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Samstag, 22. Februar 2014

Lead Articles: Clarin: “Vultures: a “friendly” fund also appeals before the U.S. Court” Telam: “Bondholders that entered the swap appeal before the U.S. Supreme Court” Infobae: “Kicillof in private: admits problems with inflation and the dollar, but speaks of a stabilization plan” Clarin: “In the U.S., they advise against military assistance to Argentina”

Vultures: a “friendly” fund also appeals before the U.S. Court
Friday, February 21, 2014
by Ana Baron
In a gesture of support for Argentina, Gramercy, a "friendly" vulture fund, filed its own appeal Thursday to the U.S. Supreme Court requesting it reverse the ruling that prevents the government from paying bondholders who entered the swap if it doesn’t pay the holdouts in the conflict.
The so-called Exchange Bondholders Group run by Gramercy argued that the decision not only violates the Foreign Sovereign Immunities Act but also violates the Fifth Amendment to the U.S. Constitution, an argument that lawyers who filed the Argentine appeal didn’t use. The Fifth Amendment protects private property. Gramercy believes that by preventing Argentina from paying the funds that entered the swap if it does not pay the holdouts, the ruling in question violates this amendment.
All the analysts consulted by Clarín say that the likelihood that the Court listening to this appeal is almost nil. They claim that if it chooses to listen to anyone, it will be Argentina.
In any case, Gramercy’s appeal adds arguments in support of Argentina while it continues insisting on an out-of-court proposal. Indeed, Gramercy proposed to bondholders who entered the swap to cede to the vulture funds, led by NML of Paul Singer, part of their interest collected periodically. To achieve that, the planned solution has added that the government would not need to change its hard line against the vultures that it has maintained until now.
Paul Singer, however, has already rejected this proposal. He said that he is willing to negotiate, but only with Argentina.
What can happen from here forward? At the judicial level, all those who want to submit amicus curiae briefs, i.e. a letter on behalf of the Argentine appeal, have 30 days to do so. The big question is if the U.S. will do so or if it will wait for the Court to ask for its opinion.
The vulture funds also have 30 days to respond to Argentina’s appeal. However, they are likely to request an extension of 30 days to read the briefs submitted on behalf of Argentina before filing their response.  That means that the Court would then be in a condition to decide what to do in May or June. But before it makes that decision, if the U.S. has not filed an amicus curiae, the Court could decide to ask for its opinion, and if so, the U.S. has up to 6 months to file it. That would mean the entire process would take until 2015.
Bondholders that entered the swap appeal before the U.S. Supreme Court
Friday, February 21, 2014
The group of bondholders that entered the restructuring, called the  Exchange Bondholder Group (EBG)  -led by  Gramercy Management- joined the petition made by Argentina on Tuesday before the U.S. Supreme Court.  
The petition for 'review' has the objective of "remedying the enormous damage that imminently threatens third parties as a result of the judicial orders,” explained the bondholders.
These rulings, as detailed in the document that Telam had access to, "pose fundamental issues of national importance in connection with the correct scope of the equitable power of the federal judiciary, and constitutionally, by endangering the interests of private ownership of some citizens, for the private benefit of other.”
The decisions referred to in the petition are those issued by Judge Thomas Griesa first, and then the Court of Appeals for the Second Circuit, which established a method of payment to the holdouts for an amount close to US$ 1.330 billion.
The payment formula includes the use of funds allocated to pay the bondholders who had decided to enter the swaps in 2005 and 2010, as represented by the Exchange Bondholders Group.
Under this scenario, the Group argued that the petition - filed on Tuesday, the same day that Argentina filed before the Supreme Court in Washington - "raises an issue of national importance" under certain clauses of the Fifth Amendment of the U.S. Constitution.
In this regard, the members of the group wrote in the brief of 32 pages and 65 appendices that they "have constitutional rights that protect them from government actions that take control of their assets for the benefit of other private citizens.”
