January 23, 2018

Interview with economist juan siaba serrate

Friday, June 27, 2014

‘The move could very well be a loophole to pay both parties’

By Francisco Aldaya
for the Herald
The government’s decision to make a deposit to meet its June 30 debt coupon deadline was very well thought out as the funds may be seized by US courts and partly distributed to the holdouts, Economist José Siaba Serrate, an lecturer at the University of Buenos Aires and also a member of the International Economic Negotiation Comittee of the Argentine Council of International Relations (CARI), told the Herald, adding that it could be a potential loophole to pay both creditors without breaching the pari passu clause. Griesa will have the final word at today’s hearing.

What did you think of the government’s tactic to make a move before Griesa’s stay decision?

It’s part of the negotiation process. This is a chess game, a game of poker. It’s one thing to violate the ruling and another to seek better terms. It’s clear that the government is treading a fine line, but it still seems to be on the safe side.

The move seemed somewhat rash...

We musn’t fully trust what either party says in public. There may be agreements behind closed doors we’re unaware of.

What better terms could be obtained by paying the restructured bondholders?

The government knew going in that this would end in an embargo on the funds, but also that there may be a legal loophole with the bank in the US that implies that money will be prorated proportionally between restructured bondholders and holdouts. Argentina makes it clear that payment to the holdouts was not voluntary, as the creditors who took up debt swaps could challenge different payment conditions according to the Rights Upon Future Offers (RUFO) clause.

So how effective has the government been in negotiating so far?

If Judge Griesa says his order has been violated, the consequences would be serious and Argentina’s position would be greatly weakened. But it seems there are 30 more days to finish negotiations with the holdouts before being in contempt of court.

What’s next and how would an offer shape up?

Agreeing on a sum. The government has been building an ethical framework that will help in negotiations, such as Kicillof speaking at the United Nations on Wednesday and receiving declarations of support from developing countries. The deal could be similar to what was agreed to with the Paris Club — part in cash and another in bonds.

If the holdouts are paid beforeJuly 30, a default would be avoided, but there would likely be many suits from restructured bondholders and other holdouts...

Griesa asked for this case to be resolved first. But several cases are likely to crop up for quite some time. The government understands this and that it will involve a lot of money, but it will be resolved step by step. How these negotiations are solved will be very important for others in the future.

How is the market reacting to developments?

Prices show markets feel there will be an agreement, but they’re not infallible.


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