2nd Circuit ruling, pari passu
Associated Press – Wash Post/WSJ/The Telegraph/Huffington Post: "US appeals court rejects Argentine bond arguments" (Porzecanski)
- Spanish version - Terra.com: "Corte de EEUU rechaza argumentos "
La Nacion: “U.S. court orders “vulture funds” to be paid”
La Nacion: “The government tries to show its indifference, but it feels the impact”
Clarin: After the Frigate, another judicial ruling in favor of the vulture funds”
La Nacion: “It will be difficult to reverse the ruling, they believe in Washington”
Clarin: “The government seeks to minimize the impact of the sentence”
Outstanding Debt
La Nacion: “An unnecessary cost” (Jorge Ovideo, Opinion)
La Nacion: “The dangers of “Falklandizing” the discussion of the debt” (Nicolás Dujovne, Opinion)
Clarin: “Locked-shut law: a move that bounced back negatively”
Frigate Libertad
GhanaWeb: "Seized Argentine Ship a victim of decades of failed economic management"
La Nacion: “A collection to recover the Frigate”
La Nacion: “How great: the Frigate is already resting in peace” (Carlos M. Reymundo Roberts, Opinion)
Clarin: “The Frigate could cost US$30 million, but its symbolic value is incalculable”
Clarin: “At the Defense ministry now they don’t want to talk about timetables”
La Nacion: “The decision is suggestive, those in the Navy say”
Buenos Aires Herald: "What you sow, you reap (or garner)"
Political Environment
La Nacion: “A government distracted by its obsessions”
OTHER NEWS ITEMS:
· The 2nd Circuit ruling in the US caused local bonds and shares to plunge on the BA markets on Friday. Bonds lost 11%, country risk shot up 16% and CDS prices went up to 1000 basis points.
· The governor of Chaco announced that the next bond payment on dollar-issued debt will again be in pesos, further eroding investor confidence.
· Guillermo Moreno’s state-run website launched yesterday to “put an end to the diatribe and so much partial and malicious information” on prices in the country. The site will list the prices of 250 products in different supermarkets around the country in order to “inform” the country on bargains and spreads, allegedly to spot ‘gougers’. But the real intent, many argue, is to further intimidate retailers on controlling prices.
JORGE ARGUELLO on Twitter and Blog:
· He tweeted that the articles from the latest newsletter from the embassy, in Spanish, were uploading to his blog.
TRENDING TOPICS/ARGENTINA on Twitter:
· Topic number 3 is “DiaNacionaldeCorrupto” or “National Day of the Corrupt” and topic number 6 is “Nestor Kirchner” as it is the 2nd anniversary of his death. A quick look at the real-time trend on the former shows many, many are linking it to the latter and making ironic comments as to how the two fell on the same day.
ASSOCIATED PRESS/WASH POST/WALL STREET JOURNAL/THE TELEGRAPH/HUFF POST: "US appeals court rejects Argentine bond arguments"
[Spanish Terra.com - http://noticias.terra.com/america-latina/argentina/corte-de-eeuu-rechaza-argumentos-de-argentina,bde9395871e9a310VgnCLD2000000ec6eb0aRCRD.html]
October 26, 2012
BUENOS AIRES, Argentina — Argentina lost its long battle against bond holdouts in the U.S. courts Friday when an appellate panel rejected every argument it made against paying $1.33 billion to investors who refused to accept as little as 25 cents on the dollar for the country's defaulted debt in 2005.
The U.S. 2nd Circuit Court of Appeals in New York rejected a dozen appeals filed by Argentina over the years, and ordered the South American country to pay the holdouts an equal amount whenever it makes payments on other debt that has been restructured since the country's economic collapse a decade ago.
"We hold that Argentina breached its promise," the appellate court said, summarizing a 29-page ruling that could make it difficult for Argentina to use the U.S. financial system to make other debt payments unless it complies.
The ruling effectively gives Argentina a stark choice: Either pay all bondholders equally, or pay none of them.
A spokeswoman at Argentina's Economy Ministry said the government had no immediate comment on the ruling.
NML Capital Ltd., the investment fund that brought the case, referred questions to its parent company, billionaire Paul Singer's Elliott Capital Management fund, whose spokesman Peter Truell has declined to comment publicly.
Prices for Argentine bonds of all kinds sank after the ruling, especially debt paid in dollars. That increases borrowing costs for the country's national and provincial governments, which are already much higher than other nations because existing Argentine debt is rated far below investment grade.
The Argentine government argued that forcing it to pay the holdouts could provoke another severe economic crisis in Argentina, but the appellate court said that "nothing in the record supports Argentina's blanket assertion." It agreed with U.S. District Judge Thomas Griesa, who ruled that with more than $40 billion in foreign reserves, Argentina can afford to pay.
Argentina also argued that U.S. law makes its assets immune from seizure as collateral. It got support on this point from the U.S. government, which warned the courts that ruling in favor of a single creditor could complicate U.S. foreign policy in ways that go far beyond relations with Argentina. Banks also warned against creating expensive bottlenecks in the U.S. financial system's clearinghouse for bond payments.
But the judges dismissed these concerns, noting that laws imposed since Argentina's default now effectively prevent would-be holdouts from opting out of debt restructurings, and that if Argentina pays up as ordered, no more assets would be seized.
Economist Arturo Porzecanski at American University in Washington called the ruling "a watershed legal event."
"This decision has driven a stake through the heart of Argentina's legal and political strategy of refusing to pay the holdouts while paying all other bondholders," said Porzecanski, who served as an expert witness for plaintiffs in a separate case involving unpaid Argentine debts.
Argentina argued that the holdouts bought the bonds at rock-bottom prices during the country's 2002 default fully knowing that they might not get repaid, but the judges said Argentina made promises when it issued the debt in the 1990s and must keep them.
The judges also said NML Capital and other holdouts legitimately invoked "acceleration" clauses that raise the total to $1.33 billion in unpaid principal and interest.
One point bothered the appellate court: Griesa said any financial institution that processes Argentina's payments to the holders of restructured bonds would be violating the court's order if it didn't ensure that the holdouts are simultaneously paid an equal amount. This could force U.S. banks to stop accepting Argentina's money unless the government complies. The appellate court asked for more clarity on how this would work.
"The judge will come up with some minor changes," Porzecanski predicted. "But he basically got the green light to find a practical solution to what seemed an intractable problem."
