Whether out of nationalist pride, populist grandstanding or simply a lack of better options, Argentina is betting it can go it alone.
After months of tense negotiations, the nation defaulted on its debt at the end of July. It's the country's second default in 13 years.
In June, the U.S. Supreme Court declined to hear an appeal of a federal district court decision that ordered Argentina to pay in full the bonds held by a small group of individuals and hedge funds who purchased debt after the country's previous default in 2001. President Cristina Fernandez de Kirchner refused to accept the terms put forth by the court, leaving the nation in technical default and unable to make any payments on its debt.
Most bondholders had agreed to debt restructuring plans in 2005 and 2010.
Far from total economic collapse, Argentina remains relatively stable for the moment. But default is not the end of the fight for Ms. Kirchner or the bond holdouts calling her bluff.
In an interesting twist, President Kirchner's administration filed a suit on Thursday with the International Court of Justice (ICJ) saying that the U.S. court ruling encroached on Argentina's national sovereignty.
The United States would have to accept ICJ jurisdiction over the matter in order for the case to proceed. Fat chance.
President Barack Obama could also argue that the district court decision is a violation of his constitutional authority to conduct foreign policy, a tactic with some precedent. This would force the hedge fund firms back to the drawing board and let Argentina off the hook for the time being.
But Mr. Obama has little incentive to wade into this fight, particularly while he faces far more pressing matters.
Ms. Kirchner has dubbed the holdouts as "vulture funds," and there is justification for her complaint. The companies in question have backed the nation into a corner for their own financial gain. But the hedge fund firms can legitimately argue that Argentina has a responsibility to honor the terms it initially agreed to after the previous debt default, however unrealistic they might have been.
Argentina remains at a troublesome fiscal impasse. While not likely to be as disastrous as some analysts initially predicted, the default prevents the nation from paying down the rest of its debt and pulling itself out of global economic isolation. It also faces a recession and double-digit inflation.
Argentina's plight is a sobering reminder of how a big country can slide into economic chaos by ignoring national debt.