Macrism in Argentina

This is an interview in English with the Argentine political scientist Atilio Boron. Boron is a distinctly left analyst and activist, though he is very much sympathetic to left-center parties in Latin America when they are confronting conservative or rightwing parties. That's not self-evident in Argentine politics; the Socialist Party since the 1940s has generally supported the conservative Radical Civic Union over the left/center-left Peronist Justicialista Party. Argentina's President Macri Withdraws Neoliberal Reforms Due to Massive Resistance The Real News 02/04/2018:

Since taking office in December 2015, President Mauricio Macri has applied a standard IMF/Washington Consensus/neoliberal economic policy of reducing government and social services, cutting real wages and living standards for workers, tax reductions and deregulation for the wealthiest, privatization projects, a drastic boost of public debt, etc.

Eduardo Dvorkin (La agenda del 19 Cash/Página 12 04.feb.2018) describes the result this way:

Desde el 2015 se ha escrito muchísimo para caracterizar y denunciar al gobierno de los CEOs: la desindustrialización, la desocupación, el crecimiento de la desigualdad en el reparto del ingreso, la exclusión, el ajuste en ciencia, la cancelación de los proyectos de desarrollo autónomo de tecnología.

[Since 2015, very much has been written to characterize and denounce the government of the CEOs: deindustrialization, unemployment, the growth of inequality in the distribution of income, exclusion, the cutbacks in science, concellation of the porjects for autonomoous development of technology.]

Axel Kiciloff, the left-Peronist former Argentine Economics Minister and current National Deputy, wrote on his Facebook page (@kicillofok) 02/01/2018 commenting on the following statement by Macri:

#Ahora |
Macri: "Después de más de 100 años hemos logrado que baje el gasto, que baje el déficit, que baje la inflación, que bajen los impuestos y que el país crezca dos años consecutivamente"https://t.co/HCqu9kzytr pic.twitter.com/fpxObPcCeT

— BAE Negocios (@BAENegocios) February 1, 2018

My translation: "After more than 100 years, we have managed to lower spending, which reduced the deficit, which lowered inflation, that lowered taxes, and allowed the country to grow for two consecutive years."

En una sola frase Macri batió un nuevo récord olímpico de mentiras.

1. El déficit fiscal fue mayor en los dos años de Macri que en 2015.

2. La inflación de los dos años de Macri es la mayor de los últimos 15 años (IPC CABA).

3. Después de 2 años de gobierno, el PBI recién recupera valores de 2015. Y en su repaso Macri parece olvidar que entre 2004-2015 el crecimiento promedio anual del PBI fue de +3,7%

4. La industria todavía está 2,9% puntos por debajo de los niveles de 2015.

El gobierno de Macri tiene otros “récords” que omite: el endeudamiento más rápido de la historia (usd 80 mil millones en 2 años); el déficit comercial más alto de la historia; y medalla de bronce en bicicleta financiera (3º país en el mundo).

Macri viene de mentir en Davos y en Francia, pero en Argentina la realidad es que cae el salario, recortan jubilaciones y cae el empleo de calidad. #AumentaTodo y hay un sinfín de despidos.

Eso es #ElGranAjuste

[In one single phrase, Macri broke a new Olympic record of lies.

1. The fiscal deficit was larger in the two years of Macri than in 2015.

2. The inflation of the two years of Macri is the high of the last 15 years.

3. After two years of governing, the GDP recently recovered its value of 2015. And in his review, Macris seems to have forgotten that between 2004-2015, the annual average GDP growth was +3.7%.

4. Industry still is 2.9% below the levels of 2015.

Macri's government has other "records" that he omits: the most rapid increase in indebtedness in history ($80 billion in two years); the largest trade deficit in history; and a bronze medal in the financial bicycle (third-place country in the world).

Macri went to Davos and France to lie, but in Argentina the realities is the fall in salaries, reduction of pensions, and a fall in the quality of employment. #AumentaTodo {inflation on everything} and there are layoffs without end.

