Fact Check: Argentina

Cristina’s New, Unworkable Debt Swap

On Tuesday of this week, Argentine President Cristina Kirchner announced a new bond exchange on national television. Kirchner is sending legislation to the Argentine Congress that would move the jurisdiction of exchange bonds to Buenos Aires, an explicit evasion of the injunction put into place by Judge Griesa.

Kirchner and her Economy Minster Axel Kicilloff myopically claim that they are solving the problem of exchange bondholders who have not received payment by Argentina due to the injunction.  In reality, participation by any exchange bondholder in this new scheme would be expressly illegal and simply not an option for these institutions. 

Claudio Loser of the respected Inter-American Dialogue has previously modeled what a default would look like for Argentina’s people, and had this to say yesterday about the new exchange:

 “Analysts see this for what it is:  a clear breach of Argentina’s contractual obligations under US law, which were willingly signed-on to by all recent Argentine administrations…

 “The Government conveniently forgets that its new ‘offerings’ will be unacceptable to most bondholders. Statutory limitations will make it impossible for 70% or more of institutional investors to consider this new scheme, thus rendering the proposed legislation effectively useless. Most others will not rush in to Argentina in an environment where the ‘rule of law’ has lost practical meaning.”

But perhaps Cristina and Axel know all of this, and are using the new swap to distract from the growing corruption narrative that is beginning to engulf the Kirchner presidency.  Last week, ATFA hosted a conference call with NML attorney Robert Cohen, who characterized news reports on Kirchner crony Lazaro Baez as “just the tip of a very large iceberg”.

This informative Bloomberg television segment also discusses the question of whether or not Kirchner is using the new exchange to distract from her domestic corruption problems.  If you haven’t seen it, it’s worth watching the discussion between Jorge Piedrahita and Katia Porzecanski, who notes that this swap “throws contracts to the wind.”

In short, Cristina’s new bond swap isn’t going anywhere, and it’s really nothing new either.  Argentina’s leaders have continuously trashed U.S. courts and Judge Griesa since failing to get a hearing at the Supreme Court in June.  They don’t mind using U.S. courts when it suits them, but they call these same courts illegitimate or “a joke” when they don’t like the ruling.  This is despicable behavior from a G-20 country, but sadly the consequences aren’t being felt by Kirchner, Kicillof or any of the country’s ruling elite.  Cristina and Axel’s choice to default on Argentina’s debt and to defy the rule of law hurts Argentina’s citizens more than anyone else.  These people deserve better from their leaders.

It’s not too late for Argentina to come to agreement with its creditors.

Bondholder Plight: Kirchner Administration’s Angry Statements Lack Evidence to Refute Ads

The Argentine government has put out a press release denouncing our advertising campaign, but there is something critical that is missing from the government’s rhetoric: The press release provides zero evidence that anything in our ad is untrue.

That’s because everything in our ad is 100% factual: Our ad simply highlights the stories of real Argentine citizens – some of the 61,000+ bondholders that have never been paid one penny by Argentina. Their stories have also been told by news organizations such as The Wall Street Journal, Newsweek, The Financial Times,and many others.  

Our ad highlighted the heartbreaking stories of two of these individuals, but there are thousands more just like them. Some excerpts from the news articles above tell some of the stories that we were unable to highlight:

Here’s one story that was relayed in the Journal:

“The scolding of holdouts vexes citizen bondholders like 57-year-old Horacio Vázquez. Mr. Vázquez, who started a group representing the individual holders, said they have been referred to as “little vultures” in the local press, with a recent article on Mr. Vázquez by a pro-government news outlet, Tiempo, linking to a Youtube video of a fluffy, vulture chick. The site also published a piece titled “These Are the Argentines Who Are on the Side of the Vulture Funds,” naming Ms. Lavorato and her 89-year-old sister, among others.

‘We are discriminated against by the country that caused the problem, and still we haven’t received our money,’ said Mr. Vázquez, an electrical engineer who lost $73,000—and his job—following the default.”

And here is one that was related in Newsweek:

“One of the first things Maria Elena Corral did after retiring 15 years ago was pay a visit to a Société Générale branch in Argentina’s capital city, Buenos Aires. There, she listened intently as her personal banker laid out the safest investment options for her life savings. With a heap of careful consideration and a dash of blind trust, Corral made a decision: she would put most of her money—$65,000—toward Argentine foreign debt bonds.