Argentina can appeal to the full 2nd Circuit appeals court, and then to the U.S. Supreme Court. But meanwhile it has debts to pay, and the immediate impact of the ruling is to make them much more expensive.
"If the government of Argentina were a sensible player in the international financial arena, if it were a predictable debtor, it would not have major consequences, because Argentina can certainly pay these bondholders in full, from one day to the next," Porzecanski said. "But if you were an investor in new bonds or previously restructured bonds, you have to mark them down for a greater possibility of default."
He cited Argentine President Cristina Fernandez's refusal this week to post $20 million with a court in Ghana to release the Argentine navy's signature tall ship from a port where NML Capital managed to have it detained as collateral for the unpaid debts. She said she would rather leave the ship docked in Africa for as long as she's president, than negotiate with the "vulture funds" or "fondos buitre," as she labels the holdouts.
"That's nothing compared to what they owe in this case," he said. "She might just come out and say, 'No, I'm not going to pay the regularized bondholders if it means paying the 'fondos buitre'."
The risk has increased that he next time an interest payment is due to current bankholders, they might say no.
LA NACION: “U.S. court orders “vulture funds” to be paid”
by Martín Kanenguiser | LA NACION
October 27, 2012
Halloween came early for Argentina, as the judiciary of the United States yesterday obliged the government to pay the “vulture funds” the debt in default they’ve been demanding since 2001.
In a ruling that even surprised the plaintiffs themselves, the government was ordered to honor the requisition from the funds NML-Elliott, Dart and Aurelius, as they have done for the creditors that accepted the debt swaps. These funds are asking for US$1.333 billion, while they bought them at a much lower price than the other investors.
The government reacted with a message that seeks to bring calm: “Argentina will continue honoring the bonds with international jurisdiction on the terms that it has been doing so until now,” said Finance Secretary Adrain Cosentino to LA NACION. Now the possibility of an appeal to the United States Supreme Court falls open.
Almost four weeks after the attachment in Ghana of the Frigate Libertad, for the lawsuit filed by NML, the U.S. court affirmed that Argentine could pay the holdouts by counting on more than US$40 billion in reserves at the Central Bank.
The ruling sides with the wider interpretation of the ‘pari passu’ clause which orders Argentina to treat these funds with similar terms as those for the 91% of bondholders that accepted the two swaps to exit the default (2005-2010). Argentina was expecting a more limited defeat, by which the judges would only criticize the “locked-shut law”, which impedes the country from negotiating with creditors that didn’t accept the offers but without putting them on equal footing with the others.
However, yesterday from Argentine side attempts to understand the magnitude of the ruling predominated, as now it goes back to the hands of Judge Thomas Griesa to determine how much has to be paid (if it is the 100% that the vultures demand or a similar sum to that, with a haircut, which the bondholders are collecting who accepted both offers). Once Griesa decides that amount, the case will return to the court of appeals and Argentina will try to appeal to the United States Supreme Court; experts consulted by LA NACION recalled that that court only accepts taking very narrow cases in which it is understood that there was a violation of federal law. The other chance is that the U.S. Treasury’s argument is taken into account, which warned that to side with the “vulture funds” would imply putting other sovereign restructurings at risk, like with Greece.
On that, the judges said that “none of the bonds emitted by Greece, Portugal or Spain, the nations identified by Argentina as the next ones that will restructure, are governed by the laws of New York,” as were the US$10 billion in Argentine bonds coming out of the swaps to exit the default.
"It is highly unlikely that other governments are finding themselves in the same situation as Argentina in the future,” the judges added.
If this ruling holds, Argentina will have to pay part or all of the amounts that the “vulture funds” demand before, or at the same time, as they will pay out, on December 15, the US$3.6 billion on the GDP coupon with the Central Bank’s reserves. With the same tone of annoyance that was reflected in previous rulings from American courts over the delay by Argentina in honoring adverse rulings, the judges said: “We have little difficulty in concluding that Argentina has not complied with the ‘pari passu’ clause,” under the laws of the United States.
"The court understand that Argentina violated this decision when it made payments under the current regime of bond exchanges while maintaining its refusal to satisfy payment obligations to the plaintiffs and when it approved the ‘ley cerrojo’ and its suspension,” said judges Rosemary Pooler, B.D. Parker and Reena Raggi.
Sources close to the creditors indicate that now the government ends up with the option to try for a rapid appeal or negotiation payment with the “vulture funds” in one or various installments. If it take the option to not accept the ruling and not appeal, it could be in danger of falling into another default, warn analysts and attorneys. The most audacious options would be to try to pay the bondholders who accepted the swap in Europe or Argentina, but with the risk that it could be considered that it didn’t comply with the original terms of the restructuring. “A case has to be attempted to reopen the ‘ley cerrojo’, at the margin of this decision, because to postpone a decision or isolate itself will be all the more costly. Clearly the impact of this judicial decision is much greater than the one on the Frigate Libertad,” said ex-Finance Secretary Daniel Marx.
Analyst Boris Segura, of Nomura Securities, warned from Wall Street: “Due to the erratic official policy, we see many risks of more mistakes: in particular, we foresee a heating up of the rhetoric from important officials calling this decision an attack on the Argentine people.”
Also, he said: “The chances of a technical default are increasing, as this decision will severely impact the process with which Argentina pays its post-default bonds and the risk of attachments will be very present.”
In that regard, the final interpretation will be key from Griesa about the responsibility of the banks that conduct the payments of Argentine debt; the plaintiffs asked to consider them “accomplices” of Argentina, but the judges used a more moderate language. It remains to be seen if Griesa decides that the “vulture funds” can attach the resources of the banks originated in Argentina if the government doesn’t manage to reverse the extremely complicated ruling from yesterday.
LA NACION: “The government tries to show its indifference, but it feels the impact”
by Mariano Obarrio | LA NACION
October 27, 2012
After the ruling from the Court of Appeals in New York that ordered the “vulture funds” be paid US$1.333 billion, the government of Cristina Kirchner took hours to react, in the midst of close secrecy. After that it minimized the ruling and reiterated that it will not pay those who didn’t enter the swap of 2005. But the eventual scenario of a second default didn’t stop worrying them.
That would cause a serious explosive shock to the debt reduction policy that the President always brandishes as one of her most visible achievements and a pillar of the model of production and social inclusion, according to what official sources told LA NACION over the afternoon.
