Here's what you have to understand: Argentina isn't refusing to pay angry hedge fund managers like Elliott Capital's Paul Singer because they don't have the money. They do.
The country's intransigence comes from a force far more powerful than that — the fabric of their modern political ideology.
"This was a political decision haded leaders made," said bankruptcy expert William A. Brandt, CEO of Development Specialists Inc., a firm specializing in turnarounds. "Argentina is an incredibly sophisticated economy and brought this problem on itself by doing the unthinkable and defaulting on its debt."
In case you've missed this epic fight, for the last ten years, Argentina has refused to pay Elliott Management's Paul Singer and other exchange bondholders of their sovereign debt who did not participate in restructurings and take a haircut.
Singer, for his part, has dauntlessly chased his money, even getting the Ghanaian government to impound an Argentine naval vessel, the ARA Libertad, as collateral.
Last month, New York Judge Thomas Griese ordered Argentina to pay Singer and fellow investors something through some kind of payment plan. The country has appealed the decision, but its not looking good for them.
So the question remains — why not just figure out a deal and pay Singer the $1.3 billion he's owed and be done with it?
Because, according to Argentine political ideology in the era of the Kirchners, paying investors like Singer is a serious affront to the country's national sovereignty.
Starting in 2003, late President Nestor Kirchner pulled Argentina's economy out of misery after the country's 2001 $95 billion default — a default that he blamed on creditor nations and institutions like the IMF.
To Kirchner, and other South American leaders to varying degrees, the economic rules of hegemonic countries and the institutions meant to enforce them like the IMF were (in many ways) harmful to the growth of the nation. That being the case, those rules are meant to be broken from time to time for the good of the people.
Check out this speech de Kirchner made legislature in 2004 about the debt and fund managers who refused to refinance their debt (from Terra News):
In short, the country has tied economic growth and Independence to debt. More than that, it tied respect and national sovereignty to debt. In this view, investors that respect Argentine economic Independence will restructure or be damned.
Nestor's wife Cristina became president after him, and continued this line even after his death in 2010.
That said: If you look at the Singer situation through this lens, there is no moral obligation to pay him. And that's how the issue is discussed in Argentina.
Of course, the problem is that Argentina still needs access to credit markets. That's why they have to fight Singer in a Court that plays by the rules of the hegemonic countries and institutions they see as (partly) hostile to their economic sovereignty.
But really, as Cristina Fernandez de Kirchner said in a speech last month, it seems silly to the government that so many sophisticated U.S. investors would give their money to someone like Bernie Madoff, while at the same time chiding Argentina for being a risk.
Still, Argentina has to assure the entire financial community that default is not an option, as Argentine Finance Minister Hernan Lorenzino did this weekend. Here's what he said:
Paying hedge fund managers and other investors like Singer flies in the face of Argentina's very conception of itself as an independent nation. That's not something a country gives up easily and Cristina literally cannot do it.
At least, not publicly.
So get ready for a knock-down drag out fight.