Argentina said it took the step of recognizing Palestine out of frustration on the progress (or lack of progress) in the “two-state” peace negotiations which started back in 1991 and continue to drag on today. This is exactly what Israel feared might happen after talks once again stalled after the Israeli side refused to renew a freeze on the construction of Israeli-only settlements within the borders of what would-be the Palestinian state. As part of a proposed deal for a one-time extension of the settlement freeze, the United States promised to block any unilateral moves by organizations like the United Nations to recognize Palestine as an independent state.
Of course that doesn't stop countries like Argentina from acting unilaterally, and apparently several other countries in Latin America are planning to issue their own statements of recognition according to the Palestinians. Even though Argentina's recognition has little practical effect, the Palestinians are hoping as more countries join in, the idea of a nation of Palestine occupying the 1967 borders will become the default position in the international community, a condition that they hope will lead to actual statehood for Palestine.
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