Argentina has defaulted on its debt for the second time in 13 years.
Argentina negotiators failed late Wednesday to reach an agreement with New York investment companies to avert the default. The hedge funds are demanding full payment of $1.5 billion on discounted Argentine bonds they bought the last time the South American nation defaulted in 2001.
More than 90 percent of the creditors holding the 2001 Argentine debt agreed in 2005 and 2010 to write off 70 percent of the money they were owed. But several holdout investors refused, leading to the new financial crisis.
Argentine President Cristina Kirchner is calling the holdout investment creditors "vultures." One of the investment firms, headed by New York billionaire Paul Singer, blamed Argentina for the default, contending that the country refused to "seriously consider" solutions offered by a mediator.
After the negotiations failed, Argentine Economy Minister Axel Kicillof said his country would not bow to the pressure to settle the dispute.
"The president [Cristina Kirchner] said it, this state, this government, is not going to sign anything, nor consent to anything, despite the pressure being exerted, but is going to respect the parameters of the law, and respect the interests of the Argentine people, so, we offered what was within the possibilities available to us, which was, either join the exchange or grant a stay," he said.
It was not immediately clear how the default would affect the Argentine economy, already in a recession and with one of the world's highest inflation rates.
The U.S. credit ratings agency Standard & Poor's downgraded Argentina's long- and short-term foreign currency credit rating to so-called "selective default" Wednesday. Selective default acknowledges that Argentina is current on payments to some creditors and is probably able to make some payments on the debt it has defaulted on.
The agency said it could remove the default label once the country makes payment on the bonds.
The country moved money to a New York bank to make the scheduled debt payment, but a federal judge would not allow the country to only pay those bondholders who agreed to write off money they once were owed.
Argentine officials contend that means they have only partially defaulted.