Fact Check: Argentina

149 days, 7 hours, 18 minutes ago

SINCE RUFO EXPIRED

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Argentina Won’t Let Cuba off the Hook

There’s a saying that goes “Do as I say, not as I do”, which might be originally attributed to President Cristina Kirchner, after it was revealed in a Bloomberg story this week  that Argentina refuses to give Cuba any relief for a $2.4 billion debt from 1973 that has now likely risen to more than $11 billion.  Argentina also wants Paraguay to pay the full $18 billion for a debt of $6 billion incurred in 1983.

The irony here is so delicious that we really don’t know where to start.  Argentine officials, notably President Kirchner and Economy Minister Kicillof, ruthlessly attack and deride Argentina’s creditors as “vultures.” Argentina persists in its efforts to delegitimize its creditors’ claims even though it is a relatively wealthy country with the capacity to pay these defaulted debts.

In fact, Argentina has launched a worldwide campaign to justify its refusal to even negotiate with creditors, and it has petitioned the United Nations and other national governments to advance its efforts to evade compliance with legal rulings and payment of its debts.

Now we see that the Kirchner-and-Kicillof anti-creditor campaign is not only cynical, but also hypocritical.  Argentina is the “vulture” that refuses to offer debt forgiveness to sovereigns. Even worse, and unlike Argentina, these sovereigns don’t have the capacity to pay their debts.

The duplicity goes even deeper. In 2006, Cuba asked Argentina to accept a 75% haircut. Argentina refused. Yet creditors who rightly refused Argentina’s coercive 2005 exchange offer of a 75% haircut have been met with nothing but constant aggression and endless name-calling by Argentine officials.

Even Bloomberg called out Argentina for its two-faced behavior. Here’s an excerpt:

The whiff of hypocrisy grew a bit stronger in the Cuba case last July after Russian President Vladamir Putin agreed to write off 90% – almost $32 billion – of the Caribbean island’s Soviet-era debt.  President Cristina Fernandez, Kirchner’s widow, went so far as to publicly praise the gesture as one ‘worth imitating’.”

 As always, Kirchner hopes that you do as she says, not as she does.

Argentina Attacks Citibank, Demonstrating Again Why It Is Not a Trustworthy Place to do Business

An Argentine court’s decision on Monday to give a judicial fig leaf to Axel Kicillof’s extortive injunction against Citibank Argentina came as the latest blow to the bank, which has experienced an onslaught of attacks from the Kirchner government following an agreement it negotiated in March with Argentina’s creditors.

Note to any and all parties thinking of doing business in Argentina: This is what happens when your obligations as a law-abiding participant in the global economy run afoul of the Kirchner regime’s political agenda. The rule of law goes out the window, and arbitrary administrative retaliation becomes the name of the game.

This should also serve as a warning to anyone that holds debt instruments governed by the laws of Argentina. The legal system bends at the will of the administration.

Citibank’s problems in Argentina began when the bank stated that it would comply with a U.S. court order not to pass along any illegal interest payments by Argentina. As part of its negotiated agreement with Argentina’s creditors, Citibank Argentina sought to exit the custodial business of some Argentine bonds. The injunction filed by Kicillof purports to bar Citibank Argentina from exiting this business, despite the fact that Kicillof and MECON lack any real basis in law for taking such a step.

In addition to filing the injunction, Kicillof denounced Citibank in the media and stripped its local chief executive of authority.  We’ve previously commented on this harassment of Citibank by Argentina’s leaders, and pointed out that it was a convenient distraction from MECON’s utter mismanagement of the economy.

The Argentine government’s harmful and capricious attacks against outside businesses and its refusal to negotiate with creditors have made for a disastrous combination.  Foreign investment in Argentina is nearly dry and economic growth is flat to negative because of the government’s erratic behavior and harassment of law-abiding businesses. Kicillof’s recent statements that these policies may actually remain beyond this year’s presidential election and into the next administration illustrate how horribly out of touch he and Kirchner have become.

Rather than recognize the reality of Argentina’s isolation from the international financial community and sitting down with creditors to negotiate, Kicillof and Kirchner continue to blame  whomever they can for the problems that they themselves have created. This week, Citibank is facing Argentina’s wrath. Next week it will be another unfortunate political target.

New ATFA Ad Campaign Highlights Argentina’s Costly Bond Deal

We have written extensively here about Argentina’s Bonar 2024 local bond issue in dollars, which, at one of the highest interest rates in the world, was extraordinarily and unnecessarily costly for the Argentine people.

Today, ATFA is communicating this important message directly to the Argentine people with an ad campaign in four major newspapers in the country: La Nacion, Clarin, Ambito Financiero and El Cronista Comercial.  Here is a link to the ad as it appeared in Spanish.  And here is a link to the ad translated into English.

