Lead Articles:
Ambito Financiero: “Griesa threatens with another trial: Repsol vs. Chevron”
La Nacion: “Debt: the government is not expecting U.S. support”
Clarin: “Cristina anticipates that Moreno won’t stay on”
Ambito Financiero: “A serious error by the judge or are the reserves at risk?”
El Cronista: “What purpose does the third swap reopening serve?”
OTHER NEWS ITEMS:
· La Nacion reports that Argentine sovereign bonds closed down after the “alter ego” case was left open by Judge Thomas Griesa.
· El Cronista reports that the BCRA reserves are close to perforating the US$35 billion mark.
· The Argentine foreign ministry announced that Hector Timerman will meet his Iranian counterpart tomorrow in New York to resume talks on implementing the AMIA accord. But in an embarrassing turn, Timerman announced with some fanfare to the Argentine press yesterday that Spain had agreed to unify its sovereignty claims against the U.K. over Gibraltar with Argentina’s over the Falkland Islands; hours later, Spanish government sources denied this claim to the Spanish media, saying Timerman’s take on the meeting with Spain’s foreign minister, Jose Maria Garcia-Margallo, in New York was completely off, and that Britain is “a partner and a friend” of Spain. Garcia-Margallo is expected to hold a press conference today for the Spanish media, and the issue will be addressed.
· Speaking at a seminar in Mar del Plata organize by Banco Industrial, economist Ricardo Arriazu said that a joint study between Harvard and the University of Buenos Aires found that there is an accumulated gap of 15% between the INDEC’s GDP figures for Argentina and real growth rates since 2008, leading to unnecessarily higher GDP coupon payments and contributing to a draining of the reserves.
· AF reports that local survey by Ernst & Young in Argentina found that 52% of Argentine companies plan on taking on more debt in six months to finance their 2014 investment plans, which will mostly be directed toward increasing existing production lines and new projects related to current operations.
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Ambito Financiero
Griesa threatens with another trial: Repsol vs. Chevron
Could harm the agreement in Argentina over Vaca Muerta. Elliott as sponsor.
Friday, September 27, 2013
By Carlos Burgueno
Judge Thomas Griesa is about to incorporate a new lawsuit against the Argentina, this time outside of the case of the vulture funds. The judge endorsed a presentation by Repsol against Chevron, and asked for more information against the U.S. company, which is accused of being in cahoots with the Argentine government since before the renationalization of Yacimientos Petrolíferos Fiscales (YPF). According to the filing by Repsol, the oil company that has recently partnered with YPF to begin to exploit the Vaca Muerta deposit in Neuquen planned this action since before the government of Cristina Kirchner publicly announced the exit of the Spanish company. In this posture, Argentina went ahead "emboldened" with the renationalization because it had the "comfort" of knowing that there was an agreement with the American company in place.
Specifically, the legal claim that Repsol filed before Griesa’s court is against Chevron and is based on so-called "illegal interference" or "illegal intervention", to ensure that long before the announcement of the re-nationalization of YPF in April 2012, the American oil company had already closed the agreement with the Argentine government; with that as a minimum, "it collaborated to have the Spanish company ejected as the majority shareholder.” According to legal advisers close to the Argentine government who work in New York, proving this "legal interference" would be "really difficult and complicated" and would depend more on the good will of the judge to open the case and then to rule on it. The sources even say that in normal situations, a case like this, to have space in a court like Griesa’s, would require compelling evidence in advance, which Repsol has not provided.
It is here where the suspicions from the Argentine government arise. It is said assuredly that it was Paul Singer’s vulture fund, NML Elliot, which paved the way (at least with information) for Repsol to go to Griesa’s court where the case can move forward. Elliot is the vulture fund that (along with other creditors) won the first two rounds of the lawsuit in New York, which starting tomorrow will begin to be analyzed by the Supreme Court to decide if it takes or rejects the case. It is also the Fund that managed to attach the Frigate Libterad for months in Ghana’s in the port of Tema.
