Friday, October 26, 2012
By Marcelo Bonelli
The attachment of the Frigate Libertad is another chapter in the unresolved story of the debt in default, an issue that also is an obstacle to the country’s access to the international credit market.
The international embarrassment generated by the attachment of the Frigate Libertad unveils an economic problem underneath: after a decade, Argentina still has not resolved the problem of the default of its foreign debt.
The attack by the fund NML Capital on the Navy ship reveals that the government could not conclude a negotiation that was initiated in a successful manner by Nestor Kirchner. The unprofessionalism and the improvisation by current officials, which impedes the closing of that financial chapter, has high costs for Argentina. One is that, while ignoring international legislation, vulture funds are holding a ship of the National State. Another is that the country remains on the margins of cheap international credit, like those which the Paris Club could provide for infrastructure projects, nor can it seek private funding like Bolivia has just done at an interest rate of only 4.9%. The government would have to pay 11% at a minimum.
The offensive against state assets is possible because the country continues to have – for more than 10 years – unpaid obligations that have not been negotiated for a total of US$34.285 billion.
A secret “paper” from Minister Hernan Lorenzino acknowledges that the debt with the bondholders is US$11.2 billion, with the Paris Club it’s US$6.748 billion plus interest, and the lawsuits from the ICSID come to US$13.6 billion.
Barack Obama personally asked Cristina Kirchner on November 9 to normalize those commitments. And during the private meeting they held, the President committed to paying a ruling that the ICISD issued for a U.S. company, CMS.
Cristina never followed through and Washington responded with a clear green light to the bondholders and made possible the complaints from the Paris Club and the threats from the IMF.
Cristina committed herself to paying the debt with the Paris Club in cash: she signed a decree and announced it at the Casa Rosada in 2008.
But she didn’t pay. Added to the presidential breach were various other efforts of ex-minister Amado Boudou that ended up just being formalities. For that, the head of the organization, Ramón Fernández, he accommodated the most hardline sectors against Argentina. The French Treasury secretary communicated to the Palacio de Hacienda that he will only deal with the Lorenzino-Axel Kicillof duo through written documents.
The lack of agreement with the Paris Club is generating two problems: Argentina has no cheap international credits for infrastructure projects, like railways, which could have avoided the Once tragedy.
–There exists a real international isolation.
No developed country has shown solidarity with it before the outrage of the attachment of the teaching vessel.
The vulture funds are trying to attach Argentina since the day that Adolfo Rodríguez Saá defaulted. In more than 10 years they never were able to follow through on their purpose and now they did so by the malpractice and amateurism of many local officials.
The only partial success that the speculators have had was when they froze a deposit from the Central Bank destined to paying the IMF debt. Then, international courts sided with the BCRA, then led by Martín Redrado. Now, the attachment of the Frigate Libertad follows the lack of foresight and a late reaction, which again clearly shows the terrible management of the government.
Héctor Timerman failed in the UN and Argentina didn’t work professionally where it should have: with corps of attorneys hired in Ghana, to release the Frigate. Faced with the problem, the firm of Cleary & Gottlieb, which advises on the debt issue, was absent or acted through its attorney Jonathan Blackman, as disoriented as the Casa Rosada.
This box was considered by the business associations, which met to evaluate the capital market reform. In those meetings Kicillof’s phrase to explain the move was commented about: “Companies used to shovel cash out, now they’ll have to put in.” This is how the official revealed the true intention of the plan. The government wants to use confidential information on the companies to pressure and threaten those businessmen that don’t see the right conditions for investing in Argentina. This was analyzed in the Argentine Business Association and the Argentine Industrial Union. In the meetings, many said that the reform includes, in part, old projects from the era of Domingo Cavallo, but they fear the discretionality and hostility from the government toward private activity.
This year the Securities Commission (CNV) opened 13 summary reviews, but only on companies being persecuted by the Casa Rosada like Siderar, Gas del Norte (both part of Techint), Papel Prensa, Clarín, Cablevisión, Boldt and economist Orlando Ferreres.
They’re pursuing Ferreres because he gave out precise data on inflation and Boldt since the time its director, Guillermo Gabella, spoke out against Boudou in the Ciccone scandal.
On Tuesday, Adelmo Gabbi, head of the Bolsa de Comercio, had a very strong argument with the head of the CNV, Alejandro Vanoli.
He accused him of being disloyal and ungrateful, and Vanoli responded that they were going to put an end to the gamblers. It was the second round of the public speech that Gabbi gave a the Academy of the Capital Markets. Before Vanoli, he spoke of the lack of trust that the government was creating. Gabbi was one of the most loyal members of the establishment to the government. Now the Rosada is paying him back: the institution that will suffer the most from the reform is the Bolsa de Comercio, which will lose its function. It’s another businessman with close ties to the late Nestor Kirchner who is being expelled from the official paradise of the President and La Campora.
To read this article in Spanish, visit: http://www.clarin.com/opinion/cosecha-amarga-incumplimientos-repetidos_0_799120184.html