October 1, 2014
The whole debt and nothing but the debt
Against a backdrop of the gap between the official and parallel exchange rates widening to 71 percent, Wednesday’s lengthy plenary committee debate in the Senate on the bill to repatriate foreign debt bond payment added little to what has been said by either side, except perhaps to confirm the increasing irrelevance of the RUFO (“Rights Upon Future Offers”) clause since Economy Minister Axel Kicillof ruled out any negotiations with holdout litigants even when that clause (setting a dangerous precedent for all other creditors) expires at New Year. If there was any common denominator to Kicillof’s marathon explanations, it was to adopt a holistic approach — if there are to be any negotiations with the holdouts, it is to be with all of them, not just the litigant vulture fund minority, and they are to be offered the same terms as the other creditors. Meanwhile Legal and Technical Secretary Carlos Zannini underlined that the ultimate objective was to bring the entire foreign debt under Argentine jurisdiction while clarifying that the bill to offer bondholders locally the payment denied them by judicial deadlock in New York was to create a voluntary option, not to impose a new venue.
Meanwhile on the other side of the Upper House, the alternatives continue to be in default while the intervention of 2001 default president Adolfo Rodríguez Saá (now a San Luis senator) was pure hypocrisy. Many opposition politicians seem to feel that the billion-plus dollars at stake in Manhattan judge Thomas Griesa’s courtroom are but a drop in the ocean of global capital markets (especially in the recent years of quantitative easing liquidity) which could be unblocked by yielding the point but very few dare to think so aloud — the idea of paying vulture funds in full is too electorally repugnant and financially dangerous. Indeed Upper House Minority Leader Gerardo Morales (Radical-Jujuy) even endorsed Kicillof’s condemnation of Griesa and the vulture funds while criticizing his strategy. So instead the line was rather to wash their hands — an ultra-presidential and centralized government had more than enough powers to sort out its own mess without dragging in other parties, was their argument. Yet this evasive attitude is not wholly valid — quite apart from all the specific contractual obligations which the government cannot change unilaterally, a law of Congress confers so much more legitimacy than any executive decree which can always be attributed to presidential whim.
The bill continued to move smoothly through Congress but there are also other fronts such as Griesa’s courtroom, the exchange markets, yesterday’s general strike and the world at large.