The strategy was to show indifference and lack of concern. Cristina Kirchner traveled at 2:00pm to Rio Gallegos and had no official activity in Olivos during the morning. The Casa Rosada was almost deserted: various officials attended events yesterday and today to commemorate the second anniversary, today, of the death of Nestor Kirchner.
The only one authorized to speak, in the midst of an information blackout, was Finance Secretary Adrain Cosentino, who told the Telam official news agency that the sentence will be appealed and that “it was suspended from the very moment it was issued.”
The official said that “the ruling is not the last word on the litigation over ‘pari passu’, which will require additional procedures both in the lower and upper courts, and of course before the Supreme Court of the United States.”
The clause of ‘pari passu’ establishes that the bondholders that didn’t enter the swap of 2005 must collect the same – haircut included – as those that did accept the restructuring proposed by the government. Then, the “vulture funds” could collect under protest and continue litigating.
Among the bondholders that demand equal treatment are the funds NML Capital Ltd. – involved in recent days in the retention of the Frigate Libertad in Ghana – and Aurelius Capital Management. The case of the Frigate sensitized the mood when this decision was heard of.
An optimistic look that the government had referred to the eventual unexpected allies. “The government of the United States is permeable to countries that can move funds and interests them to have cash flowing there,” said a minister to LA NACION. Also, the ruling would break, according to the government’s view, the financial architecture for future restructurings in Spain, Greece or Portugal, very indebted countries.
That factor could be addressed by American courts before the lobbies of creditors in that country, they speculate at Balcarce 50.
On Wall Street, the government has detractors that are seeking to punish it for being a bad example for other countries that could fall into default. But other debtor countries and creditor funds could be harmed by a bad judicial precedent from Argentina.
"We could have unexpected allies on Wall Street. Nobody wants those countries to go badly,” said an ex-official of the current government, knowledgeable on the issue, to LA NACION.
A concern was central at the Casa Rosada. The American court left it to Judge Thomas Griesa to decide the form of payment of those US$1.333 billion. There could be pressure from the “vulture funds” whose attorneys will send inconvenient proposals for the country. Griesa will decide, for example, if those payments should be retroactive from 2005 or from this point forward. The only appeal that could be made by the Argentine state, therefore, is on that form of payment. The debt is a firm ruling.
Could the government refuse to pay in the future faced with another adverse ruling? That could expose the country to a second default, to international scorn and absolute isolation. The position of the government is that it will continue showing that this measure is not legally applicable.
CLARIN: After the Frigate, another judicial ruling in favor of the vulture funds”
It happened in New York. And it orders the same payment to the bondholders that didn’t enter the debt swap as those who did accept the haircuts and longer terms.
by Ana Baron
October 27, 2012
New York. Correspondent – The Court of Appeals of New York ruled that Argentina discriminated against the vulture funds and other bondholders that decided not to participate in the debt swaps of 2005 and 2010. It’s because – the court says – the country refused to pay them in the same manner as it is paying the bondholders that did accept the swaps. Thus, the door is open that from the next payments of the restructured debt, which are in December, payment will have to be made to these creditors on par with those that agreed to haircuts and longer terms. In play are disbursements of US$1.3 billion.
“We find that the provision of equal treatment that the bonds have prohibits Argentina from discriminating between the bonds of the plaintiffs (read as the vulture funds) in favor of the bonds issued in connection with the swaps (debt restructurings),” says the ruling, “and that Argentina violated that provision by classifying its payment obligations on the debt in default below its obligations to the bondholders that restructured their debt.” It uses the commitment of “pari passu” included in the original Argentine debt warrants, which guaranteed equal treatment to all the creditors.
While the government yesterday sought to minimize the impact of the ruling, this means that the next time payment is made to the bondholders that restructured their bonds, it could also have to pay the vulture funds.
Made up of three judges, the Court of Appeals this way ratified a decision from February of last year from Judge Thomas Griesa, who is overseeing one hundred different lawsuits against Argentina from other bondholders and funds that fell outside the swaps. At that time, the Argentine ambassador in Washington, Jorge Arguello, said: “Since Griesa’s decision is political, weak in its legal argument, we have confidence that it will be decided on appeal in favor of Argentina.” But yesterday the court rejected Argentina’s appeal and ordered the case sent back to Griesa’s court. It is for the judge to establish a mechanism by which Argentina would have to pay these bondholders when it pays the others. A source that knows the case well told Clarin that the funds and bondholders that filed this complaint are demanding a total of US$1.3 billion.
The same source explained that if in December (the next debt payment) the government pays one bondholder that entered the swap 100% of a coupon, it will also have to pay the vulture fund 100% of what it is owed; namely, that US$1.3 billion, including interest and principal. Yesterday, however, another rumor circulated that said that the government will have to pay the funds only interest. Whatever the case, if a payment agent for the Argentine government pays the bondholders that restructured their debt and not the vulture funds, the latter could file suit against the bank itself for disobeying Griesa’s order. In the swap, the payment agent is Bank of New York.
In July, the government asked the Court to revoke that decision arguing that it could set off a financial crisis in the country. In its argument, the Argentine government also spoke of the impact that this could have in the restructuring of debts in other countries, like Greece, Ireland, Italy or Spain. In fact, the government of the US supported Argentina’s position affirming that Griesa’s decision could undermine the efforts that are being made to overcome a sovereign debt crisis at the global level.
But like what happened with the judge in Ghana that detained the Frigate Libertad (in the court in New York the plaintiff NML Elliott was also a party), the court of appeals in New York didn’t take into account the opinion of the government of its own country and ruled unanimously against Argentina. Judge Barrington Parker, one of judges in the court, said in the decision that the Court had little difficulty in establishing that out country didn’t honor its obligations. And he added that “nothing in the documents supports the Argentina’s blanket assertion that the injunctions will plunge Argentina into an economic and financial crisis.”
In addition to NML, among the plaintiffs in this case are the funds Aurelius Capital, A. C. Paster, Blue Angel and a dozen Argentine citizens.
LA NACION: “It will be difficult to reverse the ruling, they believe in Washington”
by Silvia Pisani | LA NACION
October 27, 2012
Washington.- The legal and political strategy that the government of Cristina Kirchner exercises in this city suffered a very serious blow from the complaint from the holders of debt in default, which the government calls the “vulture funds”. For some, even, what happened is an almost “mortal” blow, difficult to reverse. But that will have to be seen.