This is #ElGranAjuste {the big cutback}. ]

The bicicleta financiera ("financial bicycle") is a phrase often used in economics and politics in Argentina. It refers to financial profiteering in the carry trade, which is basically exploiting exchange rates to extract economic "rent". Bert Dohmen (Carry Trade: The Multi-Trillion Dollar Hidden Market Forbes 09/04/2014) defined the carry trade briefly this way, "What is the carry trade? It’s the borrowing of a currency in a low interest rate country, converting it to a currency in a higher interest rate country and investing it in the highest rated bonds of that country. The big trading outfits do this with leverage of 100 or 300 to one."

The Presidential administrations of Néstor Kirchner and Cristina Fernández had imposed capital controls - heresy to the neoliberal gospel - and carefully regulated the dollar reserves to support their policy of promoting domestic industrial development and as part of blocking "imported inflation." Macri reversed that policy. And the predictable consequences have followed.

See also: Daniel Pardo, Qué es la "bicicleta financiera", un símbolo de la Argentina de Mauricio Macri con el que inversionistas de todo el mundo han ganado millones BBC Mundo 27.junio.2017; El Banco Central renueva la "bicicleta financiera" con $380 mil millones en Lebac El Destape 14.nov.2017; Federico Kucher, El regreso de la bicicleta financiera Página/12 30.dic.2016.

El retorno de Cristina?

Cristina Fernández, that is, the President of Argentina 2007-2015.

Not that's she really been absent from the political scene since leaving office in 2015. Her successor Maricio Macri campaigned on a moderate program, or at least a moderate-sounding one. Since assuming office in December 2015, he has instead instituted a standard neoliberal/IMF/Washington Consensus economic menu. And the results are what should have been expected: falling real wages, higher unemployment, cutbacks of essential government services, a cave-in to the blackmail from vulture funds that had bought up defaulted Argentine debt, and taking on new debt, some of which reportedly uses Argentine state property as security. Dropping capital controls has contributed to a high inflation rate, even by Argentine standards. (It's not the kind of triple-digit hyperinflation that Argentina experienced in the late 1980s, at least.)

Cristina has been a regular, public critic of Macri's government. And she still has strong support within the Peronist Partido Justicialista (PJ) and the broader electoral coalition of the Frente para la Victoria, (FpV). This photo and slogan has been popping up in hard copies and online.

La Esperanza de un Pueblo, el Terror de la Oligarquía. pic.twitter.com/8iWCdYEJtA

— Juan Manuel Huss (@juanchohuss) May 24, 2017

The slogan says, "The sun of the 25th is appearing." Or, "Sunrise of the 25th is coming" probably works, too. That's a reference to the 25th of May, a national holiday celebrating the official proclamation of a new national government on that date in 1810, displacing the Spanish Viceroy Baltasar Hidalgo de Cisneros (1756–1829). It's known as May Revolution Day, a key event in the establishment of Argentina as an independent nation. Argentine Independence Day is celebrated on July 9, commemorating the formal declaration of independence of 1816.

May 25 took on a particular political and patriotic significance for the kichneristas. Cristina's late husband Néstor Kirchner became President on May 25, 2003, the beginning of a dramatically new reformist direction for Argentina in which neoliberal political prescriptions were largely rejected in favor of a more activist government aggressively promoting Keynesian policies and recovering the language and spirit of left Peronist populism. (Martín Granovsky, “Llegamos sin rencores y con memoria” Página/12 06.05.2003) The 25th of May was treated as a major day of celebration of what they called the "national and popular" tradition of Argentina, i.e., left-nationalist, democratic and militant social-democratic ones.

Cristina took part in a meeting with other political leaders this week working to form an effective political coalition in Buenos Aires Province for the 2017 legislative elections. (Sin definiciones, pero con afiches Página/12 24.05.2017)

Former Finance Minister and current Deputy in the lower House of the Argentine Congress Axel Kiciloff considers Cristina to be the leader of the movement (kircherista/peronista/FpV), 22/05/17 - Kicillof: "Cristina es la jefa del movimiento y yo soy parte de él":

Republicans endorsing Hillary

Bob McElvaine makes a plea for undecided and even Republican voters to support Hillary Clinton over Donald Trump on the basis of patriotic sentiment in Patriotism over partisanship Clarion-Ledger 10/01/2016. He lays great stress on the economic issues: "The truth is that what Trump proposes is a return to the policies — massive tax cuts for the richest and deregulation of the financial industry — that produced not only the 2008 collapse (which Trump cheered because he could make money off it) but also the Great Depression. The slogan for Trump’s trickle-down economics should be: 'Make America a Great Depression Again!'"

