Argentine Economy

Esten, I expect you to break out in song at any minute - "Don't Cry for Me Argentina" for the poor masses.

Where did the judge get the power, why Argentina gave it to him when no one would buy their debt issued under Argentine law they, Argentina, went to New York to issue the bonds so everyone would get a warm fuzzy buying Argentine bonds governed by New York law.

All the judge did was READ THE CONTRACT between the bondholders and Argentina, which I might add Argentina WROTE, and just like any other contract dispute in American courts he just ruled on what WAS IN THE CONTRACT.

I believe in Poland they would say "Tough Shitisky", Argentina wrote it, got the money and now they have to live with it.

By the way, I would not consider a reduction in value of 75%+ the other bondholders took to be a "haircut", I would consider it a decapitation!

[QUOTE=Esten;440689] Somewhere in the US today, some very wealthy people are very pleased with judge Griesa. On Wall Street, it doesn't matter who gets hurt, as long as there is profit to be made.[/QUOTE]Esten, Are you serious? If Kirchner and Kicillof would negotiate in good faith they could settle this for about $1 billion and move on. The benefit of avoiding default to Argentina would be worth much more than that. However, the Peronists have their eyes on elections in 2015, so the public and country be damned. They think this will win them votes. There are parallels in USA politics.

What do you think the effect would be on new issues of emerging market debt if investors believed courts would not attempt to enforce contract terms or repayment? There would be less issuance of debt and interest rates would be higher. Poor people would suffer. Griesa did the world a service.

This is an example of why some of us are confounded by the sanctimonious attitude of some on the left. You hurt the people you're trying to help.

I was actually working at a futures trading firm when the bonds in question were conceived. We traded mostly interest rates and currencies so we were interested in this issue. Hence I read the entire bond indenture and remember thinking that some of the provisions could end up tying the Argies' hands down the road. I don't remember all the specifics but the judge looked to this same indenture when making his decision. Esten has a point in that there is a conflict of interest since the default would be insured, but the Argies and their underwriters knew all of this going in, because it was all in the indenture for all the world to see. Watch the film 'Camila' for a good example of how Argies make decisions based on pride, greed, lust, etc. , but never based on logic or common sense.

Also they are lying about inventing the ballpoint pen (el birome). Both Biró and Meyne were Hungarian Jews who did not arrive in Argentina until three years after Biró had obtained a patent in the UK. So the inventors are not Argie and the ballpoint was not invented in Argentina. Carlos Gardel was French on both sides so eliminate him too. What does Argentina have left? Luis Firpo was pretty good, Juan Manuel Fangio was pretty good but every BA cab driver who thinks he is Fangio is unfortuately not, and you have a few athletes. Mollejas are okay but chinchulines are gross and mondongo is only tolerable. Maté is among the most wasteful and vapid culture practices one can think of, possibly a cut above chewing betel nut but not much, and of course argentinos do it in a gross and unsanitary fashion; note that the [I]bombilla[/I] is never shared in Uruguay.

I would feel sorry for the hard-working rank-and-file Argentinian doing their best to get ahead, if I had ever met any in the six and a half years I spent there. Hence the need for the verb 'zafar' which does not exist in other Spanish-speaking countries.

[QUOTE=Doppelganger;440693]

All the judge did was READ THE CONTRACT between the bondholders and Argentina, which I might add Argentina WROTE, and just like any other contract dispute in American courts he just ruled on what WAS IN THE CONTRACT.

[/QUOTE]This link to an article in The Atlantic might have been posted before, but I thought it was a good article that helped explain to me the why's of the Argentine default especially why the US courts have jurisdiction. In a nutshell, the writer reminds everyone that you "always read the contract" and you can't fault the judge's ruling because the 65 words in the contract are not ambiguous.

[URL]http://m.theatlantic.com/international/archive/2014/07/65-words-just-caused-argentinas-29-billion-default/375368/[/URL]

There was an interesting article last week in the Wall Street Journal on how the Kirchner's purportedly amassed a fortune while in the Casa Rosada with the help of a businessman, Lazaro Baez. Here's the link: [URL]http://online.wsj.com/articles/in-argentina-mix-of-money-and-politics-stirs-intrigue-around-kirchner-1406601002[/URL]. I was able to read it without logging in, but in case you're not, here are some highlights.

