AS IRELAND TRIES to renegotiate the interest rate it is paying on its EU/IMF bailout and a Greek default is never off the cards, Argentinian businessman Andres Blumenthal describes what it is like to live in a country that defaults on its sovereign debt.

The Argentinian default in December 2001 was the largest debt collapse by an industrialised country in history at $82 billion in principal (€57bn). Blumenthal describes the run-up to ‘D Day’ or the day of the default – and how the country, very slowly, is only beginning to now emerge on the other side.

One Year before ‘D Day’: Quasi currencies.

The provincial and local governments, who were running high fiscal deficits, lose their capacity to borrow. Meanwhile, the national government makes an arrangement with the bond holders and IMF. They call the deal the ‘Megacanje’, which guarantees the national debt, but doesn’t include the debts of the provinces.

As a result, the provinces starts to pay salaries, pensions and suppliers with their own currencies. The country is juggling almost ten different types of quasi currencies: Patacon (Buenos Aires local peso), Lecor (Córdoba local peso), Lecop (National peso for government suppliers).

There are unofficial exchange rates within all these currencies, but most of them are devaluated against the Argentinean peso.

The main problem is that Argentina is not allowed to print money. Unlike in Ireland where you are paid in euro and use euro in the street, the government in Argentina arranges with the big supermarkets that people could only buy with these government dollar bonds. So you had this black market of these bonds where people tried to buy them but instead of one peso for one dollar, you could only get 30 cents of the dollar.

My family and I have a small business supplying raw materials to the food industry so we manage to stay dealing through that. The country is starting to get scared about the devaluation and the black market for bonds gets bigger.

One month before ‘D Day’: Corralito.

Argentina is seeing massive transfers of money from banks to safes, to offshore accounts and even to under the mattress. We hear stories about armoured trucks full of dollars leaving banks at midnight. People are afraid that they won’t be able to get their money out of the bank if the government decides to default so there is panic about getting your hands on cash.

The financial system runs dry, and the original idea that one Argentinian peso would be exchangeable for a dollar goes bust. The national government restricts the amount that a person could take away from his or her bank account to a maximum of 250 pesos per week per person.

This step is highly resisted by population. After the announcement, people are out on the steets, tapping saucepans on the sidewalks as a sign of their discontent.

I go to the bank near my place of business and it looks more like a fortress than a bank. They have replaced the glass windows with metal panels because people are trying to break in and get their money. Because we deal with ice-cream shops who only use cash, we are lucky enough to have access to money but during the following days there are riots against supermarkets and government facilities. Almost 30 people are killed.

There is looting in the suburbs and in the centre of Buenos Aires, around Plaza de Mayo, there are riots and violence. Everyone is scared.

‘D Day’: Default.

Two days before ‘D Day’, the president resigns and escapes by helicopter from the government house.

We have four different presidents who each last an average of one and a half days in power. One of them, Adolfo Rodriguez Saá, goes to the Congress, and in a historical speech declares the default.

There is joy in the country at the announcement and 300 Congressmen and most of the country clap the president. He resigns one day after that.

But despite the initial euphoria over the default, the situation on the streets is still one of anarchy. That is why there is such a high turnover of presidents. I am 23 at the time, a graduate, and there is 20 per cent unemployment. A lot of my friends leave to go to Spain, Italy and other places.

Three months after ‘D Day’: Devaluation.

Argentina is used to devaluations of the peso but there has never been one like this. Production almost stops everywhere for a year. Our family business has to try to get paid through some suppliers in another countries.

The IMF asks the government to adopt a free float currency model and the result is a devaluation of 400 per cent.

The Argentinian salaries and wages went down 70 per cent in USD dollars. Cash is the only instrument to sell or buy goods. Any type of credit disappears. Most credit contracts (mortgages, loans, etc.) are broken and restructured.  Mortgages aren’t that common in Argentina but it is pretty much impossible to get one now.

Were these four steps to hell, or heaven?

In the years since the default, the country has restarted – very slowly – its productive and financial capabilities. I could never say that defaulting is a good thing. Argentina was living in a fairytale with the dollar so it’s impossible to compare our default with Ireland’s for example.

Argentina’s GDP has grown almost 8 per cent per year for the last eight years since ‘D Day’. There are different explanations (high commodities prices, low international rates, populism and national government, “it’s not growth, it’s just recovery”, etc, etc.)

But for better or for worse, perhaps ‘D Day’ has something to do with that.