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Sonntag, 2. März 2014

Lead Articles: Telam: “Vulture funds: Argentina’s attorney warns of the danger of the decisions of the U.S. judiciary” Clarin: “The government defends its position in the U.S. against the vulture funds” Clarin: “Return to orthodoxy: now they are flirting with the IMF” Ambito Financiero: “Blejer: “Good for both parties””

Vulture funds: Argentina’s attorney warns of the danger of the decisions of the U.S. judiciary
Friday, February 28, 2014
Paul Clement, who acts as the country’s legal counsel in the case against the vulture funds, warned that if the Supreme Court upholds the rulings of lower courts in favor of the holders of debt in default, it will put in danger the systems of voluntary debt restructurings, by the “power” that this will give to the holdouts.
"If the current interpretation of the lower courts about “pari passu” is upheld, it will radically change the balance of power in favor of the holdouts to such an extent that it would put in danger the voluntary restructurings of sovereign debt,” said the former Solicitor General of the United States during the administration of George W. Bush, during a meeting organized by the Argentine embassy in Washington.  
Clement also argued that “the courts’ evasion of foreign sovereign immunity is an issue of interest for all sovereign (states).”  
The panel of the meeting, which brought together more than 100 experts from the White House, the Congress, the International Monetary Fund, the World Bank, and the Inter-American Development Bank, among other experts, was also made up by Ambassador Cecilia Nahon and the Argentine representative before the IMF, Sergio Chodos.
The meeting was convened under the title: “Sovereign debt restructuring: Why (the case) NML v. Argentina is important to all.”
The expert attorney in cases before the U.S. Supreme Court centered his speech on the key arguments of the extraordinary recourse (writ of certiorari) presented by Argentina before the highest court on February 18, in which he asked for review of the “erroneous” decisions taken by lower courts in New York.
"If the current interpretation about pari passu (equal treatment clause) from the lower courts is upheld, it will radically change the balance of power in favor of the holdouts to such an extent that will put in danger the voluntary restructurings of sovereign debt,” he warned before more than 100 experts present at the meeting.
Rulings issued first by Judge Thomas Griesa and upheld by the Court of Appeals for the Second Circuit of New York, hinder Argentina from making payments on its debt unless it pays in full (an amount of approximately US$1.330 billion) creditors who opted not to enter in the restructuring of sovereign debt.
The method of payment set up and supported by the lower courts, ordering the country to follow it, is that funds allocated to pay the bondholders who entered the swaps in 2005 and 2010 must be used to pay them, which could trigger a technical default on Argentina's debt given the impossibility of honoring the restructured  bondholders.
In their speeches, both Ambassador Nahon as the Argentine representative at the IMF, Sergio Chodos, focused on the systemic implications of the Argentine case.
Officials recalled that various different actors like the United States, France, the G-77 plus China, and institutions like the IMF, and experts such as economists Joseph Stiglitz and Nouriel Roubini, have already warned about the possible effects that the issue might have should it be resolved according to the thinking of the New York judiciary.
All these actors " warned about the consequences of this case for the future of debt restructuring, the stability and predictability of global financial markets, and the reputation of New York as a key global financial center," said the embassy in a statement.
Nahon said that the resolution of the case that pits Argentina against the vulture funds "will determine whether a minority of debt speculators can obtain a new weapon that will strengthen holdouts around the world," threatening the flow of payments to bondholders who agree to debt restructurings.
This, in turn, "would make such restructurings impossible in the future,” said Nahon.
For his part, Chodos said that "Argentina is fighting for its right to pay.”
[NOTE: The above Telam piece also ran in Ambito Financiero and Pagina/12 in excerpted form.]
The government defends its position in the U.S. against the vulture funds  
There were diplomats, officials of that country and analysts.  Nahon and Clement spoke.
Friday, February 28, 2014
by Ana Baron -New York, correspondent
In a new attempt to counter the lobby of the vulture funds, the Argentine embassy in Washington organized a conference about the case “Argentina vs NML”, whose main speaker was Paul Clement.  
