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Bankers have short memories, which is why they lend to Argentina. The Province of Buenos Aires raised its first loan in 1824, arranged by Barings, and defaulted on it four years later. At such times a diversion is needed, as we now see. 

Barings came back later in the century, lost a fortune, and had to be rescued. By the time of the most recent default, a dozen years ago, Argentina had outlasted Barings. The latest creditors, or most of them, have settled for losing two-thirds of their money, but some of the debt has been picked up in the curved beaks of the market's scavengers. Now these "vulture funds" are claiming payment in full. A New York court found that they are entitled to it, another court  granted a stay of execution, one fund tried to foreclose on an Argentine schooner — and President Cristina Kirchner is focusing on the Falkland Islands, or, as she calls them, the Malvinas. 

"Argentina once again has been attacked by speculative funds," she says, "and by others who threaten to come 12,000 kilometres to invade and militarise our Malvinas." For the avoidance of doubt, she published open letters in the London press, complaining of a blatant exercise in 19th-century colonialism. This went down well with her readers at home. The same diversion was used by her predecessor, General Leopoldo Galtieri, when Argentina was heading for default in 1982 — but, of course, he overdid it. 

The president with the right idea was Juan Manuel Rosas, who came to power after the first default. He proposed a deal to Barings' man in Buenos Aires. The Argentine minister in London, he said, had been authorised to propose the absolute cession of the Malvina Islands to the English government, on condition that it should take charge of the loan. In effect: you write off the debt and we'll write off the islands. Barings' man asked him to put this in writing. 

The offer was sent back to London, where a shortsighted government turned it down. Rosas was to be told that these islands were not his to cede — they were British territory. This was one of history's missed chances, for the deal would have saved a lot of trouble, which has lasted to this day. Indeed, a deal on these lines would still make eminent sense — at least until Argentina's next default. 

 
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