Yves here. This important Real News Network segment did not get the attention it deserved by virtue of running right after Turkey Day. And it is important to note that interviewee Henry James is far too polite in how he characterized the New York ruling by Judge Griesa against Argentina. Most bankruptcy efforts regard his calls on Argentina’s restructuring (for instance, in trying to assert that his ruling has force in jurisdictions not subject to US law) have typically ranged from dubious to utterly batshit.
ESSICA DESVARIEUX, PRODUCER, TRNN: Welcome to the Real News Network. I’m Jessica Desvarieux in Baltimore.
Wall Street is celebrating this week after Argentina elected a new conservative president. Conservative opposition leader Mauricio Macri beat the ruling party candidate by a 51-48 percent margin. The change in government could end a decade-long battle between hedge funds and Argentina over huge debt payments. You may remember back in 2001 Argentina set a record by defaulting on $95 billion worth of loans. Their economy tanked and vulture capitalists like Paul Singer swooped in and purchased nearly worthless debt after the default. Then they waited while the debt gained value, and now they want full repayment. A plan this new administration is more amenable to than sitting president Cristina Fernandez de Kirchner. She and her party have refused to pay the hedge funds for the past twelve years.
Here to give us more context is our guest James Henry. James is a leading economist, attorney, and investigative journalist who has written extensively about global issues. Thanks for joining us, James.
JAMES HENRY: You’re very welcome.
DESVARIEUX: So James, Paul Singer, who I mentioned in the intro, he wants Argentina to pay back at least $1.5 billion. Why shouldn’t they pay back these hedge funds? I mean, a New York judge recently said they should. So do you agree?
HENRY: No, I don’t. I think, you know, governments don’t have a bankruptcy court, unlike the rest of us. And so when they get into deep debt problems, by virtue in this case of the previous neoliberal government in Argentina under my classmate Domingo Cavallo, they ran up a huge foreign debt that they just could not service. And there was no place for Argentina to go other than to restructure that debt on its own. So they issued new bonds in 2004, and 95-98 percent of the bond owners, the creditors, that had bought Argentina debt, Argentine debt before, accepted those bonds and the terms of the bonds.
Paul Singer actually didn’t buy the bonds that he owns in 2004-2005. He waited till 2008 and purchased them for $48 million. And today he’s claiming the face value of the bonds he bought back then at $1.5 billion. So you know, that’s–it’s really a basic fault of the international system that we don’t have a bankruptcy court for a government where they can work out reasonable payment terms and figure out how to restructure debts. Because every government in the world, including our own, gets into debt problems. But Argentina has a history of indebtedness. In the 1970s about half of the 2001 debt, $180 billion, came from the military junta during the 1970s. Nobody even knows where that money went, about $88 billion was inherited by the succeeding democratic government. And you know, it’s outrageous to deny Argentina the right to restructure those odious debts.
But in fact, one of the good things about the Kirchner government, I mean, you can criticize them for being, you know, letting inflation getting out of control more recently, and corruption problems have emerged over a 12-year period. But one of the great legacies of this Kirchner government is that they reduce the debt to practically nothing. I mean, the current net public debt over looking at reserves for Argentina is less than $25 billion.
DESVARIEUX: And how did they do that?
HENRY: So I think the fact–what people are really worried about here, in fact, is that the Macri government might come in and do what previous neoliberal governments and military junta did, which is to run up the debt as an alternative to raising taxes.
DESVARIEUX: What is the new president proposing? How does he propose to handle the debt, and can you just speak briefly about how the Kirchner administration handled the debt?
HENRY: Well, they’ve engaged in this bond restructuring, and they stubbornly refused to negotiate with Singer, because it would make a, it would set a bad precedent. They were supported, by the way, with hedge funds all over the country that are basically supporting the Argentine position, as well as leading economists like Joe Stiglitz. I mean, I don’t know of a single Western economist that, or even at the IMF, who doesn’t agree that the vulture capitalists need to be put out of their misery.
