La Nacion The negotiation with creditors will not include the vulture funds

La Nacion

The negotiation with creditors will not include the vulture funds

 

Monday, October 14, 2013

 

By Silvia Pisani

 

WASHINGTON.- The negotiating line shown by the government of Cristina Kirchner to, finally, pay what it owes to foreign companies that won cases in the arbitral tribunal of the World Bank (ICSID) has a limit.  

 

The so-called vulture funds that have been winning cases in American courts are not entering the dialogue radar.  On the contrary, the government is sticking to the idea of confronting them in the courts, even when there is little hope that it will bring good news here any time soon.

 

"Actors, with a clearly speculative objective, are putting at risk a country, a society, an entire economy and this, as a sovereign nation, is unacceptable,” said Economy Minister Hernán Lorenzino.

 

So re-emerged the “hardline” before the plaintiffs, speaking before the International Monetary Fund (IMF) which ended yesterday in this city.  Beyond the speeches, the impression gotten by LA NACION is that it is the real position.

 

The recent agreement by the government to pay claims of more than US$600 million to five American and European companies that won suits in the ISCID set off conjectures of an eventual turn in a similar direction towards the funds that obtained rulings against the country in American courts.

 

"It’s time to sit down and negotiate,” said, a week ago, one of the executives at Elliott Management, one of the most active claimants against the country, with two favorable rulings in district and appellate courts by which a US$1.3 billion payment is being imposed.

 

The sentence is stayed by an injunction, awaiting the opinion of the American Supreme Court.  It’s estimated that the whole process will take almost a year.

 

During that period, the government continues betting that there will be a decisive intervention by the government of the United States before the tribunal.  They don’t believe that the announced agreement with the ICSID has unblocked anything in that direction.  Only that, possibly, doing it makes it easier.

 

The IMF gifted a bit of oxygen in that sense.  Barred at the time from charging against the vultures in the court due to Washington’s refusal, the entity led by Christine Lagarde returned to the subject by setting up in the full assembly a seminar dedicated to analyzing the “lessons of recent debt restructurings.”  

 

There, and starting in large measure with the Argentine case, the number two of the organization, David Lipton, spoke of the “convenience” of the IMF “getting more involved” in the phenomenon.

 

Not only that.  The ex-academic from Harvard came to suggest a reflection about possible “modifications” in the so-called “pari passu clause”.  Speaking of equal treatment of creditors, it is a legal chess piece upon which the recent rulings from Judge Thomas Griesa were built which have put Argentina’s debt policy in checkmate.

 

Many that listened agreed with the point of view.  There are fewer, however, that believe that, finally, Argentina will end up negotiating with the plaintiffs.

 

"It all seems to indicate that sooner or later that moment will arrive,” argued attorney Richard Samp to LA NACION, from the Washington Legal Foundation, headquartered in this city.  

 

As of now, the government has not made any signals in that direction.  The plaintiffs themselves accept that, for all the offers made, until now nothing has moved forward in that direction with the authorities of the country.

 

The shift by which, finally, they decided to pay those who won cases in the ICSID does not seem to put a dent in that judgment.  The question refers to the claim filed by the funds NML Capital and Aurelius Management, together with a dozen private investors, among them, various Argentines.  The government characterizes them all as vultures.  

 

 

La Nacion

The parrots are now struggling against the vultures

 

Monday, October 14, 2013

 

by Jorge Oviedo | LA NACION

                               

"Parrots!" shouted Axel Kicillof in Congress to deride those who propose financial deals abroad in order to go back to taking debt.  It was at the beginning of the second term of the President and the eccentric professor was enjoying his ascent. The President celebrated it.  She said in public that she liked the nickname of the "parrots".

 

The big parrot, according to Kicillof, was none other than Amado Boudou, who along with Hernán Lorenzino and Adrián Cosentino had promised Wall Street they would sort things out with the vultures and start the negotiations with the Paris Club.

 

Several investment funds had promised resources at reasonable rates. The formula was mutually beneficial. They would get returns far superior to the usual ones in the world and Cristina Kirchner would have more space to protect her legacy and say that she never made an adjustment.

 

The clumsiness of Boudou in the Ciccone case destroyed him in the infighting and Kicillof and Moreno won the tug of war in the struggle to be heard by the President.

 

Cristina Kirchner did not pay the arbitrations she lost in the World Bank tribunal against American companies, while the President of the United States, Barack Obama, personally had asked her to do so twice.

 

With its intransigence, Argentina lost the support of the IMF and the government of the United States, who recently refused to argue in its favor, as they did until this year, in the lawsuit against the vultures.