He cites endorsements of Hillary from traditional Republican newspapers like the Arizona Republic, the Dallas Morning News, and the Cincinnati Enquirer.

Bob doesn't mention this San Diego Tribune endorsement in the Clarion-Ledger column but he linked it on his Facebook page: Endorsement: Why Hillary Clinton is the safe choice for president 09/30/2016.

It's nice to see Hillary getting so many newspaper endorsements. But I can't say I'm thrilled by the reasons the San Diego Tribune gives for supporting her. Like: "As a U.S. senator, the Democrat showed she can collaborate with Republicans, using what Roll Call labeled an 'incremental approach' that 'could help restore a working relationship between the White House and Capitol Hill that has been in tatters' for years."

The only way that's going to happen is if Hillary wins the Presidency and mounts an unprecedented level of Democratic Party effort to beat the Republicans in House and Senate races in 2018. Until the elections take place and Republicans know they're electorally on the run at all levels, the Trumpified Republicans Party will keep up their obstructionism on domestic issues that we've seen the last eight years. Or should I say the Ross-Barnettified Republican Party?

Also: "Argentina is finally coming out of the chaos created by Cristina Kirchner and several of her predecessors. Trump could be our Chávez, our Kirchner." (!!!)

O.M.G.

I wish we could have a 12-year run of solid Keynesian economics like Néstor and Christina Fernández de Kirchner brought to Argentina in 2003-2015. After decades of neoliberal/Angela Merkel/Washington Consensus economics, during the first 10 years of the Kirchner era Argentina had one of the healthiest growth rates in the world, higher even than China's. And the healthiest in Argentina's entire history.

he usual Bipartisan Wall Street drone, I will seriously injure myself doing backflips of joy. As for Trump being "our Kirchner," it's hard to imagine anything less possible. Cristina's successor, the "safe" oligarch Mauricio Macri who took over in December, has returned to the disastrous Merkelist policies of the 1990s, and the Argentine economy has been in a nose-dive ever since. With no prospect of returning to Kirchnerist levels of health under these policies.

Now, Trump could certainly be our Macri. Only he would probably be worse. And he would be in command of a nuclear arsenal. This graphic of Macri is more likely what a President Trump would be.

Left, right and economic progress in Argentina

Mark Weisbrot summarizes the lazy conventional wisdom about the conservative trend in Latin American politics (Has the Left Run Its Course in Latin America? The Nation 05/10/2016):

There is a popular narrative here in Washington and media circles that Latin America’s left-populist turn has finally run its course. It goes something like this: A commodities boom, led by demand from China for Latin American raw materials exports, fueled regional economic growth in the 2000s. This happened to coincide with the election of left governments that were reelected after spending lavishly on handouts to the poor. They alienated foreign investors and their economic policies were unsustainable. Now Chinese growth has slowed, commodity prices have gone south, and with them the fortunes of Latin America’s nationalist, populist left. November’s election of right-wing challenger Mauricio Macri as president of Argentina, the Venezuelan opposition’s landslide congressional win in December, and economic and political crisis in Brazil — including the current effort to remove President Dilma Rousseff—herald the beginning of the end of an era. In this view, the region will continue to elect more right-wing—or, in business-press parlance, “moderate” (and pro-US)—governments that will return to some of the more sensible economic policies of their predecessors.