Thus, "these violations of the constitutional rights of non-parties underlines the reasons to grant the request" to the Argentine Republic, the representatives of the EBG wrote through a petition for a special recourse known as "writ of certiorari".
The bondholders claimed in turn that "the threat of severe losses to third parties is part of the attempt by the orders (of the appellate court) to force Argentina to pay" bondholders who didn’t enter the 2005 and 2010 swaps "in violation of the Law of Sovereign Immunity of States".
In the section called "the orders ignore an indisputable injury" to bondholders, they held that "it is not Argentina but the District Court which is taking the concerned third parties hostage."
"There was no threat of injury to the EBG until the District Court issued unprecedented orders aimed explicitly at their property" with respect to all the country’s debt, which are being used "deliberately as a lever against Argentina" by attempting to circumvent the law of sovereign immunity of States (FISA).
In this case, the brief concluded, "it is the courts, not the defendant, who have threatened the third party Exchange Bondholders and their assets.”
Putting in writing their "support" to the petition for granting of extraordinary appeal by Argentina on Tuesday, the Group said that granting a hearing to the case before the Supreme Court will serve "another highly pragmatic purpose.”
The rulings issued by lower courts in Manhattan, "if they are not modified, threaten the stability of billions of dollars in existing sovereign debt restructurings,” adding that to date Argentina "has honored fully its obligations.”
There exists, also, "an overwhelming political and academic consensus that voluntary restructurings of sovereign debt of this kind are fundamental to the stability of the global economy," they concluded, referring to the amicus curiae (friends of the Court brief) that the government of France filed long ago.
Kicillof in private: admits problems with inflation and the dollar, but speaks of a stabilization plan
The minister is optimistic.  He aspires to reaching June without new problems in the exchange rate, which will remain at 8 pesos, and in prices.  The Paris Club, holdouts and public spending, in a snapshot of the officials ideas.
Friday, February 21, 2014
by: Leandro Gabin
The government is taking a turn that is unexpected for some.  The economic issues and the financial agenda have come back perhaps like never before.  The team led by Axel Kicillof is showing its cards to those who want to listen in the midst of certain tranquility after the soaring of the dollar.  The changes from the minister, towards pragmatism despite the rhetoric, are notable: he went from applauding and boasting of the expropriation of Repsol’s shares in YPF to leading the negotiations to close a deal in an imminent manner.
Not only that, Kicillof and his Finance Secretary, Pablo López, are putting out a clear line for investors and bankers in private meetings: they will do what is necessary to stabilize the Economy.  The change in discourse from the era of Hernan Lorenzino is notable in the treatment of investors and bankers.  Now officials are not afraid to admit, as they’ve been openly doing in meetings with businessmen, that inflation is a problem and the fall in reserves is worrisome.
Moreover, in those same meetings they say that they will lower the rate of spending to some points below revenue.  For that, the salary cap of 25% will be real, more than anything in state salaries.  The cutting of subsidies will be, they say, gradual and punctual.  Underlying measures won’t delay.  If, obviously, in a year of economic slowdown.  
The fall in reserves clearly is at the top of the list that Kicillof has.  What Economy has let be known is that “the devaluation helped but they can also withstand an exchange rate delay” by the inflationary effect.  Until when? Kicillof, Cabinet Chief Jorge Capitanich, and BCRA President Juan Carlos Fábrega maintain the posture that the dollar will stay “around” 8 pesos will stay until at least June.  
The economic team and the Central Bank’s technical staff (which now make different decisions than from the era of Mercedes Marcó del Pont) know they have to provide certainty for exporters to sell off in April/May their produce from the huge harvest.  They have to liquidated between US$27 billion and US$30 billion over the whole year.
They trust, in official corridors, that by keeping the dollar at these levels, dollars will come in. Even more so with the measures that the Central Bank has "rewarded them" a future dollar at low prices. The grain producers sell their dollars, the dollar futures market covers them and those pesos are placed in more competitive deposit rates.
