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Problem Of Bank Reptacy Argentina Essay

3890 words - 16 pages

Kaunas University of Technology
SCHOOL of economics and BUSINESS

department of economics

The Problems Of Bankruptcy Process In Argentina

Semester work

Written by student_: saskia saimol Sebastian (VBa4)
Sajith Saji Nair (VBa3)
)

Accept: dr. Rita Remeikienė

Table of Contents

INDRODUCTION 3
Case Study 1 4
Argentina and 10 Other Countries Facing Bankruptcy 4
Case study 2 6
Argentina Bankruptcy 6
Argentina towards Bankruptcy 6
What Happens When Argentina Goes Bankrupt? 8
Background to the Crisis 9
Argentina's Unemployment Rate 10
The Facts of the Case 12
Riots, ...view middle of the document...

H. state median income for a comparable household.

Case Study 1
Argentina and 10 Other Countries Facing Bankruptcy

The third-largest Latin American economy Argentina failed to make scheduled payments on its government bonds at the end of July.

Credit agency Moody’s Investors Service reported a spike in Argentina’s one-year Sovereign EDF (Expected Default Frequency) to 48% in one week.

“Amid increasing concerns that Argentina’s default will exacerbate its ongoing recession, the country has the highest one-year probability of default of any of the 84 sovereign entities in our data set,” says the report.

Argentina failed to come to an agreement with its creditors and reached the end of a 30-day grace period to make good on its payments. As a result, Moody affirmed Argentina’s Caa1 issuer rating and changed the country’s outlook to Negative from Stable, as its rival agency S&P downgraded the country to SD from CCC rating.

A Caa1 rating is well below the first level of bad rating Ba1, which already indicates a significant credit risk. An SD, in the S&P scale, is next to worst.

Ten other countries listed by Moody have a rating of Caa1 or worse – that is, they too are at risk of default. Each of these nations has its own unique problems. Ukraine, for example, was downgraded because of political instability, while Belize had its credit rating upgraded in recent years because of improved economic conditions.

Before the default, the gold market seemed to ignore Argentina, but the future is very uncertain given the crisis in Ukraine, the Russian sanctions, and the Middle East crisis. Perhaps a safe-haven bid for the gold market is on its way.

Here’s the list of countries with a bad credit rating in the Moody scale:

Argentina
Moody’s credit rating: Caa1; Moody’s outlook: Negative

Belize
Moody’s credit rating: Caa2

Cuba
Moody’s credit rating: Caa2

Cyprus
Moody’s credit rating: Caa3
|

Ecuador
Moody’screditrating:Caa1

Egypt
Moody’screditrating:Caa1

Greece
Moody’screditrating:Caa3

Jamaica
Moody’screditrating:Caa3

Pakistan
Moody’screditrating:Caa1

Ukraine
Moody’s credit rating: Caa3
Venezuela
Moody’s credit rating: Caa1  |
 

Case study 2
Argentina Bankruptcy
In 1998, Argentina entered what turned out to be a four-year depression, during which its economy shrank 28 percent. Argentina’s experience has been cited as an example of the failure of free markets and fixed exchange rates, among other things. The evidence does not support those views. Rather, bad economic policies converted an ordinary recession into a depression. Three big tax increases in 2000-2001 discouraged growth, and meddling with the monetary system in mid 2001 created fear of currency devaluation. As a result, confidence in Argentina’s government finances evaporated. In a series of blunders that made matters even worse, from December 2001 to early 2002, succeeding governments undermined property rights by...

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