Horacio Verbitsky (El tercer semestre Página/12 22.05.2016) writes about Federico Sturzenegger, the current head of the Banco Central de la República Argentina, appointed by current President Mauricio Macri, a devotee of neoliberal economic dogma. Sturzenegger is part of Macri's PRO party and was elected as a deputy (legislator) in the Autonomous City of Buenos Aires in 2013. Verbitsky describes the communication strategy on which Sturzenegger was coached along with other PRO candidates on how to defend their policies in public. As Verbitsky recounts it, this was part of the instructions:

No explicar nada. Si se explica qué es la inflación, habría que decir que la emisión monetaria genera inflación, que entonces debería reducirse la emisión, y que si se reduce la inflación habría que hacer un ajuste fiscal y que si se hace un ajuste fiscal la gente va a perder su trabajo. Eso es lo que no hay que decir. Desde el gobierno se puede hacer lo que se considera necesario, pero no hay que decirlo en medio de un debate. Mejor decir que están mintiendo con los números de la inflación o decir cualquier cosa; hablar de los hijos de uno. No importa.

[Don't explain anything. If you explain what inflation is, you will have to say that the issuance of money generates inflation, that therefore the money supply will have to be reduced, and that if inflation is reduced there would have to be fiscal austerity, and that if fiscal austerity is implemented people will lose their jobs. That's what you don't need to say. The government can do what it considers necessary, but doesn't have to say it in the middle of a debate. Better to say that they {Cristina Fernández' government} are lying with the inflation numbers or say whatever; talk about your kids. It doesn't matter.]

When you have a standard economic prescription that will damage large numbers of ordinary people in order to enrich the wealthiest even more, you have to dress it up some other way. Or, as Sturzenegger's coach recommended, avoid talking about them as much as you can.

Cristina's last Finance Minister Axel Kiciloff in his book Diálogos sin corbata. Para pensar la economía, la política (y algunas cosas más) en el siglo XXI (2015) discusses the dominance of liberal/neoliberal (free market/Herbert Hoover/Angela Merkel) type economic policies, associated especially with the military dictatorship of 1976-83 and the government of right-Peronist President Carlos Menem (1989-99).

Durante el liberalismo esto resultó tarea sencilla porque traían de afuera el recetario económico. Más allá de que tuvieras o no ideas propias, te decían lo que, había que hacer en el Ministerio de Economía, y eran políticas que todos conocen: ajuste fiscal; ajuste financiero, que significa bajar la liquidez, bajar el credito, la politica monetaria contractiva; apertura de la economía, es decir, ningún tipo de resguardo o administración del comercio exterior, dejar que todo venga de afuera ...

[During liberalism, this {finding an economic theory} turned out to be easy work because they brought a recipe book from abroad. Aside from whether they had their own ideas or not, I'll explain what they had to do in the Ministry of Economics, and those were policies everybody knows: fiscal tightening; financial tightening, which meant reducing liquidity, reducing credit, the contractionary monetary policy; opening the economy, that is to say, no type of protection or administration of external commerce, let everything go abroad ...

That latter reference is to the Hail Grail of the corporate-deregulation "trade" treaties like TTIP and PPT, the unrestricted flow of capital, both into and out of a country. This makes a developing country not only vulnerable to financial speculation that can create a run on its currency and and cause a financial panic. It also means that the country's development can be dominated by external political and market forces. The governments of Néstor Kirchner and Cristina Fernández de Kirchner pursued a policy of capital controls that had as its goal promoting domestic industry for the balanced development of the Argentine economy and reduce its vulnerability to economic attacks from other countries.

Kiciloff also gives this brief summary of the standard neoliberal prescription, "Ese plan de cuatro puntos - ajuste fiscal, ajuste monetario, apertura de la economía y endeudamiento - es el plan permanente del liberalismo y de la ortodoxia." ("This four-point plan - fiscal contraction, monetary contraction, opening of the economy and indebtedness - is the permanent plan of liberalism and orthodoxy.")

That prescription is also known as the Washington Consensus because the United States has promoted it assiduously through the IMF and the World Bank and the corporate-deregulation "trade" treaties. That four-point plan is a good summary of what the Macri government has been implementing at a rapid pace since it took office this past December.

Verbitsky's article includes the following table projecting a probable scenario for the growth of public and private debt in Argentina:

The orange bar shows the projected public debt plus the private debt denominated in foreign currency as a percentage of GDP (PIB). The immediate concern about the growing debt is not the percentage of GDP as such. It's that most of the current new debt is going not to long-term investments in Argentina but to paying what is essentially ransom to vulture funds that bought up already-defaulted debt. And the private debt denominated in foreign currency becomes bigger as a percentage of GDP the lower the Argentine peso falls in relation to the foreign currency.