The former Solicitor General of United States, currently the star lawyer who drafted the appeal which was filed before the Supreme Court, Clement warned that if the Supreme Court upholds the ruling requiring the Argentina to pay the vulture funds at the same time as it pays the restructured bondholders, it will tilt the balance of the "power" for the former, and threaten voluntary debt restructuring.
"What surprised me most was that Clement’s presentation, like the ones from Ambassador Cecilia Nahón and the Argentine representative to the IMF Sergio Chodos, were more political than legal," one of the invitees told Clarin.
The professor specializing in international finance from Georgetown University, Anna Gelpern, told this newspaper that "two of my students went in my place and they told me that it was all very political.”
Clement said at the breakfast that "If the current interpretation of the lower courts on pari passu is upheld, it will radically change the balance of power in favor of the holdouts and will jeopardize voluntary sovereign debt restructurings.”
Among the approximately 100 officials of the U.S. government and Congress, invited representatives from international agencies and analysts, one of the most prominent present was representative of Brazil to the IMF, Paul Nogueira Batista. In fact, a source told Clarin that the Argentine government continues to hope that Brazil and the IMF will send amicus curiae briefs in favor of Argentina to the U.S. Supreme Court. The IMF had intentions of doing so when our country appealed the first time, but in the end, the U.S. objected and the Fund had to reverse course.
The offensive by the vulture funds against Argentina is such that at the entrance of the embassy there were people handing out pamphlets entitled "Paul Clement, defender of Argentina’s shameful conduct before the U.S. courts.”
No journalistic media was invited to the conference except Telam, the official news agency, which runs counter to the embassy’s efforts to counter the vulture funds’ lobby.
In the press release that the embassy circulated, Nahon said that the resolution of the case that pits Argentina against the vulture funds "will determine if a minority of debt speculators will obtain a new weapon that will strengthen holdouts around the world," threatening the flow of payments to bondholders who agreed to debt restructuring.
For his part, Chodos said that "Argentina is fighting for its right to pay.”
Return to orthodoxy: now they are flirting with the IMF
Friday, February 28, 2014
by Marcelo Bonelli
The Casa Rosada is studying getting even closer to economic orthodoxy. After the heavy adjustment he implemented, Axel Kicillof wants to open negotiations with the International Monetary Fund.
Jorge Capitanich confirmed it is this week to his inner circle: "We will accept the Fund reviewing the economy". The Cabinet Chief said that, together with Kicillof, they were "fighting the inner battle" to embrace the IMF again. The goal would be to go back to borrowing from Wall Street to strengthen the sagging reserves. They are seeking US$ 10 billion. The return to orthodoxy is also due to another urgency: to have the support of the United States in the lawsuit with the holdouts. The deadline for the Treasury to submit a brief to the Court expires at the end of March.
But the move exposes the inconsistency of the official narrative and Kicillof’s double discourse.
The issue was taken up at a secret meeting between Capitanich and the heads of the UIA. Héctor Méndez and Daniel Funes de Rioja expressed their anger over the government operations against business owners. They also warned about the risks of Héctor Recalde’s bill, which seeks make food companies, textile companies and manufacturers of production materials "subject to intervention.” Capitanich said: "Be calm, economic way out is a step away." But this run against the clock has a heavy burden: the total lack of credibility abroad for the Minister and his team.
The government is promoting a virtual agreement with the Paris Club, but reality is different. Ramon Fernández, the head of the entity, was very clear with Kicillof in their meeting: he rejected Argentina’s offer because it did not meet the minimum conditions required by an international negotiation.
Now, the Paris Club has sent a request for information from Buenos Aires with some humiliating and cutting questions for officials. The text signed by Clotilde L'Angevin did not open any serious negotiations, as Kicillof tried to explain at the Olivos compound.
