Don’t cry for Argentina, fight back!

26 November 2012 by Beverly Keene

The prized Argentine naval frigate named “Liberty”, has been retained in a Ghanaian port since October 2, by virtue of the claim filed there by the same vulture fund Vulture funds
Vulture fund
Investment funds who buy, on the secondary markets and at a significant discount, bonds once emitted by countries that are having repayment difficulties, from investors who prefer to cut their losses and take what price they can get in order to unload the risk from their books. The Vulture Funds then pursue the issuing country for the full amount of the debt they have purchased, not hesitating to seek decisions before, usually, British or US courts where the law is favourable to creditors.
that yesterday obtained an order from a New York Judge to pay all the holders of Argentine bonds, whether they entered into the forced restructurings in 2005 and 2010 or not.

The “stop discrimination” vulture ruling has attracted global attention due to the havoc that it stands to provoke in relation to debt restructurings around the world – whether South or North. But also due to the judge´s injunction, upheld earlier by a related Appeals Court ruling, that would place in contempt of court not only Argentina, if it fails to comply, but also the New York banks and clearing houses that presently intervene in order to transfer payments to those bondholders who did accept the earlier restructurings.

Failure to make the next round of scheduled interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. payments on December 15th would place Argentina in a situation of technical default, provoking huge profits for those hedge funds Hedge funds Unlisted investment funds that exist for purposes of speculation and that seek high returns, make liberal use of derivatives, especially options, and frequently make use of leverage. The main hedge funds are independent of banks, although banks frequently have their own hedge funds. Hedge funds come under the category of shadow banking. that have been betting on just such an outcome. Complying with the Judge´s order, among other consequences, would force Argentina to renegotiate all of its restructured debt claims, given the inclusion of clauses that committed the country to refrain from recognizing better terms to those “holdout bondholders” than those recognized to the investors who accepted the swap.

An initial reading of the most recent New York ruling, however, forces a spotlight onto three priority considerations:

1. The decision is a serious affront to justice. It fails to take into consideration the consequences for the people of Argentina, and for the inhabitants of all countries that have been forced into processes of indebtedness, and the subsequent restructuring of unpayable debt claims.

Justice demands that legal decisions regarding debt claims recognize the primacy of international human rights obligations over any and all financial or commercial claims or transactions. The recently approved UN Guiding Principles on Debt and Human Rights underscore the human rights responsibilities of all relevant actors in international debt agreements, including states, multilateral institutions, and private enterprises.

2. The decision is the result of the tremendous imbalance of power that dominates the international financial system, facilitating the unscrupulous and unacceptable action of international speculators, and rendering the fruit of their action – unbearable, unjust, and illicit debt claims – totally illegitimate. Enormous debt loads were accumulated in the 70´s and 80´s in countries like Argentina under military dictatorships and through the massive and systematic violation of all human rights, due to the pressure of international banks and speculators that were seeking to make more spectacular profits in the South than they could then in the North. Under their extorsionary weight, governments throughout the South were then subjected to the neoliberal Washington consensus of the 90s. They were forced to auction off the people`s patrimony to the vulture funds of that day, but also to submit to the new rules of the game: the surrender of state sovereignty and immunity to the market, waiver of jurisdiction, treatment of debt as investment, equal treatment of foreign and domestic claimants, etc.

Such surrendering of state sovereignty, including the waiver of jurisdiction, must be recognized as null and void, whether incorporated into the issuance of bonds, the signing of Bilateral Investment Treaties or Free Trade, Economic Partnership or other Commercial Agreements, or adherence to ICSID ICSID The International Centre for the Settlement of Investment Disputes (ICSID) is a World Bank arbitration mechanism for resolving disputes that may arise between States and foreign investors. It was established in 1965 when the Washington Convention of that year entered into force.

Contrary to some opinions defending the fact that ICSID mechanism has been widely accepted in the American hemisphere, many States in the region continue to keep their distance: Canada, Cuba, Mexico and Dominican Republic are not party to the Convention. In the case of Mexico, this attitude is rated by specialists as “wise and rebellious”. We must also recall that the following Caribbean States remain outside the ICSID jurisdiction: Antigua and Barbuda, Belize, Dominica (Commonwealth of) and Suriname. In South America, Brazil has not ratified (or even signed) the ICSID convention and the 6th most powerful world economy seems to show no special interest in doing so.

In the case of Costa Rica, access to ICSID system is extremely interesting: Costa Rica signed the ICSID Convention in September, 1981 but didn’t ratify it until 12 years later, in 1993. We read in a memorandum of GCAB (Global Committee of Argentina Bondholders) that Costa Rica`s decision resulted from direct United States pressure due to the Santa Elena expropriation case, which was decided in 2000 :
"In the 1990s, following the expropriation of property owned allegedly by an American investor, Costa Rica refused to submit the dispute to ICSID arbitration. The American investor invoked the Helms Amendment and delayed a $ 175 million loan from the Inter-American Development Bank to Costa Rica. Costa Rica consented to the ICSID proceedings, and the American investor ultimately recovered U.S. $ 16 million”.

https://icsid.worldbank.org/apps/ICSIDWEB/Pages/default.aspx
, the World Bank World Bank
WB
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 180 members in 1997), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

http://worldbank.org
`s Center for the Settlement of International Investment Disputes.

3. The decision seeks to legitimize debt claims that are illegitimate and illicit. The bonds now held by the highly aggressive “vulture funds” that have been pursuing their Argentine prey for 10 years now, in courts all over the world, are direct descendants of the debt accumulated in Argentina at a cost of 30,000 disappeared, in order to sustain the civilian-military dictatorship that ruled the country between 1976 and 1983, and force the country into the neoliberal strait jacket. That debt has been the subject of extensive judicial investigation in Argentina, and in July, 2000, Federal Judge Jorge Ballester ruled that it was the result of at least 477 fraudulent and arbitrary acts. A federal court decision to declare the debt null and void is still pending as are several federal court investigations covering various aspects of all the successor debt – including the megaswap carried out in May, 2001, just months before the final collapse of the debt-burdened Argentine economy that only a few years earlier had been the nunmber one poster-child of IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org
and World Bank policies for disciplining the South into the global economy ruled by the North.

The debt claimed of Argentina must be audited, not paid. The realization of a comprehensive, public, and participatory audit that investigates the legality and legitimacy of the process of indebtedness in relation also to its purposes and the accumulation of social and ecological debt, is more urgent than ever. Among other results, it would provide the people and the government of Argentina with the information we need to recover our sovereignty, defend our rights, and advance our demands for justice and reparations.

Beverly Keene

Dialogue 2000 – Jubilee South Argentina

Buenos Aires, November 22, 2012


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COMMITTEE FOR THE ABOLITION OF ILLEGITIMATE DEBT

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