The other suspicion that was born in Buenos Aires is that the judge is allowing the expansion of Repsol’s petition from the animosity he has had against the Argentina since the government of Cristina Kirchner warned that it would not accept any of his rulings if these were adverse.
If the case enabled yesterday succeeds, and if Chevron gets a negative decision out of Griesa, its assets in the United States could be attached as part of compensation to Repsol in its claim against Argentina from the renationalization. Griesa could also apply a multimillion-dollar fine. Anyway, Argentina’s legal advisers claim that "legal interference" is more than difficult to prove; and if Griesa allows the case and sides with Repsol, there are just as many appeals available where the framework with the country will more reasonable.
The real problem with the question is that a case opened in this district court of New York would be a very bad image problem for YPF at a time when it must find more partners like Chevron to develop Vaca Muerta.
Griesa rejected a second motion from Repsol, which aimed at denouncing the agreement between YPF and Chevron as "null" for about US$ 1.2 billion, on the grounds that the company had been "illegally" confiscated. He also dismissed one of the arguments on which Chevron based its defense, where it argued that the expropriation of YPF was a decision of a sovereign state and therefore could only be edjudicated in the country where it had happened.
La Nacion
Debt: the government is not expecting U.S. support
Timerman admitted that the case will reach the Supreme Court without that backing
Friday, September 27, 2013
NEW YORK (From our correspondent).- A few days from the U.S. Supreme Court’s consideration on if it will accept the complaint of the so-called “vulture funs” or not, the Argentine government formally admitted that it is not expecting anything from its American counterparts on the matter, unless the court expressly asks for its opinion.
The scenario, which leaves Argentina without crucial support at this phase, is unfolding in the way that attorneys who follow the case believed it would. But, until now, it had not been officially acknowledged by the government.
Yesterday, it was Foreign Minister Héctor Timerman who, in a dialogue with journalists, admitted that there is no judicial instance left for the United States to support Argentina as, for example, France has done.
He admitted, however, that that possibility comes when the judges expressly ask the Obama administration to give an opinion in this regard. "If that happens, I am sure that it will support Argentina, as it did in previous cases," the diplomat said.
Argentina counted on the favorable opinion of the United States when the negative ruling of Judge Thomas Griesa was sent for review in the Court of Appeals of New York. But, so far, it has declined to repeat its support.
"The support of the United States would have been a decisive element" for the judges to show themselves inclined to consider the case, argued the lawyers following the case, in a consensus.
Argentina formally asked the Supreme Court to accept a review of the case. The court will begin to look at the subject starting on Monday and it is supposed that it will give its response within a week. The matching impression is that it will give a negative response in the first instance, which will not be definitive, waiting for the rest of the process, which is still in the Court of Appeals.
Clarin
Cristina anticipates that Moreno won’t stay on
Friday, September 27, 2013
by Marcelo Bonelli
Hernan Lorenzinos mission to the United States suffered a heavy stumble and, thus, the government failed in its attempt to open a minimal channel of dialogue with Washington.
The U.S. Treasury again communicated that it will not support Argnetina in the New York courts.
The White House conditioned the sending of a supportive brief to the Supreme Court on the country first paying off pending debts in the ICSID, for US$460 million.
Also, the World Bank sent another negative signal: it rejected the feelers sent by Lorenzino, who went to seek a credit for cash to pay off those five lost cases in the international tribunal.
The hard attitude obeys a conviction that exists in Washington: that Cristina Kirchner wants to buy time but doesn’t want to settle the debts, and less even, to solve the problems existing in the macro-economy. Also, because they argue that no member of the economic team is a reliable interlocutor for the White House.
There is talk of replacing Ambassador Cecilia Naón.
That is the conclusion – as Clarin has reported – of the report that a secret envoy from Washington to Buenos Aires sent. In May, William Lindquist, the delegate from the American Treasury, wrote a negative memo and since then the White House has toughened its position with Argentina.
