The Argentine government is locked in contentious negotiations with foreign bondholders, led by the U.S. investment firm BlackRock, over the terms of nearly $65 billion in payments it owes on its debt. This is familiar — and risky — territory for Argentina. Should negotiations fail before the June 2 deadline and the government of President Alberto Fernández misses another debt payment, the country will formally slip into default for the third time this century and ninth time in its history.

What’s new this time is the chaotic international backdrop. The global coronavirus pandemic and the accompanying severe, ongoing, worldwide economic contraction suggests we may see a wave of sovereign debt defaults. This could envelop a large number of emerging and developing countries that are also struggling with large foreign currency debts, made worse by the covid-19 environment. So investors and policymakers around the world are watching the Argentine case closely.

Despite that scrutiny, domestic political calculations will still shape the government’s strategy.

Here’s how Argentina got to the edge of default

Argentina has a checkered history as a country that relies on foreign investments to fund government operations. In 2002, its currency collapsed, leading to a deep financial crisis. As a result, Argentina defaulted on its debt in 2002, triggering years of litigation with creditors in New York. It took the 2015 election of center-right President Mauricio Macri to end the standoff between holdout creditors and the Argentine government. The debt settlement and the Macri government’s market-friendly policy agenda paved the way for a borrowing spree, including the June 2017 sale of “century” bonds maturing in 100 years.

Investors’ initially euphoric reception of Macri and his agenda gave way to pessimism and then panic by May 2018, when the Argentine peso’s value plunged, inflation accelerated and the country turned to the International Monetary Fund for a $57 billion rescue package. The capital exodus grew so severe that in September the Macri government — in a sharp reversal from its previous positionimposed strict restrictions on buying dollars to limit flight out of pesos and prop up the currency’s value.

But Macri lost in the October election, and was replaced by the center-left government of Fernández and Vice President Cristina Fernández de Kirchner. CFK, as she’s known in Argentina, led the country during its standoff with holdout creditors. Martín Guzmán, a vocal critic of international investors’ strategies for extracting payments from debt-dependent countries such as Argentina, is now economy minister.

Facing difficult economic conditions in late 2019, Guzmán and his negotiating team entered into on-and-off talks with three separate groups of bondholders to restructure Argentine debt. Even before the election, some international investors had taken a hard line on debt restructuring, warning that “owners of these bonds are willing to go to the mat with Argentina on this.” By early February, negotiations to ease Argentina’s punishing repayment schedule had made little progress. A month later, Buenos Aires identified its first cases of the coronavirus. On March 21, the Argentine government ordered the country into lockdown.

The combined effect of the global financial shock, an emergency spending package on the order of 1 percent of gross domestic product to combat the public health crisis, and the forecast of a 10 percent fall in economic output spurred the Argentine negotiating team to drive a harder bargain with creditors, asking to reduce the interest rate on outstanding bonds from 7 to 2.3 percent and proposing a three-year standstill on payments. The major creditor groups have, to this point, rejected the government’s bargaining positions — even as other countries are financing their debts at record low, near or below zero rates.

Domestic politics could matter. A lot.

If, as seems likely, Argentina misses its upcoming debt payments and falls into another default, the political price for the government could be steep. Recent polling data finds a majority of average Argentines still support repaying the country’s debt. While a government refusing to repay debt is hard on its creditors, the public at large also suffers economically. For example, sovereign defaults weaken the value of a country’s currency, and therefore push up the prices that consumers pay for many products. A majority of voters in Argentina acknowledge that default is economically costly. Creditor groups may be betting that the government’s unpopular position on the debt issue will force the negotiators to accede to restructuring terms that are closer to what the creditors want.

But as our research has found, opinions on default are strongly tied to partisan attachments. We surveyed average Argentines in summer 2015, when the country was refusing to pay holdout creditors. We surveyed them again in June 2016, after the Macri government had settled the dispute and Argentina resumed borrowing from international capital markets.

Both times, respondents’ partisan affiliations shaped their positions on repayment. Supporters of CFK’s anti-creditor Frente para la Victoria party were about 30 percent and 25 percent more likely than others to support default in the 2015 and 2016 surveys. The gap in partisan attitudes over debt repayment also increased steadily over time — especially as debt repayment attracted more media coverage and voter attention.

Today, surveys show that partisanship still shapes Argentines’ attitudes toward repayment. As the lockdown in Argentina eases and the debt issue becomes more widely discussed, the partisan gap will likely widen. Supporters of the Fernández government may follow their co-partisans’ cues and blame the creditors’ unreasonable demands if negotiations break down and the government slides into default.

Bondholders should not bank on anti-default public opinion to help them get a better deal. Partisanship may swamp voters’ concerns about the economic costs of default. Research shows that some electoral democracies such as Argentina have the political will to drive hard bargains with creditors. If an agreement is not reached by June 2, investors may be in for a very long battle with the cash-strapped Fernandez government.

Editors’ note: An earlier version of this post gave the wrong month for the 2019 Argentine election. We regret the error.

Stephen C. Nelson is an associate professor of political science at Northwestern University, and author of “The Currency of Confidence: How Economic Beliefs Shape the IMF’s Relationship with Its Borrowers” (Cornell University Press, 2017).

David A. Steinberg is an associate professor of international political economy at Johns Hopkins University’s School of Advanced International Studies, and author of “Demanding Devaluation: Exchange Rate Politics in the Developing World” (Cornell University Press, 2015).