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October 21, 2014
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Kicillof blasts US for failing to support Argentina

Economy Minister Axel Kicillof (right) talks to Foreign Minister Héctor Timerman (left) and OAS secretary José Miguel Insulza in Washington yesterday.
United States, Canada are only two OAS countries that fail to back Argentina

Economy Minister Axel Kicillof and Foreign Minister Héctor Timerman criticized US President Barack Obama’s government yesterday for failing to support Argentina in its struggle against holdout hedge funds, addressing ministers of different countries in yet another charm offensive, this time at the Organization of the American States (OAS).

“The United States had previously supported our stance in the case so it understands the gravity of the case. Nevertheless, their support hasn’t continued at the Supreme Court. I wonder why they changed their mind,” Kicillof said yesterday. “The International Monetary Fund also didn’t file an amicus because the United States didn’t agree with Argentina.”

Roberta Jacobson, US assistant secretary of State for Western Hemisphere affairs, said it was in Argentina’s interest to normalize relations with all creditors and in the interests of the country and the international community that Argentina fully participate in the international financial system.

All country members of OAS, with the exception of the United States and Canada, signed a statement in support of Argentina. Jacobson said the United States could not support the declaration as the issue was currently being discussed in court.

The Argentine officials made it clear yesterday they did not see that as a viable excuse.

“It’s surprising that the United States asks not to talk about this issue and doesn’t partake in the support for Argentina by numerous countries,” Timerman said. “Still, we have a good relationship with them and permanent dialogue. We agree on some issues but not on others.”

For its part, the US decided to focus on a message that pushed negotiations above everything.

“Both sides of this dispute have said at different times they would be willing to negotiate, which we believe offers the parties the best path to a resolution,” Jacobson said. “We are hopeful that Argentina will find a solution to this matter that resolves its issues with the bondholders and allows it to return to inclusive growth.”

Jacobson’s statement came a day after US Chargé d’Affaires to Argentina Kevin Sullivan expressed optimism that the country’s long-term legal battle with holdout hedge funds would be resolved, predicting that both sides will “reach a solution” in negotiations.

Upcoming talks

Negotiations with hedge funds are set to begin next Monday, when a delegation of government officials will travel to Washington to meet with Daniel Pollack, the “special master” assigned by US District Judge Griesa mediate between the parties. Kicillof highlighted the delegation would only meet with Pollack and not hedge funds.

“We will go to talk to Griesa’s negotiator, but we need fair and balanced conditions. Argentina wants to negotiate in good faith, but under conditions that contemplate the rights of all the creditors,” Kicillof said. “We only have 28 days to avoid a default. Argentina has the resources to pay its debt but Griesa’s decision seeks to restrain us from paying.”

Argentina has until the end of the month to strike a deal with hedge funds. If it fails, the country risks tumbling into its second sovereign debt crisis in 12 years. This would sap already-thin Central Bank reserves and prolong Argentina’s banishment from the global bond market just as the country needs foreign financing to rebuild its grain export infrastructure and develop its shale oil and gas sector.

Jay Newman, senior portfolio manager at Elliott Management, responded to Kicillof’s statements and asked the government to “sit down” with creditors to reach a solution for the dispute. Elliott had asked Kicillof to meet today instead of waiting until Monday but the government refused.

‘Urgent solutions’

Kicillof asked asked the “international community” to implement “urgent solutions and not only issue statements” to help Argentina in the case, emphasizing that Griesa’s ruling to pay holdouts is “absurd, deranged” and goes “against the rules of the financial system. At the same time, he warned the country’s legal battle with hedge funds affects “all countries in the world and not just Argentina.”

“We ask the international community to take action. We need them to implement urgent solutions and not only issue statements. We don’t want to be a case to be studied in the future on how a country suffered due to an absurd decision,” Kicillof said, speaking to the OAS country members. “We need the world to support our claim and help us.”

Kicillof’s speech came after strong words of support yesterday from OAS secretary José Miguel Insulza, China’s Foreign Ministry and United Nations secretary Ban Ki-moon, who asked the government not to allow lower classes to be affected “disproportionately” if a default is reached on July 30.

Insulza pointed fingers at hedge funds, who “seek to send countries to bankruptcy” and whose actions against Argentina could affect “the internation financial system.” Insulza said the country’s “financial stability” has been affected.

“Hedge funds threaten the financial stability of Argentina and undermine debt restructuring mechanisms that allow countries to pay their debt and start growing again,” Insulza said. “They buy bonds at a cheap price and make a lot of money.”

Herald with Reuters

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