The mission headed by Lorenzino aimed at untying the situation, but the minister smashed against an iceberg in Washington.
Adrián Cosentino –his second in command– sought to soften the failure, putting out positive rumors about the trip. But that narrative lasted little time and ended up being ridiculous. The operation had the backing of the President, after the loneliness and absence of solidarity she felt at the G-20 meeting.
Her proposals against the U.S. didn’t get the backing of either Brazil nor Mexico. Nor were her complaints listened to by Barack Obama, who dismissed her request for a meeting.
Lorenzino only got a mouthful of oxygen from the IMF: its board will again postpone sanctioning the country, waiting for the new index, while it will not close the audit over the manipulation of statitics. But he came back from the U.S. with two other political monkeys on his back: the U.S. SEC will not approve the “18-K”, vital for reopening the debt swap with minimal international cover. The Casa Rosada is condemned to make the reopening in Buenos Aires, because Argentina’s economic policy will not pass muster at the SEC.
The minister returned with the news of the ruling of Judge Thomas Griesa that declared the reserves of the Central Bank to be attachable.
This measure was not correctly pondered, although it means a severe setback for the country. So far, the Manhattan courts have respected the funds of the Central Bank, but the terrible judicial strategy of the government ended up weakening that dam. The result is also due to the domestic political use that Cristina has made of the vulture funds issue, far from seeking solutions.
Yesterday, the Association of Banks was fearing the worst: that Griesa’s decision open the door to attachment orders on Argentine company stocks traded on Wall Street in which the ANSeS - an agency of the state - has stakes.
The issue opened a strong internal dispute in the economic cabinet and Lorenzino blamed Mercedes Marcó del Pont. The BCRA has its own lawyers, and they harvested this unusual failure, when during the efforts of Alfonso Prat Gay and Martin Redrado that possibility was blocked off.
Among the leaders of the Argentina Industrial Union, the following information is circulating: Cristina plans to reshuffle the economic team after October. Daniel Scioli and other governors have the same information. In the UIA, they claim that the President was very explicit in a meeting with Peronist mayors, led by Fernando Espinoza. The Mayor of La Matanza was the spokesman who communicated to her the problems arising from inflation and the political cost provoked by the inefficient management by Guillermo Moreno.
Cristina surprised everyone: "Moreno will not stay, but I'm looking for the manner and the time of his departure." And she concluded: "I don't want to give a victory to Clarin and hand that head over on a platter."
The governors want a reliable interlocutor in the Palacio de Hcienda and someone who tries to gradually correct the current distortions. Axel Kiciloff is not in Cristina’s plans. The Vice Minister has not been able to impose his candidates on the Board of the Central Bank so far.
Nor will Marcó del Pont and Hernán Lorenzino remain. Moreno could go to Banco Nacion, and Juan Fábrega to the Central Bank.
But the issue is not one of names, but of policy. Everyone is surprised by the fabulous financial business that the President is endorsing, and it will cost US$4 billion from the increasingly squalid reserves of the BCRA.
The INDEC’s sketchy drawing of high growth this year will make bondholders with the GDP coupon collect a fictitious super-yield in 2014.
The ANSeS is not benefiting because it has few public warrants tied to GDP. Among local banks, they insist that the measure is generating profits for investment funds abroad. But in private the bankers admit to a sensitive issue: they argue that many Kirchnerist economic groups bought those bonds. They also confess the following: they did so because they knew that Moreno would alter the data and overestimate economic growth, enabling the payment of the super-yield next year.
Ambito Financiero
A serious error by the judge or are the reserves at risk?