During the 11 years that Argentine President Cristina Kirchner and her husband Nestor Kirchner have dominated national politics, they accumulated a small fortune.

Between 2003, when Mr. Kirchner was elected president, and 2010, when he died, the couple's net worth rose from $2. 5 million to $17.7 million, according to their annual filings with the federal anticorruption office. A lot of people in Argentina want to know where that money came from.

Yet it is an investigation involving a construction baron with close ties to the Kirchners that is creating one of the biggest stirs. A Buenos Aires prosecutor alleged that the businessman, Lazaro Baez, plotted to launder some $65 million through a global network of shell companies. The prosecutor, Jose Maria Campagnoli, said in an interview the money likely was diverted from government funds earmarked for public works and that [B]Mr. Baez was acting on behalf of the Kirchners.[/B].

The prosecutor's investigation was cut short, however, when judicial authorities suspended him, accusing him of exceeding his jurisdiction and leaking information to the media. He denies the accusations, saying he is being persecuted for investigating corruption. He now is facing a judicial proceeding that could cost him his job.

Austral Construcciones SA, Mr. Beez's flagship construction company, was created weeks before Mr. Kirchner took office in 2003. Since the Kirchners moved into the Casa Rosada, the pink presidential palace in downtown Buenos Aires, Mr. Baez's company has received hundreds of millions of dollars in public-works contracts in Santa Cruz, becoming the province's top private-sector employer.

In April 2013, Argentine investigative journalist Jorge Lanata broadcast allegations about Mr. Baez's company on his popular news show. The program aired secretly recorded videotapes of Leonardo Faria, who said on the tapes that he managed a $5 billion fortune for Mr. Baez and acted as his courier.

In the tapes, the ponytailed, Ferrari-driving Mr. Faria said associates of Mr. Baez loaded bags of cash onto Mr. Baez's executive jet and carried them to Buenos Aires. There the money was taken to a financial firm informally called "La Rosadita," he said, just five blocks from the presidential Casa Rosada. There was too much cash to be counted by hand, he said, so it was weighed to determine its value, then sent abroad to tax havens. Mr. Faria also claimed to have played soccer and socialized with Mr. Kirchner.

Federico Elaskar, the owner of the financial firm, appeared on the program and backed up Mr. Faria's comments.

After the show aired, Messrs. Faria and Elaskar both retracted their statements, saying they had lied to Mr. Lanata. But the Buenos Aires prosecutor, Mr. Campagnoli, said his team verified their links to Mr. Baez and their involvement in an alleged money-laundering scheme that used a network of shell companies.

In a recent interview, [b]Mr. Campagnoli alleged that Mr. Baez was a frontman for the Kirchners, diverting funds earmarked for public-works projects. He said he requested raids on the Kirchner residences to collect evidence.[/b] The request was denied by a lower-court judge.

[QUOTE=Doppelganger;440693]
By the way, I would not consider a reduction in value of 75%+ the other bondholders took to be a "haircut", I would consider it a decapitation![/QUOTE]I consider it a theft, pure and simple. The Argentine government got 75% of the money the money for only 25% of the cost. Most corporations would have to declare bankruptcy, but all the Argentine government did was declare a default, and then get pissed off when not everyone went along with it. The pari passu contractual language was written by Argentina. All the judge is doing is enforcing the contract. Enforcement of contracts is only something the Argentines do if it suits them.

Tres3.

The language in the pari passu clause is clearly general and non-specific. It's right there in Yujin's link. It does not authorize blocking one creditor's payments to help another creditor. Doppel's claim that the judge just read the contract is more crapola. If the language was so clear, the judge's decision would not be challenged by the Euro bondholders.

What the judge did was [I]interpret[/I] the clause to mean that if Argentina paid one creditor, it had to pay all, which in this case meant paying some creditors 30 cents on the dollar and others 100 cents. That's a biased interpretation of "equal treatment", clearly benefiting the holdout hedge funds.