“At first, the bonds paid Corral, now 77, enough to keep up her comfortable lifestyle in Barrio Norte, a posh neighborhood in Buenos Aires. But in 2001, the government defaulted on its external debt—at $82 billion, the largest of its kind in history—and since then, Corral has not seen any return on her investment.”

And here is one more from the Financial Times:

“Eva Geller’ parents, Holocaust survivors from Germany and Austria, always taught her that two things were important in life: education and savings.

“‘Every penny I got from my grandparents, I put in my piggy bank. I saved all my life,’ said Geller, who was born in Uruguay where her parents moved after the war. Having been advised that Argentina was a “very strong government with a very firm government” Geller not only poured her life savings into Argentine bonds, but also advised her Austrian mother, now 90, to buy them too. The rest is history.

“Argentina defaulted in 2001. Geller rejected restructuring offers in 2005 and 2010 because she and her mother would probably both be dead by the time the bonds paid out, and “we never got a single cent back.”

The Argentine government has left so many of these stories in its wake that our 60-second ad could have been a 60-minute infomercial.

If these stories make the Argentine government uncomfortable, that is because they should. What the government has done to them – denying them their right to negotiate a fair and just settlement on the defaulted bonds they hold – is shameful.

It is long past time for the Argentine government to negotiate a fair settlement with all holders of its defaulted debt, so that country can finally emerge from default.

As we have repeatedly pointed out, the Argentine economy would benefit enormously from such a settlement: Interest rates would plummet, credit spreads would plummet, the currency would strengthen, foreign investment would become much more attractive to outsiders, and Argentine financial markets would soar.

The government appears to think demonizing its bondholders, attacking U.S. judges and the U.S. government, and refusing to pay this valid debt makes its administration more popular with the people. But calling this government “populist” is false. A truly populist government would take actions to benefit the people. This government has given the people inflation, currency collapse, sky-high interest rates, pariah status among a growing number of nations, and an atmosphere that scares away outside investors.

Angry press releases will not help the people of Argentina regain the status of a country where outside investment is welcomed and the rule of law is respected. But at least the press release issued by the embassy today (unintentionally) shines some light on the plight of the victims of Argentina’s ongoing, 13-year default.

Baez Shell Companies “Just the Tip of a Very Large Iceberg”

Thursday, ATFA hosted a teleconference for reporters on the recent ruling by a Nevada court giving NML Capital discovery into 123 Nevada shell companies that are controlled by a well-known Kirchner associate, Lazaro Baez.

Here’s a link to an audio recording of the teleconference hosted by ATFA.

Robert Cohen, attorney for NML, framed the Nevada court’s ruling this way:

“The 123 shell companies – we believe are just the tip of a very large iceberg.  There’s a lot more that we believe will come out connected to Lazaro Baez and others who have been making a practice over many years of stealing from the Argentine government.  We are closing in on these people.” 

 The Wall Street Journal recently reported on Argentine construction magnate Lazaro Baez and his ties to the late Nestor and the current President Cristina Kirchner, as well as the dramatic increase in wealth of the Kirchner family during their years of public service.

The Nevada court ruling will force the Baez shell companies to comply with discovery sought by NML, and in issuing the ruling, the judge was unsparing in her description of these companies.  Here’s a notable excerpt:

“There is no doubt that the 123 companies are shell corporations. Similarly, there is no doubt that shell corporations are routinely formed to commit fraud.”

Thursday’s ATFA media call took place against the backdrop of continued attacks by Argentine officials on Judge Griesa and the U.S. justice system.  Here’s a picture of Axel Kicillof’s Facebook page Thursday:

Axel Fbook

NML attorney Robert Cohen denounced these attacks on the U.S judiciary, and pointed out the irony of Argentina calling the U.S. courts corrupt, when court records show that Argentina is in fact one of the most frequent foreign customers of the U.S. court system.

Argentina’s leaders are quick to use the U.S. court system when it suits them – to collect tax judgments abroad or to obtain evidence in a wide variety of other cases – but it labels this same court system “corrupt” and “incompetent” when it rules against the country.