Friday, September 27, 2013
by: Eugenio A. Bruno (*)
The federal judge in the Southern District of New York, Thomas Griesa, recently ordered that the process of attachment petitions be left open against the reserves of the Central Bank of the Argentine Republic, initiated in 2005 by the litigant funds NML and others. The Argentine government will surely appeal this decision before the Court of Appeals, above Griesa, in order to try to close an open front that potentially can complicate the management of the reserves and in the worst case scenario make them subject to attachment.
The case of the reserves of central banks is not one of easy interpretation and legal decision, since United States legislation is unclear and incomplete and the existing jurisprudence is not absolutely conclusive. Additionally, the suppositions to determine whether or not the reserves are attachable may depend on facts or specific actions of each case. For example, there are two key concepts: one, it is reserves that are “used by its own account” by a central bank. And the other is the term "alter ego" or "independence" of the monetary authority. In the first case, that term is associated with carrying out activities related to the exercise of "monetary policy." But these activities are reviewed one by one by the courts when cases involving requests for attachment of reserves and the conclusion is that there is no pre-set standard on what is and what is not "monetary policy" but which depends on every action and each case.
Moreover, the term "alter ego" is related to when an action cannot be considered "monetary policy", in the case that a central bank is 'independent' of the Executive branch, the banking authority would not respond for debts of the national government. But this concept of "alter ego" is also subject to being proven in each case. Therefore, there are legal gaps that are filled by jurisprudence, but there are hardly two equal cases anywhere and therefore the actions of "monetary policy" are not easily “jurisprudential” along standard terms.
With regard to the present case, Griesa ordered in 2010 that the BCRA was what is called an "alter ego" of the Executive Branch and therefore its assets, basically reserves, were attachable as they had also been used for commercial purposes (the payment of debts), something very questionable in my opinion. In virtue of the fact that in those years, the plaintiffs had gotten attachments on reserves in the amount of US$105 million, the lawsuit aimed to determine if it was appropriate to use them, and others that are transferred via New York, to pay the plaintiff funds.
After Griesa’s decision of 2010, the BCRA appealed before the Court of Appeals for the Second Circuit of New York (the same court considering the complaint of the holdouts, but in another courtroom), which ruled in favor of Argentina, without referring to the theory used by Griesa but basing its decision on the finding that the reserves were used by the BCRA’s “own account”, which means for purposes of monetary policy by the central bank, and therefore they were not attachable under any of the articles of the law of sovereign foreign immunity of the United States, which states that such reserves are not attachable, regardless of the degree of dependence or independence that the monetary authority might have. Therefore, it is always the case that “reserves used for purposes of central banking, including some actions of a commercial nature", cannot be attached without consideration over whether the Central Bank is independent or not, the appeals court said in that ruling. That ruling was on July 5th and the attached reserves were released after it.
After this ruling, the litigating fund appealed to the U.S. Supreme Court, which decided not to take the case (without commenting on this stance, which is common) and therefore the decision of the appeals court was final. The rejection by the Court was in August 2012.
So then, why is Griesa again insisting on this case now? Wasn’t this a decided matter? Is it due to the anti-Argentina legal position that one can perceive in the decisions of the judge? Has he committed a "serious error"? Or does his decision have some merit and therefore the reserves are again at risk? And in the latter case, since there are no attached reserves, the New York market is always used by central banks in some way or another and therefore the moving, depositing and custody of international reserves without going through such jurisdiction becomes very difficult to manage and becomes risky since at any time there may be an attachment. On the other hand, this case does relate to the anti-Argentina position in the courts of the United States for over a year, and facing a possible final result from the Supreme Court that will be unfavorable for the country, which could be followed by a contempt of court, which could also complicate the reserves outside of New York (Bank of Basel) since being in a situation of possible confrontation with the U.S. courts could affect the relationship with other developed countries despite the fact that the deposits in the Bank of Basel are also clearly not attachable. But the situations in a scenario of possible contempt of court cannot be measured since it is unexplored territory. There is much still left (less than before) and this decision by Griesa and the Appeals court can still be reversed via the Supreme Court.