But Macri has indicated that he’s going to get beyond this issue and basically settle with Singer. And so, you know, because discussions will probably lead to a payout for Singer and he’ll realize a huge return on this $48 million.
DESVARIEUX: All right. Let’s turn the corner a bit, James, and let’s talk about an alternative plan that would give everyday Argentines a more prosperous future. Considering, as you said before, massive inflation is happening in Argentina right now, declining cash reserves, and really a meager economic growth some say due to exclusion from the global markets post-default. Do you agree with that assessment, and what should be done to address the clear economic woes that the country currently faces?
HENRY: Well, one of the opportunities for Argentina is that their own citizens have about $400 billion offshore of private wealth that they’ve kept outside of the country. So I would love to see a government that was able to attract that investment back to Argentina. I think there’s tremendous growth potential there. They have enormous resources, including, you know, some of the largest untapped oil reserves in the south.
This government has talked a good game. But I think in terms of mounting a concrete economic strategy to compete, they’ve lost a lot of opportunities, and they’ve been riding the backs of the commodity boom and the China growth spurt during the last decade. So you know, Argentina is a country with a very well-educated labor force. They have enormous natural resources. It’s practically empty Much of the country is, you know, there’s enormous agricultural potential there. But they have a, they’ve had a consistent–the whole century of sort of bad governance. The Kirchner government I think was actually relatively adept at solving certain problems, like I mentioned, with debt.
But on the tax front, one clear thing that they need to do is a tax reform not only reducing payroll taxes, which are exorbitant, but to have taxes, actually a more fair tax system that takes advantage of all this wealth that many wealthy Argentines have offshore. I would say focusing on the tax system would be one of the first priorities.
DESVARIEUX: Okay. James Henry, thank you so very much for joining us.
HENRY: Quite welcome.
DESVARIEUX: And thank you for joining us on the Real News Network.
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Precisely what is great about Argentina, if only like in Greece the parasites didnt steal too much
“… I think there’s tremendous growth potential there. They have enormous resources, including, you know, some of the largest untapped oil reserves in the south…
…So you know, Argentina is a country with a very well-educated labor force. They have enormous natural resources. It’s practically empty Much of the country is, you know, there’s enormous agricultural potential there. “
Macri favours creating a better working relationship with the UK and easing off on the Malvinas rhetoric. Good news as that mythical Malvinas stuff is wearing a bit thin on the imagination: https://www.academia.edu/17799157/Falklands_-_Some_Relevant_International_Law
Having been involved in Argentina in the late 70’s early 80’s it is one of the most screwed up places in the world. My advice to anyone who is thinking about doing business in Argentina is forget about it. They have a culture of luring capital in and stealing it. There are only a few large families that run Argentina and it is like dealing with the Mafia.
Argentina is another country attempting to make socialism work. The name of the Peronist party that has ran Argentina for most of the last 30 years translated into English is something like the Social Justice party. I have no sympathy for the people of Argentina. They have the country and government they deserve.
Remember as I said earlier — Michigan = Argentina, Illinois = Venezuela and California = Brazil. All going the way of Puerto Rico.
For those who think that Sweden is a socialist heaven and if the US was like it then people would never have to work again you should read – http://www.gatestoneinstitute.org/6607/sweden-migrants-fear.
I also lived in worked in Scandanavia. I can tell you the reality is totally different than the perception. Few Americans would want anything like it. I was told that I was the best Expatriate they ever had but that is because I can live rough.
I, for one, am glad that we have cleared up who exploits who.
Ah, you must be referencing the Gringoes that come in and exploit the poor South American country. Yeah, that’s it!
As I was sitting one day enjoying a beer in one of those countries after visiting a mine I had a national come in and sing that sad song to me. I looked at him and told him if his country had any balls they would finance these ventures themselves and they would not need us Gringoes. Oh, but let us not forget the people lined up out there looking for jobs in that mine!
you probably liked that better than them lining outside with guns, no?
