Argentina defaulted on its payment within hours after a meeting with the investors on Wednesday on grounds that they cannot afford to make the payment.

A federal judge gave a deadline of 4 GMT on Thursday for the issue to be settled.

Before the deadline passed, Argentine banks pulled their resources together in a deal to pay the debt to prevent a default, but the deal failed to go through, a source told CNBC.

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Daniel Pollack, a mediator appointed to the case, said that although the effect of the default cannot be guaranteed, it is certain that it will be beneficial for Argentina.

If a country experiences a default, its economy will suffer, especially if it's under recession and inflation rates are high.

The Argentine government has been cut off from international trade since its first default on 2001 for US$100 billion.

The first default happened in 2001 when Argentina wasn't able to conform with the court's order to pay "hold-out bondholders" and to make a $539million payment to investors who agreed to be paid in a reduced amount because of a reconstruction deal.

Argentine President Cristina Fernandez called the investors who didn't accept the reconstruction deal as "vultures" who takes advantage of debt in order to gain profit.

Despite the effect of their second default in the economy of Argentina, analysts claim that it will not be as drastic as the effect in 2001 when dozens of protesters were killed and bank accounts were frozen to stop any transactions.

American financial agency Standard & Poor's rated Argentina as "default" on Wednesday. The agency said that in order for the rating to be changed, Argentina must find a way to pay the debt.

TagsArgentina, Christina Fernandez