In Cristina’s entourage, Daniel Scioli suggested addressing Kicillof’s anemia and adding experts such as Mario Blejer and Guillermo Nielsen to the international talks. Yesterday, Nielsen was in Manhattan at a bankers’ event. Cristina rejected the advice: "Daniel, let Axel have very good non-conventional ideas to resolve the issue." The government has already stumbled by believing that the proposal from the Gramercy Fund would end the lawsuit of the holdouts. Black Rock - the main holder of Argentine bonds - reported that it withdrew from the proposal and, therefore, the efforts by financier Gustavo Ferraro - intimate friend of Amado Boudou - ended in a total inconsistency.
Now Cristina is seeking another magic formula and has asked the Fintech Advisory Fund to begin negotiations to buy the debt in litigation with the vulture fund NML Capital. David Martinez - the head of Fintech, which acquired Telecom - is willing to start probing, but demanded sources of financing to be able to negotiate with Paul Singer.
The agreement with Repsol also seeks to bring relief the external front. For that reason, Kicillof made a 180 degree turn to appease Spain. As Vice Minister, in the autumn of 2012, he said at Olivos that Repsol would not be paid "a single dollar.” Now, the agreement is deteriorating Kicillof’s image.  The government had demanded that Antonio Brufau be removed to begin negotiations, but that backfired, since it ended up strengthening Brufau’s image with the advantages conceded to Repsol.
The agreement allows for the burying of the obscure dealings that took place with the Argentine oil company.
In 1998, Carlos Menem handed over control of the company to the Spanish and King Juan Carlos himself participated in that unclear negotiation.  It was always said that the monarch had been stained by a public and private power play over YPF's shares.
The agreement also buries the doubts that exist about the "Argentinization" of YPF. Néstor Kirchner participated directly in the operation and Brufau was his partner of privilege. Brufau has details of what they negotiated with Kirchner and that played a role in the secret proceedings of the Spanish oil company board.
These documents are locked under seven keys, because if it were disseminated, it would lead to a political scandal in Buenos Aires and Madrid.
Starting then, Repsol and YPF moved 140% of their profits abroad. Thus, since 2008, investment and production began to fall.
The decline continued with the nationalization, despite the comments which slipped out of the company. Miguel Galuccio’s 100 days plan failed and little progress was made in Vaca Muerta.
The change of the logo cost millions and was carried out by a consultancy linked to Cristinism.
Oil and gas production is falling in Argentina and gasoline prices increased 80 percent in two years. In addition, YPF began to increase its debt.
The form of payment to Repsol includes a serious feature: Repsol, Goldman Sachs and Deutsche Bank are going to handle those bonds on the market, in a sort of privatization of the Argentine portfolio.
But before that they must overcome a serious hurdle: no valuation exists or is known about from the Valuation Tribunal for a budget line for the payment of US$5 billion to Repsol. The absence of this audit will have political repercussions, since the agreement will fail to comply with the YPF nationalization law.
Ambito Financiero
Blejer: “Good for both parties”
Friday, February 28, 2014
The former president of the Central Bank, Mario Blejer, said yesterday that the agreement reached between the Argentine government and the Spanish oil company, Repsol, was "good for both parties" and "positive for the business environment.” He also argued that the measure will permit the inflow of investment in the energy sector and h hoped that it will allow for the IMF’s support in the dispute with the vulture funds.
"The agreement is positive for the country and the business environment in general and even if it does not solve all the problems with the international financial community, it does solve the lack of investment in the energy sector," said the economist in dialogue with National Rock radio FM. In that sense he argued that the resolution "will allow foreign investment and it is a good agreement for both parties, since Repsol also needed to solve the problem.”
"It is a good signal that will satisfy international institutions and, in addition, now the IMF would tend to support Argentina with the vulture funds,” Blejer estimated. Finally, he said that "the relationship with the Fund must be normalized, not from the point of view of taking credits, but in terms of the annual consultation.”

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