So ishie, would you be acquainted with any of the other “economic hit men” our Imperial Grigo government sent to trash and endebt those little countries down there, or School of the Americas graduates or faculty, how about death-squadders, folks like that?
Argentina has rape-able resources, and dispossess able indigens, and a lot of other similarities to the USA? Including a set of expat Nazis?
‘So I would love to see a government that was able to attract [$400 billion of offshore wealth] back to Argentina.’
Essential policy changes to lure back flight capital are: (1) Scrap the dual exchange rate regime by ending capital controls; (2) Settle holdout debt and restore the country’s credit rating; (3) Replace political hacks at the central bank with competent people who will stop the inflation.
By no coincidence, president-elect Macri has promised to do all these things.
So I would love to see a government that was able to attract [$400 billion of offshore wealth] back to Argentina.’
I don’t believe any presently living generation would repatriate offshore wealth even if an unprecedented political/economic overhaul happened tomorrow. It is ingrained in the society.
Personally I do feel sympathy for the poor shlubs that live there that go to work every day and just try and get along. The older folk that have been wealth stripped have no chance to recover.
And yes, unless a business transition payment happens ex-Argentina, your nuts.
The old saw about doing business in Russia applies. “there’s a lot of money to be made in ******, as long as you don’t plan on trying to take it out of the country”
Optimader – my thoughts exactly! Only a complete idiot would put money into any south american country. It is my recollection that those bonds referenced above were issued under New York state law which protects against the kind of default Argentina performed. The reason that they had to be issued under New York state law is no one would purchase bonds issued under Argentina law because they have defaulted so many times.
Last year I came out of a meeting with management of a large company that was surprised that Venezuela govt did not make a scheduled payment on debt. Management was surprised. The rest of us were surprised that management expected the payment. In other words we were surprised they were surprised. Let me give you the MO on South America. Gringo, come on down and invest you can make a lot of money here and then later “Yes, you made money but we did not say you will get to keep it.”
Argentina is the way it is because the Argentine people are the way they are.
I do not cry for Argentina!
“The USA is the way it is because the American people are the way they are.”
Now I understand why the American people sat by wordlessly while the MERS fraud stripped the ownership and equity value from their homes and turned them into renters and trailer trash.
And that must explain why they have no quarrel with a government that spends a trillion dollars a year of their tax money on boondoggles like F35 joint strike fighter and permanent warfare all around the world in support of the most bloodthirsty “allies” it can find.
I agree with that statement. Americans are getting the govt they deserve. People vote in scumbags for a few crumbs while their politicians and their handlers steal the country blind. In fact I have said for quite a while that we are following the road of Argentina. If you see above the Peronist party’s name translated into English was the social justice party. Isn’t that what most people that post here are really crying out for — we need social justice! In the end you will get a place like Argentina!
We’re crying out for social justice, and that’s the problem?
Okay, then, we demand (even more) social injustice!
That better for you, Aynshmael?
Ever happen to think that “ the American people are the way they are because that is the way the USA is.” ??
Do people vote in scumbags because they are stupid or because the system only offers up scumbags in the electoral charade? When almost all the levers of power in the system are controlled by an oligarchy is it the people’s fault that they haven’t burned the oligarchs at the stake? Well, maybe it is, or perhaps they have just been subjected to too successful a brainwashing program. Or are too busy trying to pay the kids medical bills.
Blaming Argentina’s or the USA’s condition solely upon the “people” or the “sheeple” is a cop-out something like blaming crime in black ghetto neighborhoods upon the presence of people with black skin.
As I indicated earlier, a large percentage of the American (and Argentinian) people vote for who they do to get hand outs and also fear! Listen to Hitlary’s and Bernie – Free this and Free that. Let’s give everyone free college. How about a free Obama phone! Need an EBT card here it is. How about free health care. Do you think they promise this if it does not get them votes. The Peron’s came to power due to handouts.
Now a big push on the Republicans is fear. We spend more of the rest of the world combined on defense and they still do not feel safe.
