BUENOS AIRES, Argentina – In 2001, it was ground zero for Argentina's financial earthquake. A neo-colonial architectural gem built long ago by the Bank of Boston, it became the focal point for angry mobs of protesters who stared down riot police to demand the return of their savings, which the government confiscated in a last-ditch, and ultimately failed, attempt to stay current on its debt.
Thirteen years later, as a midnight deadline to avert another default approached Wednesday, the mood on this iconic downtown street corner was one of resignation not panic. There were no protesters banging pots and pans on the bank's impenetrable cast-iron doors. Instead, office workers used their lunch break to tend to financial transactions at what is now a branch of the Industrial and Commercial Bank of China.
While Argentine negotiators worked feverishly for days in New York to keep their country from falling behind on its debts, Daniel Gurof, a 50-year-old businessman, said he was more concerned about tangible problems such as the country's soaring crime rate. It was no matter that Gurof lost his life savings in 2001, when Argentina stopped payment on more than $90 billion in bonds. This time, nobody expects such drastic, unpopular action.
"I've got bigger problems than the vulture funds," he said, using the epithet preferred by President Cristina Fernandez to describe the hedge funds that brought Argentina to the edge of default.
The standoff stemmed from the refusal by a small group of creditors to accept a 70-percent write down of Argentina's defaulted debt. Rather than accept a deal that was signed by more than 90 percent of creditors in 2005, the holdouts took Argentina before U.S. courts to demand full payment. A federal judge in New York sided with the creditors, awarding them more than $1.3 billion — a decision upheld by the Supreme Court in June.
Even as it negotiated with the holdout creditors, the government risked falling behind on debts owed to existing bondholders because the federal court blocked a $539 million interest payment intended for them. A one-month grace period on that payment was set to expire Wednesday.
While a default would let loose the sharks of Wall Street, exacerbate a cash crunch caused by draining reserves and rock the final 15 months of Fernandez's rule, nobody predicted a repeat of the full-blown crisis seen in 2001, when unemployment skyrocketed and the presidency changed hands five times in little more than a week of deadly protests.
One reason for the relative calm was that Argentina never fully recovered from that comeuppance.
Unlike the 1990s, when the country loaded up on foreign debt as investors sung the praises of its then-dollarized economy, the country has been all but shut out of international capital markets for the past decade. That's forced it to become an involuntary paradigm of frugality in an era when the United States and much of Europe are struggling to tighten their belts. Debt to gross domestic product, a widely-used measure of a nation's financial health, has fallen from 127 percent a decade ago to less than half that amount.
The government's argument that it already has paid bondholders and that an activist judge is to blame for any ensuing fallout appears to have struck a chord — at least for now. Polls show that most Argentines approve the government's tough negotiating stance.
"They're trying to scare us and say that if we don't do what they say, we'll suffer the 10 plagues of Egypt," Fernandez argued Tuesday at a summit in Venezuela, where she won the backing of regional leaders. "Well, look, the 10 plagues of Egypt we already suffered in 2001, when another government exactly followed orders coming from abroad."
That's not to say a default would be cost-free. While Argentina is living within its means, it's mired in a recession, facing a severe dollar shortage and struggling to tame inflation estimated at around 40 percent.
A default would batter investor and consumer sentiment even further and wipe out much of the progress Fernandez has made over the past year climbing back into Wall Street's good graces. That includes striking a $5 billion deal to repay Spain's Repsol for the expropriation of its oil business, settling with the Paris Club of government lenders and even renewing contact with the organization Fernandez and her Peronist party blame for the country's 2001 collapse: the International Monetary Fund.
"There won't be a catastrophe if there's no deal, nor will the economy automatically improve just because there is one," Jorge Remes Lenicov, who was economy minister in the chaotic days following the 2001 default, told La Red radio recently.
But the government may be gambling that any debt moratorium will be short-lived, at the most stretching just beyond Dec. 31, when a clause in its previous restructuring deals will expire, no longer obligating Argentina to pay bondholders amounts equivalent to what it pays the holdout creditors.
In the meantime, residents of Buenos Aires continued their daily business, showing few signs of alarm even as the political and economic outlook grew more uncertain.
"We know what a crisis is like, and one of this characteristic doesn't scare us," said Alejandro Caballero, a 31-year-old film student and music teacher. "But being calm doesn't mean we're relaxed. I'm watching closely what happens."
AP Writer Joshua Goodman reported from Caracas, Venezuela.