Argentina was in default on Thursday for the second time in 13 years after the failure of last-ditch talks with US hedge funds it has branded "vultures."

After hours of meetings on Wednesday in New York, Argentina's Economy Minister Axel Kicillof emerged to confirm that no deal had been reached, leaving Latin America's third-largest economy unable to meet repayment obligations by the midnight deadline.

"Unfortunately, no agreement was reached and the Republic of Argentina will imminently be in default," said Daniel Pollack, the lawyer appointed by a US court to oversee the talks.

Ratings agency Standard & Poor's had already placed Argentina in "selective default" before the talks officially ended.

Argentine media reports suggested an alternative solution was being prepared in which a coalition of Argentine private banks would buy some of the outstanding debt. But until that comes about, the country is technically in default.

Kicillof complained that the creditors, US hedge funds that bought defaulted Argentine debt at knockdown rates and then went to court to demand full payment, refused to compromise.

"They were trying to impose on us something illegal," he declared, confirming that he was heading back to Buenos Aires without a deal.

Kicillof slammed S&P's downgrade, arguing that Argentina could not be regarded as being in default since the money for the repayment was in a US bank account but frozen by US District Judge Thomas Griesa's court order.

"Argentina paid. It has money. It is going to continue to pay. The one who is responsible for this situation is Judge Griesa," he said. "We are going to pay those who hold bonds that have been defaulted on, but on reasonable terms, not on terms that amount to extortion, created under pressure, under a threat."

Wednesday marked the deadline for Argentina to make a $539 million payment on debt it had restructured with cooperative "exchange creditors" after its previous 2001 default.

The country deposited the sum - earmarked for payment to those bond holders who had accepted a write-down in deals reached in 2005 and 2010 - in a bank account when the payment was due at the end of June.

But Griesa blocked the bank from forwarding the payment unless Argentina also paid two US hedge funds - the "holdout creditors" - the full value of their bonds, $1.3 billion.

Argentina and these funds - NML Capital and Aurelius Capital Management - have spent the last two days locked in talks with a US court-appointed mediator to try to make a deal.

(China Daily 08/01/2014 page12)