November 28, 2014
Supreme crisis IV
Speaking on such a patriotic occasion as Flag Day yesterday and surrounded by militants waving “Fatherland or Vultures” banners, President Cristina Fernández de Kirchner had the perfect context for a frenzy of chauvinist rhetoric but instead she used the moment to place Argentina firmly on the negotiating track with the “vulture” creditors demonized by much of her audience, thus ending a confusing week on a note of clarity. To be sure, the commitment to negotiation was qualified with an insistence on “fair terms”in the framework of the National Constitution and Argentine law but far from taking the country to the brink of default, she proclaimed her desire to “pay 100 percent of creditors” (as she had already less emphatically said last Monday), announcing that she had given “instructions” to the Economy Ministry “to ask the judge (Thomas Griesa) to generate the conditions for reaching an agreement which benefits 100 percent (of those involved) because there are laws to respect... international laws which have also been signed.” Although relatively brief by her standards, her speech also found room for such concessions to the context as advancing the theory that the financial mischief of creditors aimed beyond simple monetary greed to grabbing Argentina’s vast wealth of natural resources and the climax was an appeal for unity to defend national interests but bitter realism prevailed over rhetoric.
In professing her willingness to negotiate, CFK reproached the holdout creditors for not wanting to negotiate. During the years she shunned direct contact with “vulture funds,” this holdout intransigence (spurning two bonds swaps and a reopening) went mostly unnoticed but now the ball moves to their court. And once the centre moves to Griesa’s offices, the onus falls on the aged Manhattan judge to clarify exactly what his pari passu ruling means. When the United States Supreme Court refrained from intervening in the case last Monday and upheld Griesa’s court as the correct instance, the hedge funds took this as a vindication of their demand for full payment but might not pari passu mean that they receive no less but also no more than other creditors? This and so many other aspects can be discussed once the commitment to negotiate is made.
The main problem is that time is so short until such deadlines as the next payment to creditors at the end of the month but never underestimate the power of legal technicalities (a new stay, a Supreme Court rehearing or introduction of a negotiating period) to shift the financial deadlines. When a government understands that flag-waving is not the only way to celebrate Flag Day, much more becomes possible.