Fact Check: Argentina

Check Out this Great Editorial in Today’s Wall Street Journal

Today’s editorial in the Wall Street Journal,From Deadbeat to Despot,” is a tour de force by the paper’s editorial board in describing the absurdity and paranoia of Argentina’s leaders.  It’s a must read, and so we thought we’d pass it along.

Here are some high notes:

 “In a country where growth is negative, inflation is approaching 40%, and foreign reserves are running low, the closure of a medium-sized factory shouldn’t count as a major economic event. But this is Cristina Fernandez de Kirchner’s Argentina. In a televised 45-minute rant, La Presidenta denounced the plant’s closure as a “fraudulent maneuver and attempt to sow fear in the population,” while seeking without credible evidence to connect Donnelley to the U.S. “vulture funds” she accuses of destroying the economy.

 “Mrs. Kirchner seems to have confused the Chicago real-estate magnate with one of the holdout creditors who have won victories in U.S. courts to require Buenos Aires to honor its contracts. Mr. Zell said Mrs. Kirchner’s stunt ‘just makes her look even stupider.’”

 “That example ought to chasten Mrs. Kirchner’s cheerleaders in the West, especially one or two Nobelists who have given intellectual cover to her efforts to demonize American hedge funds and dethrone U.S. courts in favor of some international bankruptcy court that might look favorably on deadbeats like Argentina. Those who suffer most from populist governments such as Mrs. Kirchner’s are people like Donnelley’s former factory workers, lashed first by their government’s financial recklessness, and then by her demagoguery.

And the Wall Street Journal isn’t the only one picking up on Argentina’s questionable actions.  In this weekend’s Handelsblatt and Buenos Aires Herald, German politician and minister of finance Wolfgang Schäuble said:

  “Argentina has been a model of unsoundness for several decades and continues to be.”

 “Argentina has lived for decades beyond its means, it does not pay its debts and that is why it is isolated from international payments,” he added. “Problems arise when you spend more than you earn.”

Here’s a link to the full editorial.  And here’s a translation into Spanish:

De Aprovechador a Déspota

Argentina acosa a una empresa estadounidense por cerrar su negocio en Buenos Aires

Les contamos la semana pasada que la municipalidad de Los Ángeles ha provocado una pelea con Wall Street que podría impulsar a la ciudad por el mismo camino fiscal que Argentina. Ahora viene la historia de cómo Argentina, quien supo provocar su propia pelea con Wall Street, y entre en default, este verano por segunda vez en 13 años, podría estar siguiendo los pasos políticos de Venezuela.

R.R. Donnelley & Sons RRD +1.70% es una imprenta de 150 años con sede en Chicago, Illinois. Durante 22 años manejó una subsidiaria en Argentina que empleaba unos 400 operarios. Pero cerró sus puertas a mediados de agosto debido al “aumento en los costos de empleo, la inflación, el aumento en el precio de los materiales, la devaluación, la inhabilidad de pagar deudas en los tiempos debidos, y otros temas”, según contaron en la empresa. Tampoco pudo llegar a un acuerdo con el gremio, que no quiso ni contemplar la posibilidad de despidos ni negociar de buena fe.

En un país cuya tasa de crecimiento es negativa, con una tasa de inflación de casi el 40% y donde están empezando a escasear las reservas de divisas, el cierre de una empresa de tamaño mediano no debería figurar como un gran suceso de porte económico. Pero estamos en la Argentina de Cristina Fernández de Kirchner. En una diatriba de 45 minutos en cadena nacional, la Presidenta acusó a la firma de generar un “falso estado de quiebra para generar temor en la población”, e intentó conectar, sin evidencia creíble, a Donnelley con los “fondos buitres” estadounidenses que ella acusa de destruir la economía.

Para enfatizar su declaración, la Señora Kirchner mostró una foto de Sam Zell quien insiste que no tiene inversiones en Argentina. Parecería que ha confundido el magnate de bienes raíces de  Chicago con uno de los acreedores holdouts que ganaron en las cortes estadounidenses con un fallo obligando a Buenos Aires a honrar sus contratos. El Sr. Zell comentó que el ardid de la Señora Kirchner “la hace parecer aún más tonta”.

Puede ser el caso, pero no tiene gracia que ella haya invocado un estatuto anti-terrorismo para perseguir a Donnelley. La Ley Antiterrorista Argentina del 2011 brinda una definición poco precisa del terrorismo, diciendo que es cualquier acción que “intenta atemorizar a la población”, y se utilizó anteriormente este año para denunciar al editor de un diario.

Desde entonces, el Gobierno argentino ha reducido los cargos en contra de Donnelley, de terrorismo a “quiebre fraudulenta”, y el titular de la Administración Federal de Ingresos Públicos (AFIP), pidió la detención de los ejecutivos de Donnelley en Argentina. Los cargos llevan condenas de prisión de hasta seis años.

