Sovereign Debt Relief and Its Aftermath (2024)

FAQs

What is the downside to debt relief? ›

Cons of debt settlement

Creditors are not legally required to settle for less than you owe. Stopping payments on your bills (as most debt relief companies suggest) will damage your credit score. Debt settlement companies can charge fees. If over $600 is settled, the IRS will view this debt as a taxable income.

Argentina has defaulted on its international sovereign debt nine times, including three times during the past two decades.

Types of Sovereign Debt

Bonds issued by developed economies, such as Germany, Switzerland, or Canada, usually carry very high credit ratings. 12 They are considered extremely safe and offer relatively low yields.

The prospect of sovereign default is scary for investors, but many countries have never defaulted on their debts. Ecuador has defaulted 10 times in modern history, and Venezuela has defaulted 11 times.

Debt relief will also often give you a fixed payment plan and a set payoff date, which can also make it worth considering — as streamlining your payments can make it easier to manage while helping you save money on interest. "One of the biggest advantages of going through a debt relief program is the savings.

The bottom line. Debt settlement can be a viable option for those struggling with overwhelming debt, offering the potential for significant debt reduction and financial relief.

The Argentine government entered a “debt trap” by mid 2001.

The changes in monetary policy reduced confidence in the peso. Even interest rates in dollars within Argentina rose substantially, because of concern that loans and deposits in dollars were also at risk from government policies.

When many countries increased production of the same product at the same time prices plummeted. The increase in interest rates and fall in revenue from commodities led to a debt crisis for many countries including Argentina.

A default now by the federal government would cut off provincial governments' access to fresh, dollar-based bonds, Caicedo noted. Devaluation: With reserves dwindling, Argentina would face added pressure to undergo another round of devaluing its peso.

1) Switzerland

Switzerland is a country that, in practically all economic and social metrics, is an example to follow. With a population of almost 9 million people, Switzerland has no natural resources of its own, no access to the sea, and virtually no public debt.

Who owns the most US sovereign debt? ›

The coronavirus pandemic is a game-changer for the global economy. The years 2020 and 2021 will be lost years for growth. The Economist Intelligence Unit only expects global GDP to recover to pre-coronavirus levels in 2022.

The biggest private default in history is Lehman Brothers, with over $600 billion when it filed for bankruptcy in 2008 (equivalent to over $830 billion in 2023). The biggest sovereign default is Greece, with $138 billion in March 2012 (equivalent to $192 billion in 2023).

Under President Salinas, Mexico signed the North American Free Trade Agreement (NAFTA) with the United States and Canada, which went into effect in January 1994. The second was to regain access to international financial markets, which Mexico had lost after defaulting on its debt in 1982.

Credit card debt forgiveness could hurt your credit

You stop making payments to your creditors as you save for your settlement. Creditors typically report the debt as "settled" rather than "paid as agreed" on your credit report once it's paid off. This shows that the creditor wasn't able to collect on the full debt.

It's possible to streamline your monthly debt payments into a single payment, lower your interest rate, improve your credit health and pay down credit cards faster. Still, you may also have to pay fees for a consolidation loan, and there is no guarantee that you'll get a lower rate than you currently have.