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Natacha Pisarenko, Associated Press
A sign is posted on a wall at the Argentine Economy Ministry reading in Spanish "Together we will fight against the loan shark vultures", referring to an unresolved dispute over $1.5 billion in unpaid debts after its record $100 billion default in 2001, known locally as “vulture funds”, in Buenos Aires, Argentina, Friday, July 25, 2014. Argentina will default for the second time in 13 years if it cannot reach a deal with the U.S. hedge funds before July 30.

BUENOS AIRES, Argentina — Argentina's government said Monday it will make another effort to reach a deal with US. creditors ahead of a looming deadline that risks sending the country into default.

Cabinet Chief Jorge Capitanich said that an Argentine delegation will travel to New York and meet a court-appointed mediator there on Tuesday, just a day ahead of the deadline.

"Argentina's position is to reach a dialogue that establishes fair, legal and sustainable conditions for negotiation with 100 percent of the bondholders," Capitanich said in a press conference at the presidential palace.

But the mediator, Daniel a. Pollack, said in a statement that while the Argentines will meet him, they have not yet accepted his recommendation of face-to-face talks with the plaintiffs in the dispute, led by New York billionaire Paul Singer's NML Capital Ltd.

Those creditors bought Argentine bonds on the cheap and rejected the government's restructuring offers following its record $100 billion default in 2001. They are demanding payment of some $1.5 billion in unpaid debts.

By Wednesday, Argentina has to make a payment to other creditors who accepted the restructured bonds or fall into default. But U.S. federal District Judge Thomas Griesa has forbidden Argentina to pay them without paying the holdouts as well.

In June, he ordered Bank of New York Mellon Corp. to return to Argentina $539 million it had deposited to pay holders of restructured debt.

Argentina already is struggling with recession, a shortage of dollars and one of the world's highest inflation rates. But the government says default would have no effect on most Argentines.

"There's no link to the economic activity. It's independent to the evolution of these restructuring processes," Capitanich said, adding that Argentina's cash flow is guaranteed by the surplus in its trade balance and recent investment deals signed with China.

Many economic analysts and bond buyers agree that the effect of a default would be limited because, in contrast to 2001, Argentina is now solvent.

"Argentine authorities seem to have reached the conclusion that to default now and renegotiate later would the less costly option," said Carlos Caicedo, principal Latin America analyst at IHS Country Risk.

Full payment to the hedge funds would likely trigger lawsuits from other bondholders demanding to be paid on similar terms. While Argentina has nearly $29 billion in foreign reserves, those include loans to other countries, deposits with the IMF and other assets that are not easily used.

Troubled countries often find investors willing to lend them money to pay other creditors. But Argentina has been locked out of the bond markets for more than a decade. Any money it could borrow would likely come at high interest rates — and at great political cost for the center-left government that has rallied public support against paying what President Cristina Fernandez calls "vulture funds."

Restoring Argentina's sense of pride and sovereignty after the 2001-2002 economic collapse has been a central goal of Fernandez and her predecessor and late husband, Nestor Kirchner. The two negotiated or paid off most of Argentina's defaulted debt, nationalized the pension system, kept energy cheap through subsidies and dug deep into the treasury to redirect revenue to the poor through handouts.

"A default would taint (the president's legacy), but most important, it would seriously damage the chances of any presidential candidate being sponsored by her," Caidedo said.

"A group of leaders who received a country in default in 2003 and defaulted 11 years later are certain to be punished by voters."

Luis Henao reported from Santiago, Chile.