The judge's bias was again on display in demanding a settlement with the holdouts despite the RUFO clause. If there was no other option, the judge's hard line would be more reasonable, because the holdouts do have a legal right to their payment. However there were other options, not the least of which was simply waiting until Dec. 31 for the RUFO clause to expire. The holdouts have waited a decade for payment, surely they could wait another 5 months. But apparently the judge couldn't.

Of course, some judicial bias is to be expected. But here, the judge was willing to risk harm not only to Argentina, but also the other creditors by blocking their payments. Why did the judge force events in the direction of default, knowing Argentina would never risk violating the RUFO clause? Aside from the bias, spite, arrogance and ideology are all likely factors as well. Complicity in helping Wall Street make $1 Billion on credit default swaps? Unproven, but given the bizarre rigidity demonstrated here, it seems like a possibility.

[QUOTE=Esten;440707]The language in the pari passu clause is clearly general and non-specific. It's right there in Yujin's link. It does not authorize blocking one creditor's payments to help another creditor. Doppel's claim that the judge just read the contract is more crapola. If the language was so clear, the judge's decision would not be challenged by the Euro bondholders.

The judge's bias was again on display in demanding a settlement with the holdouts despite the RUFO clause. If there was no other option, the judge's hard line would be more reasonable, because the holdouts do have a legal right to their payment. However there were other options, not the least of which was simply waiting until Dec. 31 for the RUFO clause to expire. The holdouts have waited a decade for payment, surely they could wait another 5 months. But apparently the judge couldn't.

Of course, some judicial bias is to be expected. But here, the judge was willing to risk harm not only to Argentina, but also the other creditors by blocking their payments. Why did the judge force events in the direction of default, knowing Argentina would never risk violating the RUFO clause? Aside from the bias, spite, arrogance and ideology are all likely factors as well. Complicity in helping Wall Street make $1 Billion on credit default swaps? Unproven, but given the bizarre rigidity demonstrated here, it seems like a possibility.[/QUOTE]We don't know how many, if any, Supreme Court justices wanted to hear this case when Argentina tried to appeal it. However, given that they decided 7 to 1 to allow bondholders to issue subpoenas to banks to trace Argentine assets abroad, I suspect most or all of the justices would have sided with Griesa and the Second Circuit Court of Appeals. In other words, this probably wasn't even close. Apparently RUFO is only triggered if the payment to the holdouts is voluntary, and compliance with a court order is not voluntary. It will be interesting to see if Argentina will settle after December 31, when the RUFO clause expires. I seriously doubt the Peronists will settle before the next election.

Washington Post today on the "weird default". Point number "3" is interesting considering the insurance the hedge funds bought against default.

[URL]http://www.washingtonpost.com/blogs/wonkblog/wp/2014/08/03/everything-you-need-to-know-about-argentinas-weird-default/[/URL]

[QUOTE=Esten;440707]The language in the pari passu clause is clearly general and non-specific. It's right there in Yujin's link. It does not authorize blocking one creditor's payments to help another creditor. Doppel's claim that the judge just read the contract is more crapola. If the language was so clear, the judge's decision would not be challenged by the Euro bondholders.

What the judge did was [I]interpret[/I] the clause to mean that if Argentina paid one creditor, it had to pay all, which in this case meant paying some creditors 30 cents on the dollar and others 100 cents. That's a biased interpretation of "equal treatment", clearly benefiting the holdout hedge funds.

The judge's bias was again on display in demanding a settlement with the holdouts despite the RUFO clause. If there was no other option, the judge's hard line would be more reasonable, because the holdouts do have a legal right to their payment. However there were other options, not the least of which was simply waiting until Dec. 31 for the RUFO clause to expire. The holdouts have waited a decade for payment, surely they could wait another 5 months. But apparently the judge couldn't.