Those were the first impressions after the decision was known from an appeals court which ratified a ruling from Judge Thomas Griesa, which obliges Argentina to pay interest equally to its creditors. “This bit that there are good and bad bondholders is over,” said Arturo Porzekanski, from New York University, to LA NACION.
From Buenos Aires, the Argentine government let it be known their intention to appeal the decision to the Supreme Court of the United States. The impression here is that better luck before that court would be difficult to have. Local sources said that “the precedents are not in Argentina’s favor” in that court. Still, a recourse of appealing to the Court would buy some time and stretch the problem out a few more months. The other relief for the bad times is of a technical nature: that the creditors and the judge don’t manage to design a mechanism to pay the US$1.3 billion that is demanded.
But beyond everything, the fear that was beating yesterday was that the government, against the ropes, would decide not only not to pay interest to the vulture funds but to none of the creditors. That mistrust was behind the plunge in public bonds.
On the political ground, there wouldn’t seem to be much room for negotiating. The courts in this country enjoy independence, as was shown in the fact that the ruling yesterday contradicted the previous opinions of the government of Barack Obama, in the sense that a measure of this kind could alter debt negotiations in the midst of world financial uncertainty.
In the ruling they did not see ties to what the country was in 2001, which produced the biggest default in history, nor with the crisis of European debt. The growing perception here is that Argentina is county that could pay, but is not doing it.
The decision comes at a bad time. In six weeks, the International Monetary Fund (IMF) will have to decide if it will punish the country or not for its resistance to giving greater veracity to its inflation index. The court decision has nothing to do with the Fund. But it also speaks of a country that, in the judgment of the court, is not honoring what it promised.
It will be interesting to see if something from that resonates in the decision that the organization adopts.
CLARIN: “The government seeks to minimize the impact of the sentence”
Assurances that it could not be applied. And that it still has more steps in the courts.
October 27, 2012
The government sought to minimize the ruling from the Court of Appeals in New York, the one that confirmed a ruling from Judge Thomas Griesa against Argentina that establishes that the country didn’t treat the different holders of public debt in an equal manner. From the government they said that this measure “lacks all practical application” and they even emphasized that now Griesa has to decide how a payment plan would be for the vulture funds.
Some Argentine consultants, like ACM or Quantum Finanzas, and even foreign investment funds, like Goldman Sachs, issued special reports to their clients warning them of the impact that could come from this measure. The government’s position was different.
“Today’s ruling doesn’t put an end to the litigation on “pari passu”, which will require additional procedures both in the lower and higher courts, and of course before the Supreme Court of the United States,” said Finance Secretary Adrian Cosentino to the official news agency, Telam. “This order was suspended from the moment it was issued, and today it remains suspended. The status quo is not altered at all,” the official added, arriving late yesterday from the Unite States.
From the government they tried to lower the tone even more by putting out the news that Griesa would be “reviewing” the project and designing a payment plan that would be “precise”. Even the government’s strategy is based on this point. The goal of the economic team will be to try to demonstrate that “the measure is not legally applicable”. The ACM consultancy agreed with this interpretation and the firm led by Maximiliano Castillo Carrillo predicted that the government will not appeal the decision because “the underlying issue” is still unresolved.
LA NACION: “An unnecessary cost” (Opinion)
by Jorge Oviedo | LA NACION
October 27, 2012
It’s beginning to be clear that keeping most of the debt in default has brought unnecessary and irrational political, economic and financial costs for the government and the country.
Someone convinced Cristina Kirchner to step back from her idea of finding a settlement with the Paris Club and ignore the suggestion from Barack Obama to pay the unfavorable decisions from the arbitration tribunal of the World Bank. The consequences are the permanent political battle and the impossibility of getting financing and partners for YPF.
The provisional President Adolfo Rodríguez Saá announced in December 2001 that he’d “taken the decision” to not pay the foreign debt anymore. He exaggerated. He made the decision who he has the money to pay and who doesn’t. In 2001, Argentina couldn’t pay, pushed into default over structural, international and local problems and by the political decision of the government of Republican George W. Bush.
Néstor Kirchner then extended the default and the cut in remittances to those who’d contributed to AFJP. Bush, then, congratulated it
The situation is different now. The White House doesn’t want to set off explosions like the ones in Argentina in 2001 and 2002 and has done everything it can to avoid collapse by gigantic companies on its own territory and entire countries in the European Union. It doesn’t seem today that the Obama administration is “letting go of Argentina”. The American government has helped Argentina a lot in the court cases in its territory.
An eventual victory by Mitt Romney might not even change things. The ultra-right that wants to have lesson-making collapses in countries ended up making the biggest state bailouts in the history of its own country.
The collapse of Lehman Brothers almost made the international and commercial system collapse all at once. Nobody seems to want a sovereign default today.
But Argentina’s situation also changed since 2002. The international economy, which was terribly unfavorable, became favorable like never before in more than a century.
The country, says the government, has grown at “Chinese rates”. In such a way that it’s difficult to understand why it continues to not pay the debts over unfavorable decisions in the arbitration center of the World Bank (ICSID). Nor is the idea defensible to continue not paying anything to Spain, Germany, the United States, among the other countries who are part of the Paris Club. The President decreed in 2008 that she’d found a way out, which is to say, paying the Paris Club, but afterwards she did nothing important. And it would seem that the demands of the vulture funds will have to be dealt with in another way, after more than a decade of default.
Foreign Minister Héctor Timerman detailed, on Thursday, the quantity of times that the country suffered attachments in recent years and how it managed afterwards to get them lifted. It was done to promise that the Frigate Libertad will be recovered without paying the creditors. The good lawyers always say that it’s preferable to get a bad agreement than a good ruling. It’s not clear how much it costs Argentina in lawyer fees for each one of these actions.
Also, the damage in terms of financial reputation is colossal. The country is considered a “fugitive from international finance.” After the pesification of a ridiculous debt for the size of the national economy by Chaco, it leads in the ranking of the countries considered the most risky.
The list is of 61 countries and among them is Norway and the United States; and also Pakistan, Venezuela and Egypt. The one where the risk of not recovering what is invested is highest, for the market, is Argentina.
It’s not strange. Barack Obama asked Cristina Kirchner for a solution on the ICSID issues. And she hasn’t done it.
Refinancing a debt because one cannot pay it, getting bailout credits by multilateral organizations and other states is a habitual process in the market. Greece is the most recent case.