La Sra. Kirchner también busca reavivar la Ley de Abastecimiento de la era peronista, que les otorga poderes a los gobernadores regionales de fijar precios, incautar bienes, fijar cuotas de producción y hacerse cargo de empresas privadas sin expropiarlas formalmente. Sergio Massa, el ex Jefe de Gabinete de la Sra. Kirchner, y ahora uno de sus oponentes políticos, sintetizó las ambiciones legislativas del gobierno. “Estas leyes tienen una característica particular”, explicó, “porque permitieron al Gobierno de Venezuela expropiar a 1.193 empresas y cerrar 400.000 negocios y más de 2.000 industrias.”

Este ejemplo debería acallar a los defensores de la Sra. Kirchner en el Occidente, en particular un par de Premios Nobel que han prestado argumentos intelectuales a favor de los intentos de la Presidenta de demonizar los fondos de cobertura norteamericanos y destronar las cortes estadounidenses para reemplazarlos, por ejemplo, con una corte internacional de quiebre que podría ostentar una actitud más benévola hacia países imprudentes como Argentina. Pero las personas que sin duda más sufren de los efectos de las acciones de gobiernos populistas tales como el de la Sra. Kirchner son aquellos como los operarios de Donnelley, quienes primero padecieron la irresponsabilidad financiera de su gobierno y después tuvieron que soportar sus discursos demagógicos.

Cristina’s Rift with the US Grows: Obama Administration Calls Argentine Trade Restrictions “Repulsive”

Yesterday, the Obama administration said that Argentina’s trade restrictions constitute “one of the most repulsive practices” in violation of international trade rules, noting that it will use “all of its pressure” to ensure Argentina lifts its absurd restrictions.

We’ve reported on the alienation of the United States government by Argentina’s leaders. The attacks on the Obama Administration by Economy Minister Axel Kicillof for “not setting limits on a judge” probably haven’t helped Argentina’s cause.

Senator Robert Menendez, Chairman of the Senate Foreign Relations Committee, was blunt in his criticism of Argentina’s leaders when he recently stated:

 There is no reason that a member of the G20 should fail to meet its international financial and legal obligations.  Last month’s decision by the U.S. Supreme Court should have sent a clear signal to the Government of Argentina that it needed to enter into good faith negotiations with its creditors. Instead, the Kirchner Administration has engaged in a dangerous game of international brinkmanship that will likely have catastrophic consequences for Argentina’s economy and its citizens.

And this latest denunciation of Argentina’s conduct from the United States comes after last Friday’s negative ruling from the World Trade Association (WTO), which issued a ruling opposing Argentina’s licensing rules used to restrict imports.  Argentina is not only violating U.S. laws, but is also violating international rules as well.

Even though Argentina’s leaders claim the country is “not in default,” they have chosen this path.  Default has already begun to produce horrible consequences for Argentina and as such, it must pursue even more radical and protectionist measures to forestall the exodus of capital from the country.

The longer Argentina chooses to prolong this process, the more harm caused to individual Argentines and the country’s economy and the more isolated from the rest of the world Argentina becomes.

Kicillof Misleads the Argentine Senate

In a speech today before the Argentine Senate, Argentine Economy Minister Axel Kicillof stated that during debt negotiations in New York in July, Argentina asked to sit down with holders of Argentina’s unexchanged bonds to resolve its debt conflict.

This attempt to mislead the Argentine Senate completely ignores the fact that for years, Argentina’s creditors have repeatedly asked to sit down with Argentina to negotiate, and for years, the country refused to do so.

The factual record clearly contradicts Kicillof’s version of events:

 - In a Financial Times piece from July 20 titled “Argentina nears cliff in risky debt game,” a former IMF official Charles Blitzer is quoted as saying, “So far there haven’t been five minutes of negotiations. It’s inconceivable to me that the plaintiffs will just say, ‘OK, Argentina refuses to negotiate but we’ll give them the stay anyway.’ Why should they?”

 - On July 24, less than a week before Argentina was to default, the court appointed Special Master Daniel Pollack stated that “after speaking with both sides, separately, I proposed and urged direct, face-to-face talks between the parties. The representatives of the bondholders were agreeable to direct talks. The representatives of the Republic declined to engage in direct talks.” As a result, Reuters described Pollack’s work as “shuttle diplomacy.”

 - La Nacion, in a piece on July 25, stated, “Daniel Pollack, the mediator designated by Judge Thomas Griesa for guiding the negotiations, met yesterday separately with officials and attorneys for Argentina and representatives of the funds NML and Aurelius. He urged them to sit down at the same table and to speak, face-to-face, in an attempt to break the status quo in the discussions.  The litigants said yes.  The Argentine officials said no.  “The time for the Republic to avoid a default is short,” said Pollack in a statement after the meetings.

 - On July 29, Bloomberg reportedWhile Pollack had urged the sides to hold face-to-face talks, the government so far had refused. The last meeting at the mediator’s office lasted just one hour.” Thesame day, the Financial Times stated that “There had been little progress in talks between Argentina and the holdouts since the Supreme Court rejected Argentina’s appeal in June, with the government refusing face-to-face meetings.

