September 19, 2014
Fifty shades of Griesa
The rhetoric is inflammatory, but the talks with the vultures are not over
What is worse? Having the vice-president, Amado Boudou, indicted for corruption or seeing Argentina on the brink of another default due to a ruling by a New York judge, Thomas Griesa, in favour of the holdout creditors who did not accept the two debt restructurings of the past decade? It's a bit like asking how would you like your poisonous martini fixed: shaken or stirred? In the case of Argentina's cocktail it will be both shaken and stirred. Shaken by the institutional fallout that has been prompted by Boudou’s indictment for influence-peddling involving the money printing company Ciccone. And stirred by the financial anxiety of the legal battle with the vulture funds that has been unfolding for a long time.
It’s going to be like this for some time. The news will be dominated by Boudou and by the proceedings unfolding in Griesa's New York court. The only other piece of news that really matters to the public is, of course, Argentina’s best soccer World Cup run since 1990.
Argentina (the republic, not the soccer team) failed in its bid to take its case against paying the vultures what they want all the way up to the Supreme Court of the United States of America. But, ironically, the officials of President Cristina Fernández de Kirchner’s administration are more comfortable with trying to avert the looming “technical” default than with seeing Boudou's legal plight on the frontpage of the newspapers every day.
Economy Minister Axel Kicillof is getting sympathy in all major international forums. Kicillof on Thursday addressed a gathering of the Organization of American States (OAS) in Washington. The minister tried to drive home a sense of urgency about the situation that, he argued, will have a negative effect on the entire financial universe. All the nations of Latin America and the Caribbean were in agreement. But the US and Canada abstained from supporting Argentina, arguing that a legal case is unfolding in the US.
Griesa has named a lawyer as mediator, Daniel Pollack, who is supposed to find a negotiated solution to the legal battle putting at odds Argentina with the vultures.
The vultures snapped up those worthless Argentine bonds and took their case to court demanding their full worth in order to make a quick buck. Make no mistake about that. But there is nothing quick about the proceedings. Instead it is turning into a long negotiation with the venerable gray-haired Griesa in the middle of a muddle over a mountains of greenbacks.
Argentina has accused the vultures of not wanting to negotiate. Government officials are not saying nice things about Griesa. Throughout the week Kicillof and other officials have accused Griesa of being biased.
Kirchnerite groups have plastered posters all over town blasting the yankees and the carrion birds. But the negotiation is still on. An Argentine delegation is scheduled to meet with Pollack on Monday. The holdout hedge funds meanwhile are eager to reach a settlement with Argentina.
If an agreement is eventually reached then this specific financial fistfight will go down in history with the other painful accords hammered out recently by Argentina with the Spanish energy company Repsol (over the expropriation of YPF) and with the Paris Club of creditor nations. Kicillof, who now seems to enjoy the sweeping powers of a prime minister in the final years of the CFK administration, was involved in both deals with Repsol and YPF.
Argentine officials can complain all they want in respectable international forums. But the vultures are only in it for the money. The holdout funds have let it be known that they would not turn down the kind of agreement reached with Repsol and the Paris Club.
Yet there is still some hurting to be endured by both parts.
Kicillof is not part of the delegation travelling to the US for Monday’s scheduled meeting with Griesa’s mediator. (Or will he make a surprise appearance?)
CFK’s prime minister is playing hard to get. All right. Argentina’s support in the OAS, the United Nations and Mercosur might only be symbolic. But the case in Griesa’s court is also giving a vast section of the financial world the jitters. The victory of the vultures in the courtrooms of New York is not good news for the future of other debt swaps.
Kicillof, now, seems to be playing with that anxiety by crying about the crassness of capitalism. The minister is on a world tour to sort out Argentina’s outstanding debts often shuttling to places like Paris in a day from Buenos Aires.
Griesa is being called names. Yet Kicillof’s team is ultimately still doing what the judge is ordering. The legal battle with the vultures is this government’s top priority. And so it should be. The other option is to concentrate fully on the Boudou case.