It is important for the Argentine public to realize that the barrier to Argentina having unfettered access to the international capital markets at much lower rates is the Kirchner government’s total refusal to sit down and negotiate a final settlement to the 2001 default.  Both here, in print media and on television, the creditors have consistently said again and again that they are ready accept a settlement in bonds without a cash payment and put a final end to the default.  We have explained the details and the history of the conflict that Argentina has waged against the creditors, and the reasons behind its refusal to negotiate and its persistent attack on the U.S. courts.

And today, we once again remind the Argentine markets and the general public that the Bonar 2024 issuance by Axel Kicillof will cost the Argentine people more for this debt than a wide range of some of the poorest countries in the world, as well as countries currently fighting wars.  The sad reality is that the only way investors would be willing to lend to Axel Kicillof would be if he offered an interest rate so high that a handful of investors would be willing to risk breaking the law to obtain that yield.

President Kirchner believes that a persistent, endless and public request by the creditors to negotiate after decisively winning in court is “a refusal to negotiate” but 9% interest is a “reasonable rate” of interest to pay today.

This is the backwards reality of the Kirchner-Kicillof era.

Fact Check Argentina Releases Interactive Graphic on President Kirchner’s Kickback Crew

WASHINGTON, D.C—Today, Fact Check Argentina, a project of the American Task Force Argentina, launched an interactive infographic, “The Kirchner Kickback Crew.

ATFA’S new infographic details the monthly payments four Argentine business elites make to President Cristina Kirchner and her son Máximo Kirchner in return for government benefits and privileges.

Kirchner Kickback Crew Graphic

The graphic lists construction moguls Lázaro Báez and Silvana Relats, media magnate Cristóbal López, Argentine businessman Ernesto Clarens, all of whom pay the Kirchner family tens or hundreds of thousands in dollars or pesos every month.

This kickback scheme has been getting notice:  Last week, Clarin reported that Kirchner pal Cristóbal López, a recipient of numerous gaming and energy concessions from the Argentine government, has been renting a hotel to a company controlled by Máximo Kirchner for just $15,000 per month.  Clarin reports that this figure is similar to what one would pay “to rent an apartment of about three rooms or more.”  But for the bargain basement price of $15,000 per month, Max Kirchner now has a 60 room hotel located on three acres of “fascinating geography” on the shores of Lake Gutierrez in Rio Negro province.

As part of ATFA’s new interactive graphic, viewers are able to learn more about the relationship between the Kirchners and each of the featured members of their “Kickback Crew”, including details about the monthly payments of dollars and pesos made to the Kirchners.

Baez KKC Benefits

The Kirchner Kickback Crew” infographic is our latest addition to ATFA’s “Follow the Money” campaign.

The infographic and more information can be found at http://factcheckargentina.org.

Kicillof Returns to the Speech Circuit and Predicts That He and His Policies Will Continue into the Next Administration

Argentine Economic Minister Axel Kicillof was in New York this week, but apparently it was not to make any efforts toward solving his country’s most pressing economic problems, which are related to his and President Kirchner’s decision to default on more than $25 billion of debt.

Argentina’s creditors have repeatedly asked to meet with Kicillof to negotiate a settlement.  They have said publicly that they would negotiate without preconditions, and would be willing to accept bonds as part of a non-cash settlement.

Settling with creditors would immediately improve the Republic’s economic situation.  Instead, the government continues to demonstrate such disregard towards creditors and contracts that even Iraq and Rwanda can borrow at more favorable rates.

But rather than meet with creditors while he was in New York, or work toward any solution, Kicillof resorted to what he seems to do best:  Give a bombastic, overwrought speech at the UN, blame everybody else for the mess that he helped create, and absurdly claim that these policies are working for Argentina.

At the UN on Wednesday, Kicillof gave an erratic conspiratorial rendition of how the global financial system is somehow threatened by Argentina’s creditors. Of course, Argentina’s problems are not due to its creditors, but to the Republic’s refusal to take action and negotiate a good faith settlement.  Moody’s has pointed out that Argentina is the outlier in sovereign restructurings.  The report states: “unique in the historical context…of the 36 sovereign bond exchanges that have taken place globally over the past decade and a half, the case of Argentina was the only one that resulted in persistent litigation.”

Embarrassed by his own refusal to settle, Kicillof actually told the reporters who covered the speech that he did negotiate with creditors last summer. However, anyone who has followed this saga remembers that Kicillof’s excuse for putting the country into a second default last summer was that the RUFO clause prevented Argentina from negotiating, period. Furthermore, Kicillof conceded that all Argentina has ever done has been to repeat the same coercive, unilateral offer from a decade ago. Even President Kirchner admitted earlier this week that Argentina is not negotiating. In a public speech, she bragged about Argentina’s continued refusal to negotiate after RUFO expired.

And, as a defense against the consensus view that he and President Kirchner, by not negotiating, are simply leaving the problems they have created to her successor to deal with, Kicillof provided a foreshadowing of their intention to remain in power in the next administration and perpetuate the current policies:

“This administration will not leave any problems to anyone because the next government will be us.”

For Argentina, perhaps the only thing worse than Axel Kicillof’s dismal record as Economy Minister is the thought of another four years of the same failed policies.

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