There is something called “dependency ratio” which shows the ratio of everyone riding on the back of private employees since they pay the bills to fund everything. The US now has one of the highest dependency ratios in the world and it is even higher than Sweden. Argentina also has a high dependency ratio.
Hand outs and fear drives this nation.
The free Obama phone is — hold onto your hats, here, folks — false, as stated here; see Snopes for nuance.
It’s one of those “stories” that circulates in email.
Query: Does “hand outs” and “dependency” include support for banks? How about QE?
The ruling class domination of media, economics, and educational content drives the nation. They use fear and disinformation as their primary weapons. The hand-out theme is a straw man argument used by people who call themselves conservatives but are more properly called ruling class apologists and shills.
So you think the New Deal made America like Argentina? How about the civil rights movement? How about gay marriage? Those are all examples of social justice.
You really think gay marriage counts as social justice? Unlike the New Deal or civil rights movement, we’re talking about such a small minority. More importantly, a minority that’s been out of the closet and free to live their lives as they please for decades. Isn’t gay marriage just icing on the cake? Or, to be cynical, isn’t it about getting access to government subsidies? Plus many christians will point out that gay marriage – like pride parades – is the homosexual community rubbing it in the face of those who lost this culture fight.
Not, in my opinion, a wise thing to do when the loss may just be a battle and the war will be refought when the fair weather friends of the gay community are distracted by crisises in their own lives. Unfortunately economic collapse will lead to people lashing out at each other – well armed people in the US. Gays will be prime targets, right up there with Muslims and, possibly, Jews. Not saying any such groups deserve it. But anyone perceived as different will be an enemy. The gay community certainly enjoys being different and publicly showing it.
Somehow your simplistic narrative doesn’t account for the [$400 billion of offshored “wealth”], assuming “wealth” infers financial claims and “offshore” means not in Argentina. Certainly you don’t believe that the fairy tale tandem of “risk-free” and “magic of compound interest” is a cultural construct of S. America, do you?
Ah no. As I indicated earlier there are several large families that basically run the country in Argentina who (1) raped and pillaged the country and (2) raped and pillaged the gringoes they conned into investing there. These families were given cover by politicians and military junta! That is who owns that money!
“several large families that basically run the country”
Unlike the United States…
GorgeousBorges,
I am not repatriating wealth back to Argentina, but plan to buy property in Buenos Aires, soon. The new Macri government should provide the perfect opportunity to invest in property, in a new era of economic freedom sans capital controls.
My only concern is the apparent rising resentment of gringos and wonder if anti-American sentiment is on the upswing or waning. Crime is also a consideration.
I bet the right wing spent a considerable sum getting Sr. Macri elected. It is now payback time. My heart bleeds for you, Argentina.
It can’t be stressed enough that Singer’s hedge fund bought their Argentinian bonds well AFTER they defaulted.
They were truly speculators, and should face the same market discipline any small investor would when trying to play distressed investor.
Besides, there is no market-based reason for Macri to even talk to these vulture funds. If he wants to re-enter the capital markets outside of Argentina, he can simply move all trading out of New York and over to Europe where a different legal system applies. In today’s yield starved environment, someone will buy those bonds, perhaps with coupons paying in Euros.
There is one not so nice reason as the poster above writes – he may have taken money from Singer in his election campaign.
Oh, those evil speculators. Really it does not matter one iota if Singer bought these bonds after Argentina defaulted. These bonds have various legal protections. I know we should not let the law get in the way of the FSA!
It is my recollection that there is wording on these bonds or something which keeps Argentina from making an end around on them by issuing additional bonds in Europe. You do not think Kirchner would have done this if she could of? You do not think the international banks would have sold bonds to more saps (who knows how many times Argentina has defaulted on debt) if they could have and collected the fees. It is my recollection that Argentina has attempted several legal maneuvers in Europe to no avail.
Now it is also my recollection that there is a time limit on the protection and that soon that will be over and Argentina will then be able to bypass these bonds and sell additional bonds on the market. If it does not expire this year then it expires next year.
