Post date : 08.26.2014 6:48 pm
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.