The other effect that helps this scheme is that the same fall off in activity will hit imports. Less imports, less demand for dollars. It ends the perverse but effective scheme producing a scarcity of foreign currency.
What will happen with interest rates? What officials let on is that the rise in rates that the Central Bank, at levels similar to past inflation, have come to an end (for now). Another upward movement rates will come, they say, if inflation rises. They will closely follow this movement, if it is what it is.  If, as Economy believes, they can stop inflation with salary increases at 25% and low public spending, interest rates should be maintained at the current range of 30%.
Kicillof and Lopez in their meetings admitted that among the external fronts, the most advanced is the compensation to Repsol. They will be paid US$5 billion with bonds. With respect to the Paris Club, a liability adding up to nearly US$10 billion, and about which there has been a lot of rumors lately,  Economy admitted that a potential deal "is going to take a while now." They are at the stage of analyzing proposals and polishing up what each can offer. But it is indeed confirmed that the payment will be in bonds, and not in cash. Something crucial for the reserves and the lack of dollars.
Finally, the snapshot of the lawsuit with the holdouts shows what the Ministry has been up to. Between now and the next few months they will continue negotiating with banks to reach a plan to settle the issue once and for all. The limitation on Economy is the famous Rights Upon Future Offers (RUFO) clause which prohibits granting a better offer to the holdouts without including the bondholders who accepted the swaps. This clause expires in December 2014. From that moment on, the government can repay the funds involved in the dispute and close the case. Probably the negotiations are aimed at a preliminary approach this year and closing a deal on payment methods only in 2015.
For this reason, it will be decided in the coming months which offer makes the most sense to Kicillof. It will be one that, in addition to settling the issue of the holdouts, brings fresh money into the country. But that, at this point, is futurism. What the government officials let on now is there will be no news until June or July on the dollar. They are committed to keeping the peace on the exchange rate and that the soybean dollars come in.  What comes later, no one knows.  What isn’t a small detail is that World Cup Month is coming. The betting is that Messi’s goals and a good round for the national team in Brazil will slow the conflicts in a difficult year. Everything remains to be seen.
In the U.S., they advise against military assistance to Argentina
Friday, February 21, 2014
A U.S. Congressman wrote a letter to the Secretary of Defense in which with harsh criticism for Argentina, he asked that there not be a sale of Hummer vehicles to our country, with which Cesar Milani aims to modernize the equipment of the Army.
"I am writing to you to express my concern and my opposition to providing assistance to Argentina at this time," said Republican Congressman John Mica, in a letter to which Clarín had access.
"The Argentine Government has a recent and complex history of undermining the interests of the United States in the hemisphere,” argues Mica. "In addition, Argentina has proven to be unreliable in its relations with the U.S. military," added the Congressman from Florida, recalling that as an example of the "tense relationship,” Barack Obama has avoided a stopover in Argentina whenever visiting Latin America.
"On the international front, Argentina has not been a good faith player on the world stage,” Mica went on, recalling that our country remains on the "gray list" for the Financial Action Task Force (FATF) for its shortcomings in the fight against money laundering and the financing of terrorism.
"In addition, it is important to note that Argentina is the only member of the G-20 which has failed to comply with the reviews of the International Monetary Fund.  As a result, the United States continues to veto loans from  multilateral credit agencies to Argentina, nor does it benefit from our generalized system of preferences (for imports),” he adds.
"Congress plays an important role in demanding responsibility from the Argentina and calls on you to halt any support to that country, including the sale of Hummer vehicles. Argentina’s misconduct undermines the interests of our Nation in the region and threatens the security of the hemisphere,” Mica concluded.
As he told Clarin, Milani had agreed to the purchase of 35 Hummer vehicles from the United States as part of his plan for retrofitting equipment and improvement of salaries in the Army. Almost a campaign to align the Army behind him and the Kirchner project, in a renewed politicization of the armed forces that has been unseen for decades.

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