Griesa knows that if reserves are used by a Central Bank for its own account, they are immune to attachments regardless of its degree of independence. And that the payment of debts of Argentina by the BCRA has been considered an activity of monetary policy. In this sense the theory of alter ego doesn’t matter. Provided that it is for monetary policy, reserves are not attached. But Griesa may have doubts about such use in some cases. For example, is the use of reserves to pay national government debt is an action of "monetary policy" and therefore not attachable, or is it a "commercial action" typical of a private debtor and therefore attachable? Perhaps Griesa is after these aspects and therefore in the second case the discussion of whether or not the BCRA is alter ego will enter into the fray. The difference is that at that time, the IMF was paid (a private entity does not have debts with that body) and now the bonds will be paid (a company issues and pays that kind of debt).
It is a difficult case which, in principle, the attempt to attach reserves should not succeed, but this is not even a closed case. It must now await the decision of the Court of Appeals, where Argentina already won two years ago. It should win again in terms of legal foundations, but the situation is not the best in United States courts.
(*) Partner at Garrido Firm
El Cronista
What purpose does the third swap reopening serve?
Friday, September 27, 2013
by Carlos G. Gerscovich, J.D. (UBA) and partner at Aguirre Saravia & Gebhardt law firm
Apart from being forbidden by law, the reopening of the swap was able to overcome this "barrier" because another law exempted it. That is, the prohibition was lifted. It is clear that this is being done for the third time. The first in 2005, the second in 2010 and the last in 2013. All of this is not seen with good eyes in more developed countries, which have much more adherence to the rules.
So we are still equal, subverting what was a rule that prevented such a reopening. It doesn’t matter, nor does it seem to affect our government or its legislators at all.
But: what purpose does the reopening serve? Nothing less than to demonstrate that we are - so-called - "serial payers". However, we still owe on a battery of decisions at the ICSID, we have yet to pay the Paris Club and there's no continuing with this outstanding external debt, because there is more, and we stop here.
They have said that we "reduced the debt" (nice little word) abroad.
But what about the domestic debt? The dollars to pay abroad come out of the BCRA, and also to pay that internal debt. Previous and recent statistics from that institution show that it is sinking more and more.
So let’s go back, within this context, to the initial question: what is gained by this new swap? Who does it benefit, if it benefits anyone at all?
To answer, let’s take a little look the history of this issue. Argentina took more than three years to make the first swap proposal, and after several long years the government has managed to reopen it for the third time for those who had not entered into the previous ones, while the "Lock" Law said that it could not be done. But let’s try to follow the official reasoning.
What passed Congress did not serve the holdouts, including the "vulture funds", because after the years that they’ve been struggling in court, with the consequential costs, they have already obtained what they wanted. That is, the payment of 100% that was not paid to cthe reditors who accepted the swap earlier. And they obtained it in the Court of New York, whose intervention our country accepted.
Is it then serving to send a good signal - of willingness to pay - to the court and the U.S. government?
It doesn’t serve that purpose either, for several reasons. First, re-read the beginning of this article, where the the opposite of such intention is found. Second: one must add to this the provocative attitude of the national leaders who "defied" Judge Griesa, telling him in advance that they would not honor his rulings which meant paying beyond what we think "pari passu" means, variously beyond what they understood (US$1.330 billion in cash). Third: the Budget Act allows the government use these reserves to pay the external debt, finance energy and also cover the bulging deficit of Aerolineas Argentinas. Will it cover all of that together, or will it continue to issue currency and generate more inflation?
Against this backdrop, it is worrisome what an adverse outcome in the U.S. Supreme Court could trigger: since that amount precipitates others that could lead to a much higher sum. Jow we are going to pay them, and pay for the energy that we import at the same time? Will the the increasingly dwindling reserves of the Central Bank cover it all? Or will we enter into default?
They are disturbing questions, so far unanswered, which in the absence of solutions will end up being a future burden that will weigh upon the country.
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