September 22, 2014
An overdue counter-offensive
While Argentina is more than ever between a rock and a hard place after judge Thomas Griesa denied its request to extend deadlines to negotiate with holdout creditors, the story could have been different if the government had gone toe to toe with the ‘vulture’ funds in their press and diplomatic offensive instead of running behind events. All the current activism with Minister Axel Kicillof going to the G77 group of developing countries at the United Nations and placing ads in major world newspapers denouncing vulture voracity as well as US court complicity, claiming the theme “Argentina wants to pay but they won’t let it” at once, is all very well and fine but the government should have started ages ago instead of vacating that field to the hedge funds by default (so to speak). The latter (with a remarkable abundance of funds for people who have yet to collect a cent) have not only long invested in a lavish political and press campaign but also have created a specific American Task Force Argentina lobby which enjoys considerable clout in the United States Congress.
Explaining Argentina’s case to the world instead of the previous years of autistic intransigence has always been especially important because it is not a simple one. Most people would have problems understanding how one of the main beneficiaries of this century’s commodity boom with an indebtedness of only eight percent of Gross Domestic Product (as Kicillof is constantly stressing) could be in such dire straits — there must surely be better candidates for sympathy around the world, it would seem, with most countries having far more red ink. At the same time, this relatively comfortable debt performance is mainly due to a successful two-stage haircut in 2005 and 2010, with such a stunning acceptance of 92.4 percent of creditors in default. This right to start again threatened by Griesa’s ruling is what has raised a wave of outrage from key financial voices, which have little in common with the Argentine government.
Negotiating skills are absolutely crucial here because although the problem is usually presented as Argentina needing to overcome this last obstacle of the holdouts in order to return to global credit markets, when first there is a huge credibility gap and many image problems to tackle, which makes it more of a pity that the government did not start wooing the international press and decision-makers sooner. Last but not least, time is of the essence but it is not everything — “time will tell” is an ancient saying but in the end time will only tell you time.