the IMF." Yes, other countries could very well mimic Argentina given they've got the right tools..along with the right strategy.. "A much more powerful approach calls for indebted nations to organize to form a bargaining cooperative that represents and supports the interests of weaker, poorer states against the creditor cartel of the World Bank, the IMF, and private creditors. With this support structure in place, a surplus-blessed nation could threaten to default on its loans, knowing that it would have the support of its allies if it actually did default. Furthermore, default is not a desirable option for anybody and creditors would likely flinch if debtors seriously exploited this fear." This route is ideal for the successful break of the cycle. Both sides must negotiate to reach a compromise that'll allow impoverished countries a chance, and assure the World Ban, IMF, and privates get their money.