 

Transformation

 

The imminence of a catastrophic outcome seems to have transformed the parrots on Avenida Fenix. The bold Boudou already played a key role in saving Kirchnerism from a catastrophic adjustment when he convinced the presidential couple that expropriating the AFJPs would be all benefits and bring zero political damage. He was right. That self-confidence and lack of scruples led him to join the victorious ticket and, in recent days, to temporarily take the helm of the Presidency.

 

To promise to pay debts from the adverse decisions in ICSID unblocked promises for loans from the World Bank. It clears up the future a little, but the present is still very dangerous. There the “anti-parrots” Kicillof and Moreno are battling, trying to show that they are still able to get the dollars that the national Treasury is lacking.

 

Insulation

 

The situation is a sign of Argentina’s unusual isolation. The relationship with Brazil can’t get any worse.  Every day, trade disputes are accumulating. Dilma tolerates it because she needs to find new markets for her sagging economy and put together integration schemes for a very closed and protectionist country.

 

It has been prioritized that a free trade agreement with the European Union be accelerated. And it needs to be negotiate by the block, with a full Mercosur, to have greater strength. Argentina is playing a childhood game and is deciding to fight with Uruguay and ventilating the quarrels in the Hague, in Europe.

 

The EU could be more likely now to agree than in previous negotiations, says economist Dante Sica. It suffers from high food prices, from food that Mercosur also producers. In turn, it will ask for openings from other segments, such as auto parts, which Argentina is seeking to protect at all costs.

 

With car parts in the agreement, Sica says, it can be broader and bigger. But it is risky. Europeans are a fearsome competitors. Only three years ago, electric cars with a carbon fiber body were not even at the prototype stage. Today the BMW sells the i3 and i8. Even some supercars, like the electric Mercedes SLS AMG. A BMW M5 has more electronics than the whole Apolo 11 mission, which put the first man on the moon. Including the  Houston space center. The groups that circulate in the Argentine metropolitan area, on the other hand, have their own technology from 1992.

 

Vacancies

 

In Argentina, foreign policy is part of domestic politics. The embassies are for friends. Cristina Kirchner can’t ask the Senate to now confirm more people without a history as ambassadors. "Cecilia Nahón in Washington was the last straw,” sources say.

 

There are vacant posts in none other than the embassies in Paris, Canada, Iran and the European Union. And maybe Cristina only wants to reward those who remain unemployed after the elections on the 27th.  It’s what she did when she sent María Perceval to the United Nations, Celso Jaque to Colombia, Ariel Basteiro to Bolivia, Ginés González García to Chile, Patricia Vaca Narvaja to Mexico, Alicia Castro to London, Juan Pablo Cafiero to the Vatican, Carlos Cheppi to Venezuela and the inexperienced and poorly trained Cecilia Nahón to Washington.

 

 

Ambito Financiero

’Vulture’ effect: the Fund seeks changed in bonds

 

Monday, October 14, 2013

 

Washington - The developments in the Argentine lawsuit against the vulture funds in the United States is a topic of concern in the heart of the IMF and the international financial community. The number two of the entity, David Lipton, acknowledged that the organization is examining ways to modify bond contracts to stop the advance of the vulture funds upon countries with debt crises. "We are examining ways to strengthen collective action clauses to make them more robust in the face the potential holdouts, as well as possible amendments to the ‘pari passu’ clause that ensures consistency and predictability in all jurisdictions,” said Lipton. It was within the framework of a seminar with experts about the lessons from recent experiences of sovereign debt restructurings, and in tune with the Argentine position in its dispute with the vulture funds. The position was laid out only five days after the U.S. Supreme Court rejected, at least for now, taking up the appeal by Argentina to review the criterion of "pari passu" used by Judge Thomas Griesa and upheld by the Court of Appeals, which found that the country violated equal treatment of creditors.  In Washington, even though there is resistance to calling the holdouts "vulture funds", it is a new development that the IMF is encouraging a change in the current contractual approach, "one which provides more predictability" in the process of sovereign debt restructuring. The news comes from the side of the concern that exists over the outcome of the Argentine lawsuit, where the IMF and the specialized community of scholars and lawyers observed the unlimited power the vulture funds would get if they win the battle, and the consequent fear of a boycott of future sovereign debt restructuring. Lee Buchheit, Cleary Gottlieb's lawyer who is defending Argentina and also handles the Greek case, acknowledged that "with the Argentine case we can say that the creditors found a theory that gives them power to act, not only on debtors but also on other creditors.” “The current litigation (on the Argentine bonds) in U.S. courts casts a light on the limitations in the current contract model in cases of debt,” the Fund official said. The debt discussion meeting went further to how to being to enact these changes to curb the threat of the vulture funds. Jeromin Zettelmeyer, economist from the European Bank for Reconstruction and Development, said that a way to start would be to modify the internal mechanisms within the IMF itself, "so that countries that are heading towards an unsustainable debt situation are addressed well earlier.”