A month after finalizing historic “zoom” debt restructurings, Argentina and Ecuador find themselves on starkly different paths toward economic and financial improvements. Understanding how broad similarities have evolved into striking contrasts sheds light not only on the countries’ individual circumstances but also the wider issue of reforming the international debt architecture, which the International Monetary Fund and World Bank are, rightly, putting more focus on as they prepare for the future of a global economy shadowed by Covid-19.
While Ecuador’s process was much smoother than Argentina’s, both countries — during severe Covid-related disruptions — agreed with their creditors on significant modifications to their international bonds that eased both interest and principal payment obligations. Previous adoption of Collective Action Clauses (CACs), which severely limit the ability of small dissenting minorities from disrupting restructurings, helped enormously.
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