We encourage Kicillof to take a break from the political gimmicks and to make an effort to resolve the situation with Argentina’s creditors. There is still time to negotiate.

Cristina’s Alternate Reality

Welcome to Argentina, a nation that is led by its gifted and charismatic leader President Cristina Fernandez Kirchner!  In the alternate reality that President Kirchner and her leadership team have cultivated for Argentina’s citizens, there is no default!

And, Argentina pays its bills!

And, Argentina has tried numerous times to negotiate with holdout creditors, but to no avail!

And, Argentina is on a path to prosperous glory because of the Vaca Muerta Shale discovery!

In Cristina’s alternate reality, there is no correlation between her and her leadership team’s decision to default on bond payments and the sharply escalating economic crisis that Argentina is currently facing.  While the economy of Argentina literally crumbles around her, she’s defiant to any idea that a default could have been prevented, and whips her La Campora followers into a frenzied blame game against creditors, U.S. courts, a federal judge and the Obama Administration itself.

Whether an act of ultimate denial, or a cynical play to temporarily boost political support among her most hardened base, the distortions and misinformation being spread by Kirchner and her allies belie the hard realities facing the country.  For instance:

 - Never mind that China just announced it will require Argentina to settle its creditor disputes before moving forward with an investment and loan package that Cristina has heralded.  Maybe Argentina can mortgage some of the Vaca Muerta to China to sweeten the deal?

 -  Never mind that Argentine currency rates have been plunging in the wake of the country’s decision to default.  After the US dollar gained 22 cents against the Argentine peso in just one day earlier this week, Cabinet Minister Jorge Capitanich assured his countrymen that this was due to “speculative attacks” by “vulture funds acting through powerful international lobbies” to carry out attacks against Argentina.

 -  Never mind that Argentina’s bond payment to its clearing bank (BONY) was declared “illegal” by the court, and as a result, Argentina defaulted on its obligations to exchange bondholders. Economy Minister Axel Kicillof has triumphantly declared to the nation and the world that Argentina has “paid its debts.”

 -  And besides, last week President Kirchner announced a new exchange that would replace BONY with the state central bank, and would move the legal jurisdiction governing exchange bonds to Argentina!  We’ll see who signs up for this, but we’re doubtful that it will be very many.

 -  Speaking of BONY, well, it’s really their fault that Argentina’s leaders refuse to deal with the default mess that they created for themselves, and so this week it was announced that BONY was no longer welcome in the country.

 - And BONY is just the latest object of the Kirchner team’s invective.  Earlier this week, Cabinet Secretary Jorge Capitanich attacked the country’s unions, accusing them of being funded by the holdouts.  And, when companies like RR Donnelly decided to abandon the country due to stated “untenable business conditions,” President Kirchner accuses them of domestic terrorism, and threatens to jail their executives.

-  Never mind the growing corruption narrative involving Kirchner cronies like Lazaro Baez that is engulfing the Kirchner presidency, these stories are just “more attacks by the vultures.” “Move along everyone, there’s nothing to see here!”

In Cristina’s alternate reality, nothing is ever the fault of Argentina’s leaders – it’s always somebody else’s fault:  “vultures”, Judge Griesa, the United States, and now BONY.

But the problem for Argentina is that there are no alternate realities – the one that is being spun by its leaders is a fantasy.  The hard reality is that default was a terrible choice for Argentina’s leaders to make.  It’s already hurting the country, as experts predicted that it would. Argentina’s people deserve reality, not fantasy from their leaders.  Let’s hope that reality comes soon.

 

Argentina in default means no deal with China

Argentina’s recent agreement with the Chinese for assistance with the construction of two hydroelectric dams includes some interesting details. The arrangement with China, one of several between the countries, is for a loan of more than $4 billion. The agreement was lauded by Argentina as a great success, but perhaps they failed to read the fine print.

According to La Nacion, which obtained the loan agreement between Argentina and China, the contract includes a cross default clause, which states that if the Argentine government defaults on other debt, it implicitly defaults on the Chinese loans. The agreement makes a direct reference to “the holdouts from the sovereign debt default,” leading one to assume that if Argentina does not solve the situation with its creditors, the loans for the dam projects in Patagonia will not be granted.

In addition, Argentina must waive its immunity and “submit itself to foreign courts.” La Nacion stated that “the government of Cristina Kirchner ended up giving the Chinese banks foreign jurisdiction, submission to other courts and everything it wants to take away from the holdouts with the draft bill on sovereign payment.”

 The country must also be “a member in good condition with the IMF.” In other words, even China wants Argentina to settle its debts and get its house in order.

The La Nacion piece continued, the “contracts with China also appear to contain clauses that the Government now repudiates in the cases against the holdouts being debated in the New York court of Thomas Griesa, such as ‘acceleration’ of debt maturities, which are carried out if the country goes into default on a payment, the creditor is entitled to demand immediate payment of the total principal, even if many years to maturity remain.”

 Oh, the irony.

 

Page 1 of 812345...Last »