The Argentine default was a brutal case and it’s not an example to follow. It should be remembered above all by whomever wants to occupy the White House and the leadership of the IMF, which, of course, collected in advance, without a haircut, and in cash all of its balances.
But to maintain most of the debt in default after almost a decade of uninterrupted growth is not reasonable. And not paying off the debts with those who invested in the past is not advisable if new partners are being sought for YPF.
CLARIN: “Locked-shut law: a move that bounced back negatively”
October 27, 2012
The locked-shut law was a play thought up by ex-minister Roberto Lavagna to ensure a high acceptance of swap I, which sought to restructure the debt in default for more than US$100 billion. It was enacted on February 10, 2005. The key article said that the national Executive Branch could not reopen the swap process. “If you’re not in now, you’re never in,” was the message to the bondholders. It’s difficult to measure the effect of the law. At that time it achieved an acceptance of only just above 76%.
With Amado Boudou as Economy Minister, the government pushed a law to suspend the effect of the locked-shut law while Swap II took place. The law was not in effect between December 10, 2009 and December 31, 2010. In that lapse, bonds worth about US$18 billion entered the swap, with which bonds of US$5.45 billion remained outside. Between the two swaps, 92% of the defaulted debt was able to be normalized. The remaining 8% is whiat continues giving the government headaches. For that yesterday the government wouldn’t rule out a second suspension, or cleanly overturning, the locked-shut law.
LA NACION: “The dangers of “Falklandizing” the discussion of the debt” (Opinion)
by Nicolás Dujovne | Para LA NACION
October 27, 2012
The court of appeals for the second district of New York just confirmed a negative decision against Argentina issued previously by Judge Thomas Griesa, in favor of Argentina’s creditors. This higher court ruling confirms that Argentina violated the equal treatment clauses or “pari passu”, by discriminating against holders of Argentine debt issued under foreign legislation that didn’t enter the debt swaps of 2005 and 2010 with respect to those creditors that received Par and Discount bonds in those operations.
This way, the underlying issue had been decided in favor of the creditors, at least until that Argentina appeals and gets the U.S. Supreme Court takes the case.
That event is highly improbable. Now, the court of appeals has asked Judge Thomas Griesa that determines the form in which the payments will be made that the funds NML and Elliot are demanded, with holdings equivalent to US$1.4 billion in bonds in default. With the underlying issue settled, Judge Griesa must determine the way in which he will order the payments made to NML. Griesa’s decision could be appealed by Argentina. That is, Argentina could appeal the issues of form, but not the underlying one.
If it respects the decision by the Court of Appeals, the “vulture funds” would have to receive a compensation equivalent to those bondholders that entered the swap of 2005, including the interests collected and the payments accumulated by the GDP coupon. That amount is not more than US$1.4 billion originally demanded by the funds.
With this event, the market has gone into a panic. Not over the US$1.4 billion to pay, which is a perfectly affordable amount by Argentina. The fear is based on the consequences that will come about if Argentina decides to link this event to the folklore of the attachment of the Frigate Lbertad and plans to resolve the issue politically. To Falklandize the debt. That would hit a wall. It’s that once the method is confirmed that Argentina must use to pay the bondholders, those amounts will be separated through orders to the payment agents on Argentine bonds (Bank of New York) and the Euroclear system of payment, then deducting funds that would have to go into the pockets of the current holders of Par and Discount bonds.
The next page corresponding to these bonds is in December of this year. Then, if the American courts order funds to be separated from those payments to compensate NML, the current holders of the bonds will receive less funds than those that correspond to them. Argentina will then have to choose to fall into default or compensate NML and Elliot with whom it recently has faced off with around the conflict with the Frigate and whom they’ve promised not to negotiate with. And Foreign Minister Hector Timerman has already proven in the flesh that the United Nations can do little for him.
The vulture funds have ticked off another victory against Argentina. And the political impact, after the event of the Frigate, is such that this issue is acquiring a gigantic political dimension. Those that celebrated the enormous haircut that Argentina effected in the framework of the debt restructuring find themselves now with one of the consequences of the wound that that process left. To have left the debt issue open could have had costs. And the extravagant yields from Argentine debt in comparison with, for example, Bolivia’s have an explanation.
As with inflation, energy, trains and the functioning of the state in general, the future, far off, everything comes together and the bill gets passed on. The future motion of censure from the IMF in December for Argentina over falsifying its statistics, the event of the Frigate Libertad and this ruling from the American court show that the world has grown tired of Argentina and its special situations. The crisis ended a long time ago and Argentina has maintained its debt in default with the Paris Club for 11 years, meanwhile hasn’t paid the adverse rulings that it received from the ICSID.
If our economy is going so well for us to explain to the world how to solve its problems in every forum within our reach, the dichotomy between our success and the special comprehension that we ask of the world already doesn’t make sense. And they are making us know that.
CLARIN: “It generates an uncertainty that is not smaller”
October 27, 2012
Daniel Marx, economist and the ex-official of the government of Fernando de la Rúa, says that the government closed the only window by which the bondholders harmed by the default of 2001 could come forward. And the consequences are being seen now. “If the swap was open, Argentina would have the argument that there is an open channel to attend to the demands of all the bondholders, whether they adhered or not to the swaps of 2005 and 2010.” According to Marx the ruling generates no smaller uncertainty: it establishes that the Griesa’s courtroom is where the formula will have to be determined to apply “pari passu”. “That potentially widens the spectrum of subjects reached by contingencies linked to Argentine bonds.” For Marx, ex-finance secretary and negotiator of the megaswap of 2001, if the payment to the bondholders is done through the Bank of International Settlements (BIS) Argentina would be protected by immunities. However, through a report by the consulting firm Quantum, he argues that “they cannot rule out that certain bondholders, especially those in the jurisdiction of the United States, decide to undo the bonds if larger contingencies are confirmed in the framework of the litigiousness that they are bringing forward.”
GHANAWEB: "Seized Argentine Ship a victim of decades of failed economic management"
By IMANI
October 28, 2012
*IMANI Report: Seized Argentine Ship a victim of decades of failed economic management, corruption and populism*
* *
On Thursday, October 4, 2012, the ARA Libertad, an Argentine Military Training ship which berthed at Tema Port, was seized on the orders of a Ghanaian High Court much to the chagrin of the entire Argentine government.
