What short and longterm effects does Argentinas loan default

What short- and long-term effects does Argentina’s loan defaulting have on itself as well as its creditors?

Solution

The long term effect on Argentina will be that its currency will depreciate against major global currencies. Another effect would have been a sovereign downrating by global credit rating agencies like S&P, Moody\'s etc. The labor market will further weaken in the long run, resulting in rising unemployment. Interest rate will rise in the long run, building inflationary pressure in Argentina.

The existing creditors will have to take a substantial haircut on the principal amount. Thier net worth will erode due to this loss as they will have to make higher provisioning in their balance sheets.