Of course, some judicial bias is to be expected. But here, the judge was willing to risk harm not only to Argentina, but also the other creditors by blocking their payments. Why did the judge force events in the direction of default, knowing Argentina would never risk violating the RUFO clause? Aside from the bias, spite, arrogance and ideology are all likely factors as well. Complicity in helping Wall Street make $1 Billion on credit default swaps? Unproven, but given the bizarre rigidity demonstrated here, it seems like a possibility.[/QUOTE]Esten, what do you think pari passu means? It is not open for interpretation as you falsely allege. Argentina wrote the clause and must live by the literal meaning, not an "interpretation". RUFO only applies if the payment is VOLUNTARY, not if the government is complying with an order. The order in the instant case was Judge Griesa's, supported by an Appeals Court, and the Supreme Court. We know that you hate Wall Street, but do not let your hatred lead to the same obfuscation as the Argentine Government. No one is blocking one person's payment to help another, and credit default swaps are nothing more than a form of insurance. In simplistic terms, which maybe you will understand, one insures his automobile against collision loss, and one insures his sovereign bonds against default loss.

Tres3.

[QUOTE=Tres3;440715]Esten, what do you think pari passu means? It is not open for interpretation as you falsely allege. [/QUOTE]Here again, one more blanket assertion without any evidence to back it up. And then a little name calling. The logic here is, I say so, so you're wrong.

Here's a couple of articles that examine the pari passu clause in depth.

[URL]http://www.lse.ac.uk/fmg/events/financialRegulation/LFR15L_Buchheit-[/URL](Pari-Passu-Clause-in-Sovereign-Debt-Instruments-Emory-Law-Journal). Pdf.

[URL]http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2397929[/URL]

Seems to me the clause is very much open to interpretation.

From the Emory Law journal article:

"This leads us to the final question: how could a fallacious interpretation of.

A boilerplate clause-without a basis in law, or practice or commentary-have.

Taken even a shallow root in the minds of some market participants? It is true.

That the text of the pari passu clause itself is remarkably unconfiding about.

What the drafters were seeking to achieve with the provision, but that only.

Explains why it presented such an attractive target for creative explanations by.

Litigants in search of an effective remedy against a sovereign debtor. ".

[QUOTE=RockinBob;440722]Here again, one more blanket assertion without any evidence to back it up. And then a little name calling. The logic here is, I say so, so you're wrong.

Here's a couple of articles that examine the pari passu clause in depth.

[URL]http://www.lse.ac.uk/fmg/events/financialRegulation/LFR15L_Buchheit-[/URL](Pari-Passu-Clause-in-Sovereign-Debt-Instruments-Emory-Law-Journal). Pdf.

[URL]http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2397929[/URL]

Seems to me the clause is very much open to interpretation.

From the Emory Law journal article:

"This leads us to the final question: how could a fallacious interpretation of.

A boilerplate clause-without a basis in law, or practice or commentary-have.

Taken even a shallow root in the minds of some market participants? It is true.

That the text of the pari passu clause itself is remarkably unconfiding about.

What the drafters were seeking to achieve with the provision, but that only.

Explains why it presented such an attractive target for creative explanations by.

Litigants in search of an effective remedy against a sovereign debtor. ".[/QUOTE]Are you saying that three separate courts, including SCOTUS, all came to a wrong conclusion based on a faulty interpretation? You are also conveniently forgetting that it was Argentina who put pari passau in the bond indenture and also subjected themselves to USA Law. Even with pari passau Argentina has successfully stolen a large sum of money.

Tres3

[QUOTE=Tres3;440723]Are you saying that three separate courts, including SCOTUS, all came to a wrong conclusion based on a faulty interpretation? You are also conveniently forgetting that it was Argentina who put pari passau in the bond indenture and also subjected themselves to USA Law. Even with pari passau Argentina has successfully stolen a large sum of money.

Tres3[/QUOTE]Jeez, Tres3, you think SCOTUS couldn't come to a wrong conclusion based on a faulty interpretation? That's precisely what Roberts, Alito, Thomas, Scalia were put on the court to do!