The High Court in Ghana granted NML Capital Limited, ‘a commercial creditor of the Republic of Argentina, an injunction and interim preservation order against the ARA Libertad, The order required the Libertad to remain at Tema Port, pending hearing on the enforcement in Ghana of judgments against Argentina issued by the United States District Court for the Southern District of New York, supported by similar judgments in London. Argentina may obtain release of the ship however, by posting a bond with the High Court in Accra’ a significant departure from the nearly $300m debt owed since 2001. That came to pass and the courts in Ghana posted a bond of $20 million dollars or in default give up the Ship, which, by the way, the Argentines have said they are prepared to do, to save (what is left of) their ‘national dignity’. The Argentine President, Cristina Fernandez in a speech broadcast to the world, reiterated her earlier call that “As long as I am President, they can keep the frigate but not the liberty, sovereignty and dignity of this country”. “No vulture fund, no one gets to keep that”, she added. The Argentines may also hope against hope by using its temporary membership of the UN Security Council to compel Ghana to release the ship.
Here is how Argentina got herself in this mess.
A few decades ago she borrowed money by floating bonds and other financial instruments. Being a viable country then, its bonds were patronized and people lent her millions of dollars which they used up with the promise to pay back as scheduled. Argentina couldn’t pay back; the debts became a problem, and were inherited by successive Argentine governments. Records show Argentina owes a total of $100bn to lenders. Funds like Paul Singers’ bought Argentine debts on the secondary market, but facing the attitude of the Argentine government which US Judge Thomas Griesa, (who presided over many of these cases) has described as “doing everything they can to resist paying legitimate judgments”, they have resorted to a crusade to recover the money, usually by chasing Argentine assets around the world. The Argentine government has also declared war against the so called “Vulture Funds” and has been playing real life hide-and-seek, with these creditors.
In spite of the global embarrassment the saga has brought to the Kirchner administration and to an extent the Ghanaian government, it appears popular opinion about Ghana in Argentina, was what an Argentine Journalist said to IMANI principals last week; that Ghana was a thought of as a banana republic, and needed bullying, at least the kind that plays out within the corridors of power. How such conclusion could be reached in spite of the distant diplomatic relations that exists between the two countries beats any one’s imagination. The coolest part of this saga is that ordinary Ghanaians just do not care, let alone entertain fears of an aggressively bold but discordant chest-thumping declaration of ‘war’, as the ship involved is a decorated war ship.
At least, there is another reason Argentina is furious. Its dignity, yes, Argentina’s “national dignity”.
But a contest of dignity when it comes to financial liability between Argentina and Ghana is another play ground the former looks already drawn. Throughout the late 90s and early 2000s, Argentina witnessed daily riots and violence, ‘a procession of presidents-for-a-day, and the gathering doom of default and devaluation’. Coupled with grand official corruption, the country simply collapsed from its near first world status to the rungs of the very poor within the poor in the world. There were a few promising times, but even those times under President Carlos Menem for instance was marked by allegations of corruption and his personal involvement in arms deal. After 5 months of a house arrest, Menem was released by his hand-picked Supreme Court friends.
Transparency International, the think tank that surveys and publishes the annual index of corruption levels, in 2001, Argentina ranked a dismal 57th out of 91 countries. Worse, in other words, than Botswana, Namibia, Peru, Brazil, Bulgaria, and Colombia. Ghana was ranked 59th in 2001. The following year, Ghana ranked 50th and Argentina placed 70th in 2002. In 2004, Ghana ranked 64th whilst Argentina ranked 108th. In 2007, Argentina ranked 105th and Ghana 69th. In 2009, Argentina placed 107th and Ghana 69th. Argentina ranked 105th and Ghana placed 62nd in 2010. In 2011, Ghana ranked 69th whilst Argentina did with 100th.
On the economic freedom index, Ghana edges Argentina in several categories and ultimately the cumulative scores for many years. Economic freedom is achieved when individuals in a country have the freedom to think, make choices, own property that is acquired without let or hindrance and able to use whole or aspects of the priority to engage in voluntary exchange. The Economic Freedom of the World measures the degree to which policies and institutions of countries are supportive of economic freedom. Forty-two variables are used to construct a summary index and to measure the degree of freedom in five broad areas: the size of government; Legal System and Property Rights; Sound Money; Freedom to Trade Internationally and Regulation. The table below shows exactly which of the two countries have been more free.
Country
2002
2003
2004
2005
2006
2007
2008
2009
2010
Argentina
83rd/123 countries surveyed
99th/127 countries surveyed
83rd/130 countries surveyed
112nd/ 141 countries surveyed
110th/141 countries surveyed
99th/141 countries surveyed
113rd/141 countries surveyed
119th/141 countries surveyed
127th/144 countries surveyed
*Ghana*
76th
58th
72nd
83rd
56th
72nd
64th
70th
71st
The historical account that lends itself to the dilapidated economy of Argentina is to be premised on the administration of President Juan Perón in 1946. On the crucial question of judicial independence, Brink Lindsay, a Cato Scholar wrote “Prior to the descent into statism, justices of Argentina's Supreme Court enjoyed long tenures undisturbed by political interference. At the beginning of Juan Peron’s first administration in 1946, Supreme Court justices averaged 12 years on the bench. It's been downhill since then. Since 1960, the average tenure has dropped below four years. After Perón (he left the presidency for the second time in 1974), five of 17 presidents named every member of the court during their term, a distinction that had previously been limited to Bartolomé Mitre, the country's first constitutional president (1862-1868). And so, while before Perón, it was typical for a majority of the court to have been appointed by presidents from the political opposition that was no longer the case. The Supreme Court, the supposed bulwark of the rule of law, was reduced to a puppet of executive power”
Against the above background, it was reprehensible to hear The Argentines impugn our judicial system by stating their mistrust of our Legal system, with Ambassador Susana Ruiz Cerrutti declaring that Argentina will be going directly to international tribunals instead of submitting to Ghanaian courts because it mistrusts the impartiality of the local Courts. She is entitled to that, but it betrays Argentina’s lack of appreciation of the strides Ghana has made in building institutions of progress.
