Argentina struggles in 2014 in part because it recently defaulted on its debt in 2002, suffering since then much-constrained access to needed financing from external sources.
For all its troubles now, Argentina is actually much less reliant on foreign capital than America is today.
According to statistics from the CIA World Factbook, Argentina’s external debt stood at $111.5 billion at the end of 2013. Subtracting foreign exchange reserves of $33.7 billion, Argentina’s net external debt was $77.8 billion or just 16.1 percent of that country’s economic output.
In contrast, America’s net external debt at year-end 2012 (the most recent period for which comparable figures are available) reached $15.5 trillion or a far higher 92.7 percent of economic output.
How much longer can America carry such a large external debt?
Rumblings grow in volume threatening the role of the U.S. dollar as the pre-eminent reserve currency, while rivals such as China and Russia stoke concern among remaining states that are financially solvent about the direction of America’s finances under President Obama.
Another geopolitical zone of concern?
Buenos Aires is far removed from Washington, D.C. and from global flashpoints in the Middle East, Central Europe and Asia, so financial contagion in Argentina need not necessarily inflame a troubled world more. But pressed financially, Argentina is also ripe for the picking by powers whose strategic interests do not align with those of the U.S.
China has already stated that it backs Argentina’s claims against Britain over the Falkland Islands, which sit atop energy reserves that are rumored to be substantial in size.
Russia has not yet sought Argentina out publicly as a promising alliance partner, but Vladimir Putin certainly is following a muscular foreign policy challenging the United States.
Americans now watch as a vise clamps down upon the long suffering people of Argentina, ignoring the much larger implements that will diminish our own futures.
• Charles Ortel serves as managing director of Newport Value Partners (NewportValue.com), which provides economic research to executives and to investment firms.