Don’t Cry For Me Argentina

At the District Court Judge’s direction Argentina submitted an affidavit that indicated that it would not seek to evade the court order. National Director of Argentina’s Bureau of Public Credit, Francisco Eggers, submitted the pledge on behalf of the Argentina. Francisco Eggers stated that “As directed by the court, on behalf of the Republic, I confirm that the Republic has complied, and will comply with the terms.” The actual declaration contains no ambiguous language that would allow it to be interpreted differently. Still, there are many who believe that Argentina will not make the ordered payment. Matthew Parish, a partner in layers Holman Fenwick Willan Switzerland, who has worked on several sovereign restructurings, believes that it is likely Argentina will not pay anyone.

It seems clear to me that Argentina has adopted a strategy of inventive stalling through constant litigation. I agree with Judge Griesa in concluding that Argentina cannot be trusted to pay the money it owes. After a decade of litigation it is only fair that Argentina now be forced to pay the Plaintiffs. There is no need for Argentina to cry. The country has won its share of cases in the U.S. federal court system in including an appeal before the Court. In that case the Court ordered removal of attachments  secured by NML against its National Bank’s reserves held in New York City. The appeals court ruled that these reserves were essentially immune from creditor’s reach. Most of the litigation that has taken place since the default of 2001 concerns no exchange-holders attempting to secure payment for their bonds.

To a limited extend the New York Federal Reserve Bank (FRB) supported Argentina’s position on the issue of the interception of proceeds destined for bondholders that agreed to renegotiate their debt. The South American country is current on these payments. The FRB’s general counsel, Thomas Baxter, in a letter to the Federal Court argued that the injunction seizing funds transferred from intermediary banks would be over broad. Mr. Baxter in his letter which can only be termed an abbreviated legal memorandum also warns that a seizure of funds in this fashion would have operational ramifications that “impede the smooth and efficient operation of the payment system.” Though the FRB expressed deep reservations over the District Court’s suggested method for satisfying the Plaintiff’s judgment, the esteemed bank firmly believed that Argentina should pay what it owes to the Plaintiffs.

I understand the case merges complex issues relating to banking and international law. By its own actions and declarations Argentina has forced the Federal Court to consider somewhat unusual and novel ways to ensure that the Plaintiffs are paid something. In my opinion the South American country’s leaders are employing tactics and strategies that revolve around an unwavering conviction Argentina cannot be to pay anything to the Plaintiffs. Instead of arguing that Judge Griesa should stay his order until it can appeal to the U.S. Supreme Court, Argentina could negotiate with the Plaintiffs a payment plan. Anyone who has followed this litigation would be hard pressed to believe that Argentina would willingly pay the Plaintiffs.

As judgment-creditors the Plaintiffs have a right to satisfy their judgments out of the judgment-debtor’s assets, wherever they may be found. If the Fernandez administration will not pay pursuant to Judge Griesa’s court order then the Plaintiffs should be permitted to satisfy their judgment out of any assets that the Argentina government has at the time in the U.S.

Not withstanding Argentina’s rhetoric that makes it out to be the victim of the international financing system, the country defaulted on the bonds that the Plaintiff’s were holding. The bonds involved in this case were issued in 1976-1983. At that time the Argentina economy was not in distress. Consequently Argentina’s public outbursts that NML is a vulture hedge fund can only be understood in a political context and not a financial or legal one.

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