And this is part of the standard neoliberal recipe that Macri's government is applying to the Argentine economy. They justify it by claiming that the economy was previously in bad shape. Verbitsky writes, "Macrì no para de repetir que desde hace cinco años la economía no crece ni crea empleo privado, lo cual es lisa y llanamente falso." ("Macri never stops repeating that the economy hasn't grown for five years nor has employment increased, which is plainly and simply false.")

He cites El Revelador, which provides this table and the text explanation shown below:

Durante la campaña electoral de 2015, la oposición al gobierno de Cristina Fernández de Kirchner, repetía (y lo sigue haciendo) que hacía 4 años que la Argentina no crecía. Y lo decían en términos porcentuales del PBI. Cierto es que dejó de crecer al ritmo en el que lo hizo en los años previos. Pero contextualicemos observando lo que ocurrió en el mismo período sumado (2011-2014) en los siguientes países:

Mientras que en 2014 nos cansamos de escuchar que Argentina hacía 4 años que no crecía, en ese período, su PBI creció porcentualmente más que el de Alemania, España, Estados Unidos, Francia e Italia todos sumados.

[During the 2015 election campaign, the opposition to the government of Cristina Fernández de Kirchner repeated (and are still repeating) that since four years Argentina did not grow. And they say it in terms of percentage of GDP. Certainly it stopped growing at the rhythm that it did in the previous years. But let's put it in context of what happened in the same period in total (2011-2014) in the following countries:

While we kept hearing in 2014 that Argentina hadn't grown in four years, in this period it GDP grew percentage wise more than that of Germany, Spain, the United States, France and Italy all together.]

So when Mark Weisbrot talks about what US elites and mass media talk about "more sensible economic policies," it the neoliberal prescription that they are praising as "sensible."

Weisbrot's point is that economic policies that work well for the majority of people are a strong attraction. And it's left governments, the so-called "Pink Tide," that have been delivering that. As he writes of the Argentine case:

Changes in economic policy were also key to Argentina’s success after its default and devaluation at the end of 2001. The remarkable economic growth and poverty reduction that followed over the ensuing decade — real GDP increased by about 78 percent, and poverty was reduced by more than 70 percent (these numbers are based on independent estimates, as the government’s estimates of inflation are disputed; see http://sedlac.econo.unlp.edu.ar/eng/statistics.php)—had relatively little to do with commodities. It was not even export-led growth.

One necessary condition for Argentina’s robust recovery (real GDP grew by more than 60 percent from 2002 to 2008) was the government’s default on the foreign debt and its taking a hard line in the renegotiation. Right away, this achieved a sustainable debt burden—rather than getting Argentina stuck in a series of recurring crises due to too much debt, as with Greece, for example. And again in contrast to Greece, Argentina freed itself from the demands of its creditors for continuing austerity. The government was also able to tax exporters to capture the windfall from the devaluation, use the central bank to manage the exchange rate, implement a financial-transactions tax, and pursue other policies that enabled the country to emerge from depression. [my emphasis]

In fact, Weisbrot is downright optimistic about the prospects for the democratic left in Latin America:

The Latin American left has led the region’s “second independence” in the 21st century, altering hemispheric economic and political relations, and—even including the economic losses of the recent downturn—presiding over historic economic and social changes that benefited hundreds of millions, especially the poor. Despite the electoral setback in Argentina and the current threat to democracy in Brazil, they are likely to remain the dominant force in the region for a long time to come.

Argentina's Cristina Fernández on currency speculation scandals

The former (and likely future) President of Argentina Cristina Fernández has been targeted by current conservative President Maricio Macri's party and government with cooked-up but nevertheless vague accusations of corruption. Cristina and her former Finance Minister Axel Kicillof gave statements to Federal Judge Claudio Bonadio last week over a policy her government had instituted called the "future dollar." It was a device by which investors could make a futures bet on whether the currency would go up or down. It was a policy device to stabilize the currency. (CFK faces Judge Bonadio, accuses gov't of 'making' a case against her to 'deprive' her of her 'liberty' Buenos Aires Herald 04/13/2016)

Bonadio was accused them of a crime just for setting up the policy. He didn't even claim that they had violated the law or given inside information to investors to let them cheat the system.