Here are two recent tax cases filed by Argentina’s government in the Southern District Court of New York – the same court that Argentina is railing against every day.

 

Las compañías fantasma de Báez son “apenas la punta de un tempano muy grande”

El jueves 14, ATFA dio una videoconferencia de prensa sobre el reciente fallo de un tribunal en Nevada  que le otorgó a NML Capital el derecho de “discovery” o descubrimiento (aportación de hechos considerados relevantes al proceso), sobre 123 compañías fantasma controladas por un socio bien conocido de los Kirchner, Lázaro Báez.

Ver un link a la grabación del audio de la teleconferencia organizada por ATFA.

Robert Cohen, el abogado de NML, expresó la opinión de su cliente en cuanto al fallo de la siguiente forma:

“Creemos que las 123 empresas fantasma son apenas la punta de un tempano muy grande. Hay mucho más que va a salir en relación a Lázaro Báez y otras personas que durante muchos años se han dedicado a robar al estado argentino. Estamos cerrando la red en torno a esta gente”.

El diario estadounidense The Wall Street Journal hace poco publicó una nota sobre el magnate de la construcción, Lázaro Báez, y sus vínculos tanto con el fallido Néstor como con su esposa la Presidente Kirchner. La nota también da cuenta del dramático aumento de bienes personales de la familia Kirchner durante sus años al servicio de la Nación.

El fallo del tribunal del estado de Nevada ordenó a las empresas fantasma de Báez cumplir con la obligación de divulgación, objetivo de los cargos interpuestos por NML. Al emitir el fallo, la jueza fue implacable y declaró que:

“…no hay duda que las 123 compañías son empresas fantasma. Tampoco cabe ninguna duda que las empresas fantasma habitualmente se constituyen para cometer fraude”.

La conferencia de prensa organizada por ATFA el jueves se desarrolló en un escenario de ataques continuos realizados por parte de funcionarios argentinos contra el juez Griesa y el sistema de justicia estadounidense. A continuación, una imagen de la página de Facebook de Axel Kicillof tal como apareció este mismo jueves:

Axel Fbook

El abogado representante de NML, Roberto Cohen, denunció estos ataques sobre el sistema judicial de los Estados Unidos y señaló la ironía subyacente al ser Argentina que esté acusando a las cortes estadounidenses de corrupción, cuando los registros muestran que Argentina es precisamente uno de los clientes extranjeros que más recurre al sistema judicial de los Estados Unidos.

Los líderes de Argentina no pierden tiempo cuando les conviene utilizar el sistema estadounidense para cobrar juicios de impuestos en el extranjero, u obtener evidencia para distintos casos judiciales, pero no tiene vergüenza en calificar de corrupto e incompetente a este mismo sistema cuando falla en contra suyo.

A continuación, dos juicios recientes que tratan un tema de impuestos, presentados por el gobierno argentino en la Corte del Distrito Sur de Nueva York –el mismo tribunal al que critica despiadadamente todos los días.

Argentine Government: “Judge Griesa wants your house, your jobs and your food”

Argentina has proven yet again that it has no respect for the American judicial system. After Judge Griesa warned on Friday that Argentina would be held in contempt if it did not cease making “false and misleading” statements claiming that it has not defaulted, the government continued with its public denunciations of U.S. courts and in particular, of Judge Griesa.

Press outlets were abuzz Wednesday with titles such as “Argentina slams U.S. judge in debt case; peso hits record low” (Reuters) and “Argentina defies contempt threat from US judge in debt default case (The Guardian).

President Kirchner’s Cabinet Chief Jorge Capitanich stated Wednesday that Griesa’s “lack of decision clearly comes from not understanding the process, not understanding Argentina’s status as a sovereign country.”

In addition to statements from the politicians, the Argentine government has produced and distributed posters depicting Judge Griesa’s head superimposed on the body of a vulture. The ad reads “Griesa wants your house, your job and your food.”

8-14 Pic

We’re sure that Jonathan Blackman of Cleary Gottlieb will strongly denounce these constant attacks on Judge Griesa by his client. To paraphrase his overwrought rant from last Friday: “to attack a [judge] in that fashion personally, day after day, so that [his] family has to read this sort of stuff, just goes beyond any bounds of human decency.  It is just absolutely wrong and improper.”

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