But Argentina isn't calling it a “default.”
“We are in an unusual situation,” Economy Minister Axel Kicillof said during a press conference in New York, noting that Argentina has money and would like to pay some creditors – just not the so-called "vulture funds," or holdout creditors, who purchased Argentine bonds cheaply after its 2001-02 economic crisis and are now demanding the full value.
As the threat of default inched closer, however, Kicillof broke his vow never to negotiate with the holdouts, joining them at the table last night in what was seen as a last-minute attempt to save Argentina from its eighth default in history.
While the 2001-02 economic crisis is still fresh in Argentine memories, most agree that the current situation is very different. But analysts warn that no matter how you spin it, this default may further harm Argentina's economy, which is already facing a recession and record-high inflation rates.
"The government had bet on buying more time and had no Plan B," says Juan Luis Bour, an economist at the Foundation for Latin American Economic Research (Fiel). “They clearly underestimated ... a default,” Mr. Bour says.
The word "default" carries bad memories for Argentines. After President Adolfo Rodriguez Saá announced it in December 2001, widespread looting and violence took place across Buenos Aires. Citizens' savings disappeared overnight and the government was locked out of global financial markets.
Last week, President Cristina Fernandez de Kirchner said a new term was needed to categorize what was happening in Argentina, since it wasn't a "true" default. The hashtag #GrieFault started trending on Twitter soon after. It's a combination of default and the name of the US District judge, Thomas Griesa, who ruled against Argentina in the case brought by holdout creditors in 2012.
Whether it's a #GrieFault or a default, last night's decision could affect the economy negatively in several ways.
Bour, from Fiel, says that though the national government has been cut off from international lenders since 2001, other sectors still had some access to financing, particularly in the case of provincial governments and the private sector. This default could harm these groups, and lead to a further slowdown of the economy.
Some Argentines say they've become accustomed to economic stress.
“Crises here are cyclical,” says Fernando Ramirez, who owns a corner food shop in the capital. “If you tell someone abroad how high the inflation rate is here, they will get scared. But here we are used to it,” Mr. Ramirez says.
According to the government, the 2013 yearly inflation rate was 10.9 percent. But private economists say it was closer to 25 percent, and in 2014 it may top 30 percent. Moreover, gross domestic product fell in the final trimester of 2013 and in the first trimester of 2014 - a sign of economic recession.
'Glass half full?'
But some are holding out hope that "default" isn’t the final word.
Argentine banker Sebastian Palla was also in New York City on Wednesday participating in a separate meeting with holdout creditors. Mr. Palla was acting on behalf of the Argentine Association of Private Capital Banks (ADEBA), trying to come to a creative solution to help Argentina avoid default.
Local reports say ADEBA is offering a deal to buy out the debt that the government owes the holdouts.
While some report that the deal has collapsed, hopes remain high in Buenos Aires.
“If there is a negotiation between the private banks and the holdouts, that may be the glass half full. It may mean that the default may not last so long,” says Jose Luis Espert, an economist at the Espert & Asociados consultancy.
“Whatever the scenario, this remains a mess for Argentina. It may be a default that lasts only a few days, but it remains a default,” Mr. Espert says.