Hedge funds targeting Argentina miss the target: BIS deposits free from embargoes
Switzerland’s government rejected a law suit filed by US hedge funds asking to set an embargo on Argentina's assets deposited in Switzerland based Bank for International Settlements as they claim the payment of a 1 billion dollars debt.
The Swiss government’s Federal Council explained in a communiqué that Swiss authorities have nothing to do with the management of assets deposited in the BIS by foreign central banks.
The law suit is part of the numerous ones that Argentina faces on regard the debt default conducted in 2001, one of biggest sovereign debt default in recent history, as the two US-based funds had bought Argentina’s coupon-bonds at very low prices in order to cash in on the difference in the short term.
As numerous international funds were claiming for money, in 2004 the government of late President Néstor Kirchner and Economy Minister Roberto Lavagna decided that the Central Bank should transfer more than 99% of its foreign currency reserves which were about 53 billion dollars to the BIS in Basel.
As the usual average for nations is to deposit between 10 and 15% of their reserves in the BIS, Argentina decided to transfer almost all of them as the BIS offers assets immunity so that no third party can set embargoes on them.
Argentina between 2005 and 2010 restructured 94% of its defaulted debt with 6% pending held mostly by what Argentina describes as ‘vulture funds’ which are intent in collecting the full face value of the sovereign bonds plus interest. For this hey have launched a global campaign with the purpose of embargoing any Argentine assets they can catch following on rulings from New York and London courts.
This is the case of the Argentine navy frigate and training vessel ARA Libertad currently retained by the Ghana judicial authorities on an injunction from a New York court. The mast vessel has been retained since October 2 and has triggered an internal scuffle between the Foreign and Defence ministries which have seen the Navy chief and top aides’ heads roll.
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