November 22, 2014
Playing with Vultures
For the Herald
In the complex present of the world economy the only thing we know with absolute certainty is that nothing is (or will be) easy for Argentina. Any speculation is possible, as in a game of chess, according to each movement of the pieces.
The national government is on one side, and the vulture funds and their best advocate, the New York judge Thomas Griesa, is on the other.
Given this scenario the spectators cluster around the combat — a worried and silently expectant people; a government paying for the corruption and shady deals of its predecessors; an alarmed international community lacking protagonism; a bunch of politicians and local journalists who want everything to go wrong for this country — or worse if that were possible.
This week the still unresolved conflict took on a staggering intensity. On Wednesday everything was up in the air; on Thursday the bondholders within the swaps were assured that the Argentine government would pay them as always, remitting millions of dollars to the New York bank and disowning “any responsibility which might be ascribed to the Republic.” A precise newspaper ad covered against the judge intervening because if he did impounding those funds, the responsibility would fall on him.
Griesa retorted by declaring that Argentina’s payment to the bondholders entering into the 2005 and 2010 swaps “is illegal and will not happen.” And when consulted by the New York Mellon bank as to what they should do with the money already transferred there, he replied: “Send it back to Argentina.”
So on Friday night the Economy Ministry raised the stakes: “Argentina is paying but Griesa is obstructing the bondholders from collecting.” And in a brief communiqué it directly accused the judge of wishing to “provoke the default of our country” via the “unprecedentedly strange decision” to seek to “quash the payment already made by Argentina in fulfillment of its restructuring contracts with its creditors and in accordance with Argentine law.” And without any euphemisms: “With this measure, the judge incurred in abuse of authority and exceeded his jurisdiction because the restructuring bonds are not the object of litigation but the mega-swap bonds which fell into default in 2001 and which the vulture funds bought up at knock-down prices to obtain sky-high profits.”
There are three things here which any spectator might spot: a) the decision of the judge to force Argentina into default; b) the decision of the government to fight to the finish and disqualify the judge for his bias and for straying beyond his jurisdiction and c) the panic this issue causes among many economists and local columnists.
Everything indicates that now we will see if the world really cares about Argentina’s fate if it submits to the interests of the vulture funds. Because at local level the facts are already known: 1) the debt restructuring of 2005 and 2010 was so positive that today nobody wants the country to fall into default; 2) the almost 93 percent entering the swap did well and would like to continue collecting in peace; 3) that restructuring permitted growth without an austerity which would have had serious social consequences and 4) the country has had relatively high levels of reserves for several years.
Of course, there have been major errors in economic policy such as the erratic fight against inflation; INDEC’s manipulation of statistics; the permissive attitudes toward the great mining powers which are also destroying the environment; the absolute lack of any transparency against corruption, and etc several times over. But the balance of the 11 years Kirchnerism has been in power is still positive if viewed in good faith. Critically, of course, but nobody in good faith could fail to recognize that the country today is abysmally better than it was a decade ago — and two, three or four decades ago as well. This is inconvenient and even annoying for the opposition, as is natural and logical, but it should not cloud the minds of its leadership, as happens all the time.
For all the impressive hatred which the powerful media have inoculated into the middle classes and which expresses itself irrationally in saucepan-bashing, readers’ letters and some social networks, it is fair to say that the Argentine government has developed a strategy which might be questionable in its rhetorical style — arrogance is an unfortunate national trademark — but in terms of concrete facts has been and remains well oriented towards legal and economic defence.
If this week the shrewd move of the Argentine government was responded by another smart move by the judge, an old legal vulture himself, that provoked a new local move late Friday. Everything points to new plays for Monday and the next few days,
Meanwhile it would be good if the executive and legislative branches could come to an urgent decision never to yield sovereignty again — not to CIADI nor the New York courts nor anywhere else in the world. These capitulations, which were decided by local vultures in a still very recent past, are now as unsustainable as they are dangerous. And it would also be salutary (and urgent) to divulge who collected the interest and how much on the gigantic Argentine debt of the 1976-2001 period — the economically most ominous quarter-century of our history.
Surely it is no longer possible to repudiate that debt and not pay it, as some of the most extreme positions of the Argentine left seek. But it would be good to determine with certainty who were responsible and to place their crimes beyond the statute of limitations. That would enable the trials of those responsible for all the shady deals which have ruined the future of several generations of Argentines.
Meanwhile, in this South of the Southern Hemisphere political life continues with the new municipal police decreed by Buenos Aires province Governor Daniel Scioli, and with the case of José María Campagnoli, tainted by the media protection he enjoys and the threats against his prosecutors. The World Cup also continues, occupying a lot of space and renewing hopes which are perhaps only bubbles but which do a lot of good to the wounded national self-esteem. And as from tomorrow Oral Federal Courthouse No. 4 will be continuing the trial of the Alliance government (1999-2001) which increased the foreign debt to the benefit of seven banks — until now the only defendant is the former economy minister Domingo Cavallo.
And what will happen now with the vultures? Will we fall into an involuntary default? Nobody knows although, as in the most exciting games of chess, not only time is decisive but emotional intelligence, astute patience, audacity and surprise also determine the best moves. Let us hope that the Argentine negotiators have all these qualities in order to ride this fierce storm.