But, as Cristina herself explains at her website, there were people who may have made money on the "future dollar" system who may also have benefited from inside information (Future dollar and the “unscrupulous illegally enriched” 04/19/2016):

Some names of the “unscrupulous future dollars buyers” have been revealed. Do you think they are all K? Look, Caputo S.A. company bought in the Rosario term market 3.56 million dollars between October 8th and 27th, in 2015. Do you know who Caputo is? Nicky, for his friends. Close confidant of Macri, he was his wedding witness and usual attendant in the meetings of the Presidente with the cabinet.

You know who is mentioned too? The Macri family, that via Socma-Chery firm, adquired 8 million dollars at future price, later multiplied –not as bread and fishes- because of the devaluation determined, among others, by Central Bank president, prosecuted Sturzenegger, who paid in spite of the cause presented by his political party.

There are other “unscrupulous”: senior presidential adviser and PRO national party trustee José María Torello, bought 800.000 dollars in future dollar contracts, on October 27th, charged in February. The secretary of Interministerial coordination, former CEO in Farmacity, Mario Quintana, one of the illustrious negotiators in the pay to vulture funds, bought almost 1.5 million dollars, last September, via his Pegasus fund.

But pay attention, there are more “unscrupulous”: media companies. The newspaper La Nación bought 4 millions dollars. Grupo Clarin’s television network, Cablevisión, got 11 million dollars multiplied by the devaluation. That’s right, Clarin is always involved in this kind of things. And not precisely for being the sweetest thing.

Who benefited from the devaluation? Obviously, those who decided to devaluate, that apparently are not only in the Central Bank. Who were perjudicated by the devaluation? As usual, the Argentinian people. Question: when did they buy those millions of dollars? Did they know that in case of winning the elections they would devaluate, as the candidate denied it on TV?

A federal prosecutor, Jorge Di Lello, is opening an investigation into Banadio and Macri's Central Bank president Federico Sturzenegger over their accusations against Cristina and Kicillof. (Dólar futuro: imputaron a Claudio Bonadio El Destape 20.04.2016)

See also:

Vanoli: 'CFK, Kicillof had nothing to do with dollar futures operations' Buenos Aires Herald 04/20/2016

“Un escándalo que no tiene fin” Página/12 19.04.2016

Los beneficios de adivinar el futuro Página/12 18.04.2016

BloombergBusiness: "Wall Street Is in Charge in Argentina (Again)"

You can't make this stuff up. Well, you can, but you don't have to. The business press has suffered the chronic quality problems of the mainstream press more generally. But they are still worth reading. Especially when they come up with a gem like this, whose headline could have been from some leftie website: Carolina Millan, Wall Street Is in Charge in Argentina (Again) BloombergBusiness 03/08/2016.

Millan is reporting on the Mauricio Macri government, which has presented itself so far as a shameless neoliberal, One Percenter government:

Wall Street is back in favor in the new Argentina, and in a big way. Since winning office in November, President Mauricio Macri, a former businessman himself, has loaded his administration up with traders, financiers, entrepreneurs, economists and corporate executives.

It’s not the kind of move that a leader would consider right now in, say, the U.S. or Spain or Greece, places where the anti-banker sentiment has reached a fevered pitch in the past few years. But in Argentina -- where a decade of government intervention in the economy, peppered with a strong ideological bent, has fueled runaway inflation and stagnant growth -- the population seems more open to the idea. Macri wants to undo those policies as quickly as possible and he wants professionals well schooled in the laws of free markets to do it.

That characterization of the previous decade under the kirchnerista governments of Néstor Kirchner and Cristina Fernández is frivolous. But it's standard "shock doctrine" to accuse previous governments of causing a disaster, to justify the neoliberal measures that will produced real disasters.

