ARGENTINA was in default yesterday for the second time in 13 years after the failure of last-ditch talks with the United States hedge funds it has branded "vultures".

After hours of meetings on Wednesday, here, Economy Minister Axel Kicillof emerged to confirm that no deal had been reached.

This left it inevitable that Latin America's third largest economy was unable to meet repayment obligations by the midnight deadline.

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

Ratings agency Standard and Poor's (S&P) had already placed Argentina in "selective default" when the talks ended.

Argentine press reports suggested an alternative solution, in which a coalition of Argentine private banks buy some of the outstanding debt, was being prepared, 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 - had refused to compromise.

"They were trying to impose on us something illegal," he declared.

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 ready to be paid, 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," he said.

Wednesday marked the deadline for Argentina to make a US$539 million (RM1.72 billion) payment on debt it had restructured with cooperative "exchange creditors" after its previous 2001 default.

Argentina had deposited the sum - for payment to those bond holders who had accepted a write-down in deals reached in 2005 and 2010 - in a bank account when it 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, US$1.3 billion, at the same time.

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

"What we offered them in terms of profit was 300 per cent. It was not accepted, because they want more and they want it now," Kicillof said, insisting the funds were being unreasonably greedy.

"Default is not a mere 'technical' condition, but rather a real and painful event that will hurt real people," Pollack warned. AFP