After years of military rule which many blame for Ghana’s economic stagnation, Ghana has had an unbroken democracy for almost 20 years. There have been pitiable occurencies just as there has been positive. In this regard, Ghana and Argentina offer a contrast. Ghana, like much of Africa, is growing and its economy is expanding. It emerged from its Highly Indebtedness and Poor Country Initiative (HIPC) status and recently has sold Eurobonds — at an interest rate that Argentina can only dream about. This is because Ghana has a strong tradition of the rule of law. This is a bipartisan tradition. Argentina, on the other hand, has repudiated its debts and does not obey court judgments in New York, the UK, at the World Bank (ICSID) and now Ghana. This is why investment is fleeing Argentina, its economy is in shambles, and it has attracted the rebuke of the IMF earlier this month.
The general ethos of the discussion is that the rule of law must be made to prevail in Ghana, and no politician or foreign power should tamper with that. This singular judicial decision raises many dimensions of the nature and future of power relations within and without Ghana. Among others, it examines;
· The real strength of our judiciary and its ability to protect citizens (if it can protect foreign interests against our government then it can protect citizens against the powers that be).
· The rule of law including international law and whether our judicial system will continue to assert itself in complex international matters.
· The state of our political system; whether we have matured to the point where politicians will allow the law to take its course and not intervene even when it is uncomfortable.
· Whether our leaders are beyond bullying and pressuring by a bigger nation (Argentina). Something we will need when dealing with China and the EU.
· Crucially this is not a Ghana versus Argentina matter. This is not as some have put it in the international media, Ghana taking on Argentina, this is truly a simple case of a court hearing a matter and making a ruling on the basis of law and the evidence in front of it, the nation Ghana has no direct interest in this matter except to uphold the law as all civilized nations do. Indeed many Ghanaians resent the suggestion that our courts are not capable of independent decision making and thus this must have been the directive of some politician!
· Ghana is a NOT banana Republic and that we have paid our dues in economic failure, serviced our debts and those we were forgiven were due to good behaviour in terms of respect for the tenets of democracy, the rule of law, free enterprise, respect for contracts and decentralised management of power and resources, principles that are sorely lacking in present day Argentina prior to their debt predicament and total disregard for international justice.
· That no amount of diplomatic pressure and by extension executive force can be brought upon our Judiciary to change its earlier ruling.
· That Argentina’s actions constitute a serious erosion of the rights of foreign investors. Accordingly, Ghana’s courts must be praised for doing the right thing re the Libertad.
· The lesson from this is that Governments that incur foreign debt are mature adults, who should take responsibility for their actions and pay their debts. They, and hopefully their countries, benefited from the finance they received, and it is morally reprehensible to expect their financiers to pay for their failure to honour their obligations. It is also morally reprehensible, specifically demeaning and patronising, to treat these governments as if they are juvenile delinquents.
* *
*IMANI is a Think Tank of considerable local and international repute and significance. In 2009, The Foreign Policy Magazine named IMANI, the fifth most influential think tank in Africa. In 2010, IMANI was the only named African think tank ranked in the top 25 most innovative think tanks in the world. In 2011 IMANI was voted the 6th most effective Think Tank in Africa and among Top 20 most innovative think tanks globally In 2010 IMANI led the World Bank's Africa region's taskforce within to investigate what Africans needed from the World Bank. Kofi Bentil, Vice-President, IMANI and Founding President, Franklin Cudjoe are on standby for interviews. Please contact Shulamite Maison on 0302 40 99 03 to arrange interviews.***
LA NACION: “A collection to recover the Frigate”
by Carlos Pagni | LA NACION
October 27, 2012
The idea was born from the initiative of a Radical leader, ex-Senator José María García Arecha: to put together, through a popular collection, the 20 million dollars needed to repatriate the Frigate Libertad.
Joining around the proposal are representatives of various parties: Ernesto Sanz (UCR), Federico Pinedo (Pro), Alfonso Prat-Gay (Coalición Cívica), Liliana Negre de Alonso (PJ), Jorge Vanossi (UCR) and Julio Bárbaro (PJ).
The project came out of the emotions spurred from the image of the sailors that returned to the country leaving the teaching vessel behind on the cost of Ghana. “It’s not only treated as raising the money; we’re trying to show that national sentiment not only rises up for football,” say the organizers.
They also say that the bailout doesn’t mean an acknowledgement to the creditors that promoted the attachment: “If it is determined that they don’t have the right they demand, it will be donated to a children’s hospital.”
LA NACION: “How great: the Frigate is already resting in peace” (Opinion)
By Carlos M. Reymundo Roberts | LA NACION
October 27, 2012
How grateful I am to be in the country again. I like taking trips, but that isn’t the case: every time I go out I reach the conclusion that they’re all doing horribly and we are doing extraordinarily well.
I was in Mexico and in Brazil, where they are going through a dangerous political, economic and democratic regression. For example, in Mexico there is no presidential re-election and in Brazil only one. Worse yet, they are not debating a constitutional reform! That is to say, they are dealing with silly things instead of dedicating themselves to epic efforts, profound transformations, historical changes.
Also, with pain they are living through a scandalous situation: they can buy and sell without any restriction (please, don’t count Maximo Kirchner: we forgive him). I explained to them that it’s a terminal evil, but they didn’t understand me. The same with the media. With total irresponsibility, governments allow the press to say what they want. One day it’ll take off and it will already be too late: they will be living in the hell of freedom of expression.
Luckily, I didn’t have to arrive into the country to begin to hear the good news. Aerolíneas Argentinas is tuned to the spirit with a battery of very diverse publications: some are K, others extremely K. Also they give you some that are ultra-K. That is to say, high literature for all tastes. As you can imagine how much I missed the lady, I mitigated my acute homesickness by reading the magazines, the newspapers and watching the videos that Aerolineas kindly provides. It’s good that the foreign tourist comes into the country knowing that Cristina runs things here.
In Buenos Aires I could cover myself in everything written about the Frigate Libertad. My fear was that we would go down in history as the government from which an African country named after a soccer team had swipes the naval insignia. It’s one of those difficult embarrassments from which it’s hard to come back. Nothing of the sort. The lady didn’t release the frigate to them. She delivered it, with a flowery phrase and under a shower of applause. Great idea. One always must redress defeats in the clothes of heroic victories. Kirchnerism is not about losing. It’s about never admitting we’ve lost.
Victory all down the line was Timerman’s: he was able to shake hands with Ban Ki-Moon and even took a photo with him. Ban Ki-Moon shakes about 300 hands a day, even those who go see him he doesn’t even know their names, but it seems to me that in this case it was different. The photo says everything. Behind that expression of cold oriental diplomacy I believe I see adhesion to the case of the Frigate. In fact, he offered his good offices. I am sure that it weighed with Cristina for her to not fire the foreign minister for having come back from the UN with empty hands. They have to be understanding: the same Timerman who at Ezeiza violated, at the point of a pair of pliers, diplomatic suitcases from an American government plane that we sent now goes to the UN to quarrel over the Frigate. Nobody took him seriously.