Here's the way I see it: Paul Singer / ECM are bottom feeders, like debt collection agencies that buy up debts for pennies on the dollar and harrass people for the money. Here, what they need is to convince some judge to go along with a twisted interpretation of the law and then arrange it so that the legitimate holders of the exchange bonds are held hostage to their demands. Extortion, as Axel Kicillof put it.

Everybody got screwed equally by Argentina. They defaulted on all their bonds. 93% of the bondholders decided half a loaf (or a quarter, whatever) was better than none, and so they went for the exchange bonds. And they have been paid off equally under the new arrangement. Pari passu.

As for the holdouts, they should just accept the fact that they got screwed. Argentina is a serial defaulter, who the hell would buy their bonds in the first place? Default is the risk you take when you buy an Argentine bond. The holdouts are stuck with worthless bonds, they have been defaulted on, and now they come up with this legal chicanery to try and get some money (actually, a lot of money) out of them.

Seems what I read in the financial press is that most lawyers who deal with these issues are concerned that the rulings go against precedent and upset what till now was a stable system to deal with these matters. Many if not most question Judge Griesa's decision.

A contract is a contract is a contract. Boy, did everybody forget that in a New York minute a few years back in the financial crisis when the government bailed out the banks to the tune of how many trillions of dollars?

[QUOTE=RockinBob;440725]As for the holdouts, they should just accept the fact that they got screwed. Argentina is a serial defaulter, who the hell would buy their bonds in the first place? Default is the risk you take when you buy an Argentine bond. The holdouts are stuck with worthless bonds, they have been defaulted on, and now they come up with this legal chicanery to try and get some money (actually, a lot of money) out of them.[/QUOTE]Is it just me or does this not make a hell of a lot of sense?

Rockin Bob like other anti-liberal leftists believes it's OK to steal, as long as it's government doing the stealing. When that happens you blame the victim. It's the victim of the serial defaulter that's using "legal chicanery."

Hedge funds aren't the only holdouts. There are Argentine and European pensioners who also refuse to take a haircut. The Kirchneristas refer to them as mini-vultures.

[QUOTE=RockinBob;440725]Jeez, Tres3, you think SCOTUS couldn't come to a wrong conclusion based on a faulty interpretation? That's precisely what Roberts, Alito, Thomas, Scalia were put on the court to do![/QUOTE]The Supreme Court voted 7 to 1 to issue subpoenas to trace Argentine assets. Based on that, if they had decided to hear the appeal of Griesa's decision, you'd expect they'd vote 7 to 1 or 8 to 0 to uphold Griesa's ruling.

[QUOTE=RockinBob;440725]Jeez, Tres3, you think SCOTUS couldn't come to a wrong conclusion based on a faulty interpretation? That's precisely what Roberts, Alito, Thomas, Scalia were put on the court to do!

Here's the way I see it: Paul Singer / ECM are bottom feeders, like debt collection agencies that buy up debts for pennies on the dollar and harrass people for the money. Here, what they need is to convince some judge to go along with a twisted interpretation of the law and then arrange it so that the legitimate holders of the exchange bonds are held hostage to their demands. Extortion, as Axel Kicillof put it.

Everybody got screwed equally by Argentina. They defaulted on all their bonds. 93% of the bondholders decided half a loaf (or a quarter, whatever) was better than none, and so they went for the exchange bonds. And they have been paid off equally under the new arrangement. Pari passu.

As for the holdouts, they should just accept the fact that they got screwed. Argentina is a serial defaulter, who the hell would buy their bonds in the first place? Default is the risk you take when you buy an Argentine bond. The holdouts are stuck with worthless bonds, they have been defaulted on, and now they come up with this legal chicanery to try and get some money (actually, a lot of money) out of them.

Seems what I read in the financial press is that most lawyers who deal with these issues are concerned that the rulings go against precedent and upset what till now was a stable system to deal with these matters. Many if not most question Judge Griesa's decision.

A contract is a contract is a contract. Boy, did everybody forget that in a New York minute a few years back in the financial crisis when the government bailed out the banks to the tune of how many trillions of dollars?[/QUOTE]A flower in the desert.