November 28, 2014
Global opinion shifting toward Argentina
Argentina continued to garner international solidarity in its struggle against holdout hedge funds yesterday, with the country receiving explicit support from the United Nations, global media outlets, and diplomats.
In the strongest statement of support the UN trade agency UNCTAD said the recent US court ruling on Argentina’s debt erodes sovereign immunity and does not comply with the country’s own US Foreign Sovereign Immunities Act.
Russia also joined in on the support, with Russian Foreign Minister Serguei Lavrov reportedly telling Lower House Speaker Julián Domínguez in Moscow that the country was fully behind Argentina in its long battle with the hedge funds that have refused to restructure defaulted debt.
In addition, British unionists, journalists, members of Parliament and academics submitted a joint letter to the Argentine Embassy in London in support of the country. A group of more than 100 British members of Parliament had also presented a similar letter of support at the embassy before the Supreme Court’s decision not to hear the Argentine case last Monday.
United Nations backing
The United Nations Conference on Trade and Development (UNCTAD) issued a rare statement on the matter before Economy Minister Axel Kicillof spoke at the UN’s headquarters in New York, invited as a special guest by G77+China — a loose coalition of 134 developing UN-member countries.
“The rulings could open floodgates to other similar cases depending on interpretations given by courts under New York law, British law or other laws,” UNCTAD said, in the most direct show of support yet by the international organization.
UNCTAD said the actions of US courts could have far-reaching future consequences.
“The rulings have made future debt restructuring much more difficult as debtors are left with only moral suasion and foreign relations as weapons to encourage creditor coordination,” the UN agency said.
“They have also strengthened the hand of creditors even though their behaviour can be among the underlying causes of debt crises.”
The UN agency said the “chaotic context” of the situation reinforced the need for a globally agreed-upon sovereign debt workout mechanism.
Eventually the cost to Argentina could go well beyond the potential US$15 billion in claims, UNCTAD said, pointing out that if Argentina paid the holdouts, it might have to also give the same terms to creditors that accepted the previous debt swaps.
“This would amount to an estimated cost of over US$120 billion,” it added. On a similar note, President Cristina Fernández de Kirchner said via Twitter that G77+China had highlighted at a recent conference in Santa Cruz, Bolivia, “the importance of not allowing ‘vulture’ funds to paralyze the restructuring activities of developing countries nor bar states from their right to protect their people according to international law.”
At the UN hearing yesterday, the country received broad support from the G77.
“This is not only a cause for emerging countries, it goes further,” said Permanent Representative of Brazil to the United Nations Antonio de Aguiar Patriota. (See page 4)
Seemingly concerned by recent developments, the Paris Club group of creditor nations said its members had discussed the issue at a bilateral meeting with the Institute of International Finance.
“Creditors discussed the recent agreement between the Paris Club and the Argentine authorities on an arrangement to clear debt in arrears due to Paris Club creditors, as well as the implications of the recent decision by the Supreme Court of the United States in the case of Argentina and its litigating creditors,” the group of creditor nations said yesterday.
Media weighs in
The prestigious US magazine Foreign Affairs published an opinion piece by financial journalist Felix Salmon, which opened by arguing “there aren’t many institutions powerful enough to bring a sovereign nation to its knees,” in reference to the holdouts, and affirming that the Supreme Court’s decision not to hear Argentina’s appeal against Griesa’s ruling on equal bondholder treatment “will ... diminish national sovereignty.”
“If anybody started criticizing the country for being in default on the exchange bonds, Argentina could always say, quite honestly, that it has both the ability and the willingness to pay — and that the only reason its bondholders aren’t getting paid is that the US courts won’t let them be paid,” Salmon wrote.
Brazil, France, Mexico, and the United States supported Argentina in the case with amicus briefs, the article adds, even though “none of them had much sympathy for Argentina itself, or its government.”
Still, that did not prevent them from expressing support because “they did have a vested interest in maintaining a sovereign’s right to pay one group of creditors without paying another.”
The piece described the US Supreme Court as careless and “dangerously fundamentalist.”
Salmon’s piece was hardly an exception. Britain’s Financial Times also published an opinion piece this week by Martin Wolf, the paper’s chief economics commentator.
“Society needs a way to allow people to start over again,” and “this is why we have bankruptcy,” he said, adding that “if Argentina is forced to pay holdouts in full, the price will be borne by Argentines. This is extortion backed by the US judiciary.”
Paid adverts by the government appeared in several European newspapers on Tuesday, criticizing the court ruling and slamming the funds involved.
The advertisements also warned that the ruling would place any other country that had to undertake a restructuring of its debt in a “delicate position.”
“They (vulture funds) purchased bonds in default at obscenely low prices for the sole purpose of engaging in litigation against Argentina and making enormous profit,” reads the advertisement that was published in several European newspapers, including the Financial Times, after the government placed similar full-page ads in top-circulation US newspapers.
Herald with Télam, Reuters