US Supreme Court building (photo: Wikipedia)
President Cristina Fernández de Kirchner and cabinet chief Jorge Capitanich have responded to yesterday’s US Supreme Court’s rejection of Argentina’s appeal against a previous decision favourable to the holdouts.
The latest ruling falls in favour of the vulture funds, who purchased debt from Argentina’s 2001-2 economic crisis at rock-bottom prices and are litigating to have them paid at nominal prices.
Judge Thomas Griesa’s decision means that Argentina will now have to pay the plaintiffs -NML, Aurelius, Blue Angel, and others- US$1.3bn, and will not be allowed to pay the other creditors without also paying the holdouts. The funds can also now seek information about Argentine assets overseas that could be seized in order to pay the outstanding debt.
However, there are other funds which did not take part in the debt swaps that could also sue the state for up to US$7bn in light of yesterday’s ruling. Finally, there are fears that the exchange bondholders -whose appeal before the Supreme Court was also rejected- could also demand to be paid the original debt in full if Judge Griesa does not open a negotiation between the parts. This could bring the total debt up to US$20bn.
Last night, in a national address, President Fernández called the court’s decision “extortion”, and said that “it is absurd and impossible that a country should destine more than half of its reserves to debt payment”, referring to the possibility of more creditors coming forward in light of hte ruling.
The president underlined that Argentina will not default on its restructured debt, and that the government was more than willing to negotiate on debt payments. “We negotiated in 2005, 2010, we negotiated with Repsol, we have closed a deal with the Paris Club after negotiations,” she observed. However, she asked that people distinguish between negotiation and extortion, adding that the ruling would affect not only Argentina, but also the entire global financial system, highlighting the support Argentina has received from France, Mexico, and Brazil in its position.
President Fernández went on to question the return rates on the debts, in particular NML, who has received an interest rate of 1,608% on the bonds it purchased for US$48.7m, remarking that “not even in organised crime is there such a high return rate”.
In his morning address, Capitanich said that Argentina’s position is “legitimate and an exercise in sovereignty”, adding: “It’s not a coincidence that the world today is structurally unfair, it’s no coincidence that there is international social injustice, it’s no coincidence that Pope Francis gave a speech about the role of the financial system, it’s no coincidence that selfishness aims to undermine the terms of debt restructuring.”
He confirmed that he would give a press conference with Economy Minister Axel Kicillof in Congress today at 6pm to give more details on Argentina’s position.
The government has the option of requesting a rehearing within the next 25 days. It is unlikely that it would be conceded, but it would buy the country some time until after the end of the month, when the next debt repayment is due.
It is expected that Judge Griesa will open an instance of negotiation where Argentina could try to obtain better terms of payment.
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