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Argentina could lose an export benefit
La Nacion
January 25, 2012

By Martin Kanenguiser

The United States could increase tariffs for a series of products if the ICSID is not complied with

The government is preparing itself to receive good and bad news from Washington in the coming weeks around payment of debt to private creditors. The good news is that the Barack Obama administration will confirm its support for the Argentine Central Bank on request from the Supreme Court of that country to analyze whether it will take up the request from a pair of vulture funds to maintain reserves embargoed for US$105 million.

Diplomatic sources explained to LA NACION that, as has occurred in previous instances, the Department of the Treasury will ratify the intangibility of that money, to not create a dangerous precedent in future cases from other countries. As such, the backing doesn't refer only to the opinion of the American government about the claims by NML and EM over unpaid debt since 2001, to the need to avoid other countries which deposit their reserves at the Federal Reserve to get similar threats from private creditors.

The bad news is that if in the coming weeks the government doesn't pay out on two sentences from the World Bank arbitration tribunal (ICSID) to the companies Blue Ridge and Azurix, in February benefits in the generalized system of preferences (GSP), which benefit Argentine exports to this destination, will be suspended.

Sources indicated that the government was warned on various occasions about the removal of this tariff advantage, which in 2010 benefitted exports of US$470 million over total sales of US$3.839 billion, according to the Chamber of Exporters (CERA) and the consulting firm Abeceb.com. In fact, officials from Buenos Aires began to make moves in Washington to try to postpone this reversal, which, for American officials, is "imminent."

One of those who traveled was the new undersecretary of Financial Services, Guido Forcieri, backed by the new ambassador, Jorge Arg ello.

The Democratic government also advised the Argentine private sector that will be affected by the removal of GSP of this decision, but the CERA backed the government's actions in this issue. The conflict is due to the fact that the creditors expect to collect abroad on those judgments that they won against Argentina at the ICSID, while the government says the sentence must be discussed in local courts.

GSP benefits food and drinks, leather and furs, auto parts and other products. The bilateral trade balance ended up with a surplus for the United States of US$3.132 billion, according to data processed by abeceb.com.

The president of CERA, Enrique Mantilla, told LA NACION that they supported the actions of the embassy in the U.S. "because Argentina applies the same criteria as other countries, like Great Britain, Chile and Canada, among others; because compliance will come with the payment because the ruling of the ICSID tribunal doesn't imply a renunciation of national administrative rules in complying with the sentences."

From Washington they postponed the suspension of GSP for Argentina to wait for the first signals of Cristina Kirchner's second term. But after a month, in place of seeing progress in the negotiation of the debt with the Paris Club a balance of US$8.9 billion has accumulated since 2001 the strongest measures taken were around new currency exchange restrictions, as well as on capital flight and imports. Washington believes that, due to the smaller quantity of current dollars, the government couldn't be able to pay under sufficiently short terms to elude the monitoring of the International Monetary Fund (IMF).

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