Argentina, just hours away from default on a $3 billion debt to the International Monetary Fund today, told the lender it would not dig into its reserves to pay back the loan.
Unless a wider, last ditch loan deal is reached - to roll over $12.5 billion owed over three years to underpin a recovery from last year's crash - Argentina will at the end today join the ranks of IMF defaulters like Liberia, Sudan and Zimbabwe.
President Nestor Kirchner's new left-leaning government opposes IMF austerity plans and refuses to use around a quarter of its international reserves to pay the debt.
A default would likely not have an immediate economic impact, with economists saying it would take weeks or months for sanctions and penalties to come into effect. Analysts expect some kind of deal would be forged in the meantime.
But a default would be the latest nail in the coffin for investor confidence in Latin America's third largest economy, already a bete noire of many investors after the government stopped making payments on what is now $90 billion in privately held debt.
While Argentina was a darling of Wall Street in the 1990s after a bonanza of market reforms, now it is almost impossible for consumers to get a simple bank loan. Firms must rely on their own cash rather that credits to expand.
Argentina, which is not asking for any fresh cash, has so far failed to agree with the fund over key conditions for a deal, including compensating banks for losses after last year's currency devaluation and raising frozen utility rates.
Economists say Argentina's tough stance over negotiations may due to the fact that a default could be more damaging to the IMF since Argentina is one of its biggest creditors.
The United States also sent out a statement of political support for Argentina yesterday. All eyes are now on whether the Group of Seven also comes out to back Argentina.