Argentina fell in default on Wednesday following the collapse of negotiations between the country and “vulture funds” that are demanding full payment for the $1.3 billion in debt the funds bought up at bargain rates.

“We’re not going to sign an agreement that jeopardizes the future of all Argentines,” Argentina’s Economy Minister Axel Kicillof declared following the meeting in New York City. “Argentines can remain calm because tomorrow will just be another day and the world will keep on spinning.”

McClatchy reported that U.S. District Judge Thomas Griesa, the judge in the case,

triggered the possibility of a default when he ruled that Argentina had to pay the holdout creditors in full, then blocked the country’s plan to make a payment June 30 to other creditors who’d agreed to accept a 70 percent discount on the debt they held. Griesa said Argentina had to pay all the creditors at the same time. When Argentina missed the June 30 payment, that started the clock running on a 30-day grace period that ended at midnight Wednesday.

“Unfortunately, no agreement was reached and the Republic of Argentina will imminently be in default,” court-appointed mediator Daniel Pollack said Wednesday.

President Cristina Kirchner’s cabinet chief, Jorge Capitanich, told press in Buenos Aires, “If there’s a judge who’s an agent of these speculative funds, if the mediator is their agent, what is this justice you’re talking about? There’s a responsibility of the state here, of the United States, to create the conditions for the unconditional respect of other countries’ sovereignty.”

The so-called “holdout creditors” are hedge funds NML Capital and Aurelius Capital Management. NML Capital is a subsidiary of Elliot Management run by billionaire Paul Singer, who has a history of vulture fund activity. Aurelius was founded by Mark Brodsky, who previously worked for Elliot Management.

The two hedge funds began buying Argentine debt in 2001, the year the nation was previously declared in default.

Economist Dean Baker, co-director of the Center for Economic and Policy Research (CEPR), writes that NML and Aurelius paid “a small fraction of [the debt’s] face value. Their intention was to use their political connections to get a favorable ruling from the courts, with the hope of being able to extract something close to the face value of the defaulted bonds from Argentina’s government. This is exactly what ‘vulture funds’ do.”

The Wall Street Journal reported in June that the two are noteworthy in the “world of distressed-debt investing because they are willing to take countries to court that fall behind on bond payments. The fact that so few investors are willing to take those risks allows Elliott and Aurelius to buy defaulted sovereign bonds at deep discounts.”

Eric LeCompte, Executive Director of the religious debt relief group, Jubilee USA Network, called the default outcome “unfortunate,” and said, “Because of the precedent this case sets there are a lot of losers and few winners. Legitimate investors and poor people lose the most.”

“These predatory actors are only able to operate because our financial system is too much like the wild west,” LeCompte added.

CEPR’s Baker joined over 100 economists including Nobel laureate Robert Solow in sending a letter to Congress on Thursday warning that Judge Griesa’s recent ruling forcing Argentina to pay the vulture funds, who are “seeking exorbitant profits in excess of 1,000 percent,” at the same time as its other creditors risked “unnecessary economic damage.”

“While individuals and corporations are granted the protection of bankruptcy law, no such mechanism exists for sovereign governments. As such, the court’s ruling would severely hamper the ability of creditors and debtors to conclude an orderly restructuring should a sovereign debt crisis occur. This could have a significant negative impact on the functioning of international financial markets, as the International Monetary Fund has repeatedly warned,” the letter states.

The letter urges the members of Congress to “seek legislative solutions to mitigate the harmful impact of the court’s ruling.”

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