But it is still desperately trying to negotiate the support of another key lender, the International Monetary Fund (IMF), in order to solve its economic woe.

The World Bank, Argentina's last source of foreign credit, confirmed in a statement that it had not received the full payment.

It said it would not consider any new loans for the country, and access to current loans would be removed unless the repayment was made within the next 30 days.

Economists believe it will be very difficult for Argentina to solve its cash shortage without fresh funds.

IMF talks continue

Following news of the default with the World Bank, the IMF was quick to say that it was still committed to reaching a new deal with Argentina.

Mr Lavagna is hoping for a speedy IMF deal

The IMF's deputy director, Anne Krueger highlighted two outstanding issues that needed to be resolved; the control of public spending and anti-inflation policies.

Argentine Economy Minister Roberto Lavagna said talks with the IMF would continue and that he was hopeful of sealing a deal.

Mr Lavagna also said that Argentina was prepared to bring its loan payments up to date once the prolonged negotiations over fresh funds were completed.

Some analysts interpreted this comment as a way of trying to put pressure on the IMF to push through a new deal.

Threat to aid

The IMF cut off its lending after Buenos Aires defaulted on $140bn of private international loans late last year.

I think Argentina's differentiated itself so completely that I doubt there will be important consequences [for the rest of the region]

Michael Gavin, UBS Warburg

But 11 months of talks have so far failed to bridge the gap on economic priorities between Argentina, wary of inflaming its impoverished population, and the IMF.

It is feared that defaulting on the World Bank loan could threaten future lending, and humanitarian aid, to Argentina.

The country's economy is in crisis and is expected to shrink by more than 10% this year.

More than half the population are now living below the poverty line.

"If this is the beginning of a default with multilaterals, this is much more worrying in the long term," said Jose Luis Espert, an economist at Espert y Asociados.

But some analysts said things had got so bad in Argentina that a default would not make matters much worse.

"Making this payment was probably not going to improve matters for the population," said Carl Ross at Bear Stearns.

"I don't think this has a big impact on the real economy."

Isolated impact?

The possible spill-over effects for other South American economies are seen as being limited.

"I think it's bad news for Argentina," said Michael Gavin, an economist at UBS Warburg.

"For the rest of the region, I think Argentina's differentiated itself so completely that I doubt there will be important consequences."

What does this mean for Argentina?

Your e-mails

I do not blame those who do not want to lend any more money to Argentina because the country has failed to return it, but I am terribly worried about the people who had little to do with the corrupt governments that keep taking their money from them.
Mayra Di Lullo, Argentina

While Argentina has long been rife with corruption, the IMF and World Bank should accept that their own policies contributed to the country's present dismal situation.
Gary Lord, Australia

I think the most important thing now in Argentina, is to try to give as many as possible people food to eat.
Eddy G. Verveer, Thailand