Argentina Faces Risk of Default

Cristina Fernandez (i) cuando reunió con los Castros en enero del 2013 en La Habana.  Foto: presidencia de Argentina.

HAVANA TIMES — Argentina has reached the last stretch of a decisive economic and political road, facing the end of the term established for the payment of an international debt and a thorny litigation in the United States, DPA reported on Sunday.

If Argentina fails to settle its 539 million dollar debt this coming Wednesday – completing the payment of the sum Argentina deposited in a New York bank and US judge Thomas Griesa froze this past June – the country will default on its payment, as it did in 2001.

Faced with this situation, President Cristina Kirchner is assessing different strategies to confront the possibility of defaulting on the debt, including the application of measures that encourage domestic consumption, maintain credit programs for the purchase of homes and automobiles, halt the lay-off of workers and guarantee financing for small companies, the Argentinean newspaper La Nacion reported.

The default “is not going to have tragic consequences” for the country “because this isn’t 2001 and the domestic market is going to continue to perform as it is doing now,” national deputy Hector Recalde stated today.

The legislator insisted on the argument the Argentinian government made public in recent days through different spokespeople and officials, including Cabinet President Jorge Capitanich: “life goes on, even when one defaults on a loan.”

Clarin newpaper reported today that the Ministry of the Economy “believes that the impact on the economy will not be of the magnitude felt following the 2001 default,” which Argentina, mired in a profound political and social crisis, experienced during the brief presidency of the current Peronista deputy Adolfo Rodriguez Saa.

In this connection, the morning paper Pagina 12 editorialized that the economic situation that will result from a potential default “will not be in the least agreeable, but it won’t spell the abysmal crisis heralded by those that need a crisis to impose conditions on the country and its inhabitants.”

The president of the Union Industrial Argentina (“Argentina Industrial Union”) expressed disagreement with this, stating that the country’s economic situation “is extremely serious and cause for concern and alarm,” and that, consequently, it “should not be left in the hands of two people alone,” alluding to President Kirchner and Minister of the Economy Axel Kicillof.

“Argentina is not going to default on its loan for a real reason: countries that do not pay their debts default since Argentina paid its debt. They’re going to have to invent a new name for it,” said Kirchner on Wednesday, referring to the 539 million dollars that the Argentine State deposited in the New York Mellow (BONY) bank at the end of June to settle and overdue restructured debt.

This payment, however, was blocked weeks ago by Judge Griesa, who insists it cannot be made effective until Argentina fulfills its obligation of paying 1.5 billion to the holdouts who, on two occasions (2005 and 2010), did not accept a partial acquaintance of the debt, what Argentina refers to fondos buitre (“vulture funds”).

Argentina has reiterated that it cannot abide by the ruling because, were it to do so, it would be breaching the RUFO clause, which bars it from reaching a more convenient agreement with the debtors than the one already accepted by the holders of the restructured debt bonds.

The country has until next Wednesday to reach an agreement with the “vulture funds” in order to effect the payment of the sum deposited at BONY or, as it has requested on a number of occasions, to have Griesa extend the negotiations term. If it fails to do so, it will default on its loan.

5 thoughts on “Argentina Faces Risk of Default

  • An interesting question! Who is the other lady in the photograph shown above of Fidel Castro Ruz, President Raul Castro Ruz and President Mrs. Kirchner?

  • Beyond the perfect metaphors, your point is well-taken. When Greece, Italy and Portugal found their arses in an economic jam a few years ago, it was Merkel of Germany who, at considerable political risk, bought their junk bonds to bail them out. For all the bluster about solidarity and “Nueva America” where is Kirchner’s angel to bail Argentina out of this jam. The current group of Latin American leftists are all talk it would seem.

  • Kirchner was ill-advised into believing that she could just assume that the bondholders who did not accept the restructuring agreement would just fall in line without a fuss. She will likely now allow this debt to go into default and again, given her poor counsel, watch Argentina’s cost of borrowing hit the stratosphere. Chavez saved her butt once before. Maduro, who can barely help himself, will not likely step in as Chavez did in the past to lend Argentina the money to pay its debt.

  • This deeply indebted country under the leadership of President Mrs. Kirchner is more concerned with diverting attention away from its very serious economic problems by continuing to promote it’s bogus claim for sovereignty of the Falkland islands where 99.7% of the population voted to remain British and where the language is English not Spanish, than it is in providing sound government for its people. Clearly President Mrs. Kirchner is a poseur running around her socialist amigos joining them in forming plans which never come to fruition and in the vain hope that she will achieve some form of support from them. What support could Cuba provide when it too is in debt? The answer as usual is to have meetings, give her besos and pose her with the Castros in front of the cameras. For Argentina the only sensible action is to have an election, change the leadership and send President Mrs. Kirchner into retirement with a parting gift of multifaceted mirrors.

  • Why doesn’t Kirchner ask the new BRICS monetary fund to bail our Argentina? For that to happen, she will have to get approval from China & Russia who contributed the most money to the bank. If she wants to see what real “vultures” do, just wait till Chinese & Russian bankers descend to pick over Argentina’s rotting economic carcass.

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