The leadership of the Peronist party, which gathered on Thursday, expressed full support for the president in the conflict with the vultures. The Peronist bigwigs also condemned in a statement the "media lynching" of Boudou. But was this a formality? The statement made a reference to the vice-president without even giving his name. But Fernández de Kirchner, and her staunch supporters, still look determined not to sacrifice her vice-president in legal distress.
There was nothing symbolic about Thursday’s gathering of the Kirchnerite-controlled Lower House Impeachment Committee. The opposition has tabled a series of motions to impeach Boudou. But they had been ignored by the president's Victory Front coalition, which has the Peronist party as its main member. The Kirchnerite strategy of not even contemplating the impeachment motions has now been altered— if only just. The Kirchnerite majority in the Impeachment Committee (17 out of 31 member lawmakers) on Thursday summarily rejected the opposition’s bid to have the vice-president impeached. The decision was a stark reminder that the Victory Front, even after losing the midterm elections last year, still controls Congress. The opposition can let off some colourful political fireworks. Yet the Victory Front coalition has not fallen apart in Congress.
Boudou is in real legal trouble. The Victory Front is paying a price for not sacrificing the vice-president, who according to polls is not popular. Yet Boudou will only be in political trouble if the president decides she can no longer afford to support him. Time is on CFK’s side. Her mandate ends next year.
The Boudou case will be an issue during next year’s presidential campaign. But is that the president’s problem when she will not be a candidate?
The Boudou case will mean less once the vice-president is out of office and even when he is a lame duck himself. Still, it is an institutionally awkward situation for the CFK administration, especially because the indicted Boudou at times must serve as acting president.
Fernandez de Kirchner cancelled a trip to Paraguay during the week, formally for health reasons (a severe case of sore throat). But CFK is scheduled to soon attend the BRICS summit in Brazil. Boudou will be the caretaker running things here at home while Fernández de Kirchner is away.
Boudou has been indicted. But he is not guilty yet. Those indicted with the vice-president include some of his foes, including one Nicolás Ciccone, the former owner of the money printing company at the centre of the controversy.
Ciccone is now contesting the proceedings carried out by Federal Judge Ariel Lijo, claiming that he had been called to testify as a witness only to find out that what he had said was used against him in an indictment. The muddle will have to be sorted out by a federal appeals court, which will not necessarily back Lijo.
All these cases play out differently and are not over. The same can be said about the disciplinary proceedings waged against the suspender prosecutor José María Campagnoli, who is charged with overshooting his authority in probing corruption allegations against pro-Kirchnerite business tycoons.
Campagnoli’s trial is bogged down by the resignation of one of the jury members. The suspended prosecutor is a moral hero to the opposition. His case is also being followed closely like the cases involving Boudou and the bondholders.
None of these cases are over. All the parts are fighting — they have a right to do so. Meanwhile Kicillof, as most of the attention is still posed on Messi’s dribbling in Brazil, seems to be amassing power in the closing stages of Kirchnerism.
Daniel Cameron, the long serving Energy secretary, has resigned. Kicillof has anointed Mariana Matranga, a Kirchnerite technocrat, in his replacement. The reshuffle (Cameron was originally named by the late president Néstor Kirchner to head the energy portfolio) means that Kicillof’s team of well-trained young guns will be dictating the republic’s energy policy. Effectively, Kicillof has invaded the symbolic territory of Federal Planning Minister Julio De Vido (an old school Kirchnerite) and the YPF head Miguel Galuccio (who at times also seems to have the president’s ear).
Back in New York, there are many shades to the vulture funds’ case. But the markets are still expecting a negotiated solution.
There is no such deal yet. Argentines are hoping for a soft landing to the Kirchnerite years. But for now it is not clear exactly where Argentina will land when the president ends her mandate. The only thing certain is that her time in office expires in 2015.