According to one whacko judge, they do.
Yah, bonds are risk-free ironclad CONTRACTS, right? How parasites get a bad name…
Maybe Schkreli has a position open that would suit your resume…
Singer and his ilk are holdouts – the vast majority of the other bondholders have long since settled with Argentina, agreeing to haircuts, and took their losses like real men (and women) and moved on with their lives.
By virtue of having nearly unlimited resources to spend on lawyers, the hedge funds and Singer were able to exploit the US legal system and one overly officious judge in particular to get a ruling that favored them.
However last I checked judges orders issued in NY aren’t enforceable in Buenos Aires. Short of raising an army and invading Argentina, sovereign debt investors who lose out should have no recourse. Singer actually did try to seize ships and property to enforce the NY judge’s ruling.
I’d love to know how many millions in legal fees he has spent chasing his white whale. No reasonable money manager could justify this kind of “investment by litigation, bribery and any means available.”
If Macri allows Argentina to pay Singer, he should be tried for treason. I’m under no delusion that this will actually happen, of course.
Wasn’t familiar, so I read some more about Singer on Wikipedia re: Argentina [https://en.wikipedia.org/wiki/Paul_Singer_(businessman)]
Highlights, for anyone else un-educated on the man:
1. He bought the Argentine debt for $48 mil, is seeking 29x that amount at $1.4 bil, turned down an offer of somewhere between $600-$850 mil (hard to find good exact figures..). How much exorbitant profit is too little?
2. Made any comparison to a pirate manifest, when he had an Argentine navy vessel seized off the coast of Ghana!
3. He’s pledged to donate half his wealth in his lifetime, so at least he’s redirecting half of those millions he bled from the Congo to VH1’s Save the Music Foundation.
4. circa 2012, he “waded into Greek debt” [http://www.independent.co.uk/news/world/americas/the-vulture-capitalist-who-devoured-peru-and-now-threatens-argentina-8347577.html]
5. Sole funder behind the push to apportion California’s electoral college votes by district!
6. Once played on stage w/ Meat Loaf? That may make me hate him more than anything else…
I lived in Argentina off and on for 7 years ending in 2011. I was a witness to most of the Kirchners’ doings. They played the populist card and pandered to the masses in shameless fashion, all the while feathering their own nest and those of their cronies with gains harvested from those same teeming masses. That said, they were certainly no worse than the elites in the U.S. who are poisoning the well both in their country and around the world with their unfettered greed and corruption and they at least were able to keep Argentina out of the U.S. MOTU orbit.
Which brings us to Paul Singer.
A more despicable example of everything that’s wrong with the globalist capitalist system simply could not be found. The revulsion and disgust I’ve experienced reading about his slimy manipulation of the global financial system in general and Argentina in particular I can’t put into words. Would Scioli have been preferable to Macri? I guess it all depends on what kind of sub-human trash you would prefer to see as President of a proud, endlessly beleaguered country full of wonderful human beings.
There’s an easy solution to Paul Singer(and others like him): Charlotte Corday. All the millions of people in Argentina, the US and western society and we can’t produce one Charlotte Corday? I’m not sure what that says about us. Perhaps it’s a time lag thing and the 21st century Cordays are still to come. After all, we’re only now on the eve of real blow back for killing hundreds of thousands of Muslims.
There’s a good medicine against the local oligarchs: nationalize the key industries and the banks, then have them run as workers’ co-ops. The government should invest as the currency sovereign.
What I don’t understand, what is the denomination of this debt? If it’s peso, then why can’t they pay it?
And what caused the inflation? I know Kirchner’s nationalized some, but then what happened?
I don’t know much about the story, I need a cogent nakedcap analysis on Argentina…
The Argentine used to be in the Top Ten global economies. They have immense natural wealth.
All they really need is to be left alone to exploit it and raise their people to the level they should b e enjoying.
Fingers crossed they get the government they need.