What is important is that we brought the sailors home on a plane, with which we completed their naval instruction with air experience. Too bad that bartender on the Frigate was the first that said upon arrival that everything that happened made him ashamed. Ashamed? She should have been happy to have returned to his family, and proud to live in a country that redefines the meaning of old concepts: default is emancipation, judicial attachment is colonialism and losing the insignia ship is an act of dignity.
In the port of Tema, the sailors that spoke with our special correspondent, Elisabetta Piqué, were also very angry. They were offended by the famous phrase from Cristina: “They can keep the Frigate, but not our liberty.” To me, thinking well on it, it didn’t wow me. I would have proposed another: “We don’t renounce either our Frigate or our liberty.” They said to me it was unrealistic. Afterwards I suggested this, more relaxed but no less hopeful: “Ghana today, lose tomorrow.” They didn’t like that either.
The flight that repatriated the crew was from Air France because Aerolíneas Argentinas didn’t have any planes available. That is how Marianito Recalde explained it and I believe him. We know very well the rationality, professionalism and attention to detail with which Marianito and the boys from La Campora lose 2 million dollars a day at Aerolineas. As such, it seems very good to me that they don’t want to do strange things nor bring in more expense. Also, we took advantage. We took advantage that he’s called Recalde. Imagine he was called Macri. Imagine the information in Pagina 12: “The president of Aerolíneas Argentinas, Mauricio Macri, says that he didn’t have a single plane to go pick up the almost 300 Argentine sailors that have been stranded for 22 days in Ghana.”
Luckily, all of that is old news. The sailors came back. Their odyssey ended. Timerman returned. His new diplomatic failure ended. My trip to sad countries ended and they still weren’t able to release themselves from the dollar, nor the media, nor the cap that impedes their presidents from eternal re-election.
That’s to say, we’re all here.
We’re only missing the Frigate, which rests in peace in a port called Dignity.
CLARIN: “The Frigate could cost US$30 million, but its symbolic value is incalculable”
At the request of Clarin, appraisers specializing in cruise ships put a price on the ship detained in Ghana.
by Santiago Fioriti
October 27, 2012
A good photo of Paul McCartney, with his signature, could be sold in Argentina for US$30. Now, if the signature was certified by a notary, a Beatles fanatic could pay more than US$2,000. The auction of a car used by Peron would leave auctioneers breathless: it would cost, safely, more than a Ferrari that just rolled out of the factory. But in none of those references would one have to think of estimating the historical value of the Frigate Libertad. The comparison that appraisers make would have to harken back to the Sunflowers of Van Gogh, in 1987, when it was thought they could get US$10 million and got four times more.
Today, according to auctioneers specializing in cruise ships, the insignia ship of the Navy, with any other name, without history and built brand new, would have a market value of US$30 million.
That means its symbolic value couldn’t be estimated.
It’s incalculable.
“If they were sent to build the Frigate again, if it again took ten years to do it totally in the craft form – because that is the key to the cost – if it were reassembled progressively from the first plank of steel up to the entire equipped interior and its 15 sailing masts, and if we think in lot letting it be a nautical sailing ship, despite having two 1,200 horsepower engines with each of them combined in one axis… finally, this little monster couldn’t cost less than US$30 million. It would take no less than six years to build,” says Carlos Rocca, from the team of appraisers at Banco Ciudad, that made an estimate at the request of Clarin.
In the task of that appraisal, Rocca took into account a determining factor: between 2004 and 2007, when the Frigate replaced the covering and other elements, investing more than 10 million dollars.
Juan Carlos Pancolini, chief technician of movable assets, adds: “Its value of pertinence is much greater, it had nothing to do with the technical or craftwork value. It is worth what someone is willing to pay and from there that is what it costs until the next auction.”
In the cast of appraisers from Ciudad, accustomed to appraising planes and cruise ships – yesterday, for example, they appraised a ship that could go to auction for US$3 million – they use a metaphor to differentiate the real value from the symbolic value: “If one day we Argentines want to build a ship similar to the Frigate we’d have to put almost one dollar per capita. But if we want to recover the Frigate, how much money will we have to put in?”
In that case, the vulture funds that got the Superior Court of Ghana to order the detention of the ship would be rubbing their hands together. The amount could be multiplied by ten or more, say the appraisers: “The Frigate has historic value, the value of national insignia and it’s more than a sailing ship or a pleasure cruise ship: it’s a teaching vessel that won all the competitions, which has visited hundreds of countries and in which the cadets have done their last practical work for the last forty years.”
CLARIN: “At the Defense ministry now they don’t want to talk about timetables”
They say it will take time to recover the Frigate. Hearing without a date.
by Guido Braslavsky
October 27, 2012
The government doesn’t want to even hear about timetables over the recovery of the Frigate Libertad. Defense Minister Arturo Puricelli promised on Thursday in a ceremony with the sailors that were repatriated that in December there would be a solution to the problem. But he had to come out to take it back in a statement from his team, that said that he’d not specified any dates.
In the midst of worry yesterday in the government over the ruling in an appeals court in New York that was favorable to a complaint against Argentina from the same vulture fund that managed to detain the Frigate, President Cristina Kirchner traveled in the afternoon to Rio Gallegos. Today is the second anniversary of the death of Nestor Kirchner.
On the timetable in which the teaching vessel could return, according to official sources avoiding “false expectations” was being tried because there is no certainty. In the 28 attachments that the government has admitted to suffering since 2003 on properties and assets of State, bank accounts of diplomatic headquarters, assets and reserves, the times for getting a lifting of them was around two months in the best of cases and almost a year in others.
The government is waiting for confirmation on the date of the next hearing with Judge Richard Adjei-Frimpong, which is estimated that it will be held in the first days of November. While there is not too much optimism around getting a favorable resolution with Ghanaian justice, for that Foreign Minister Hector Timerman said that he is studying going to international court.
Yesterday the Frigate continued in the spot where it docked on October 2 arriving into the Ghanaian port of Tema, not removed as the port authorities demanded for being an “obstacle” to commercial activity.
Keine Kommentare:
Kommentar veröffentlichen