In the accompanying video, Diego Ferro of vulture-fund firm Graylock Capital refers to Macri's assumption of power this past December as "regime change." He also says that "people are looking at Brazil as a regime change type situation," referring to neoliberal efforts to oust the left-leaning government of Dilma Vana da Silva Rousseff.

The editors did let a surprising turn of phrase make into print (or into the pixels): "At the very least, the hirings are helping Macri win the confidence game, a crucial step to reinserting the country in international capital markets over a decade after it defaulted on $95 billion of bonds and disappeared from investors’ radar screens." (my emphasis)

"Confidence game" is the right name for it, for sure!

Millan disses Axel Kicilof, though, my second-favorite Finance Minister after Greece's Yanis Varoufakis:

Siobhan Morden, the head of Latin America fixed-income strategy at Nomura Securities, called it the best economic team in the region.

That’s not likely something that any bond analyst would have said of the staff assembled by Macri’s predecessor, Cristina Fernandez de Kirchner. Her last economy minister, Axel Kicillof, a former youth movement leader [and respected economist, which Millan's article manages to not mention], was famous for railing against international investors, saying once that Spain’s Repsol SA was “looting” the country and another time that the defaulted bonds held by the hedge funds were as worthless as pieces of cardboard. [Why, polite finance ministers just don't talk that way!]

“It’s certainly a shift from the Kirchner era,” Morden said.

At the head of the new group is Prat-Gay. A 50-year-old Buenos Aires native, he signed on with JPMorgan back in 1994, about the same time that [Finance Secretary Luis] Caputo joined the bank. (Bausili would begin there a few years later as would Vladimir Werning, the economist who now serves as chief of staff in the Finance Ministry.) By 1999, Prat-Gay had worked his way up to the top job in the firm’s currency research group in London, a position he’d leave shortly after the default to take the reins at the Argentine central bank -- where he earned the title of central banker of the year from EuroMoney magazine in 2004. A couple years after he returned to Argentina, so did Caputo, who took over control of Deutsche Bank’s operations in the country.

In the last paragraph, Millan mentions, "At last count, annual inflation was running at about 30 percent." She doesn't explain that the current inflation is the result of Macri's shock-doctrine devaluation immediately after taking office.

Argentina government surrenders to the vultures

Argentine President Mauricio Macri surrender to the vulture funds and has agreed to pay large amounts to those purchasers of already-defaulted debt. Apparently it will require taking on new debt to pay ransom to the vulture funds. It was a decision that not only compromised Argentine sovereignty but will also impose major economic costs on Argentina itself.

Macri's government is an ideal neoliberal, One Percenter government bending over backwards to accommodate the demands of oligarchs national and international.

Alexandra Stevenson and Jonathan Gilber reported on the deal in Argentina Reaches Deal With Hedge Funds Over Debt New York Times 02/29/2016 with a shamelessly pro-vulture-fund spin in the opening paragraphs, including: “'This is the equivalent of a giant albatross being lifted from Argentina’s neck,' said Brett Diment, the head of emerging market debt at Aberdeen Asset Management. 'The litigation and lack of access to international capital has had a sclerotic effect on the country for years but it was facing a real financial squeeze this year,' he said."

But they do provide some basic facts:

The four hedge funds, which include the billionaire Paul E. Singer’s NML Capital, were the last major hedge fund investors among a group that declared legal war on Argentina in the United States courts 12 years ago.

These holdouts, so named for their refusal to participate in Argentina’s two restructurings after the country defaulted on $100 billion of debt in 2001, sought billions in bond repayments and eventually succeeded in preventing Argentina from paying any of its creditors.

And they went to great lengths to compel Argentina to pay — at one point persuading authorities in Ghana to seize an Argentine navy ship as collateral, with a crew of about 300 on board. They also moved to impound other government assets, including a satellite.

Their ultimate victory illustrates the outsize influence hedge funds can have in the countries where they bet their money. And their legal tactics are likely to be used again by other investors contesting the debt obligations of sovereign powers. [my emphasis]

And they do give their readers an idea of the bad consequences of this case:

In 2012, the holdout hedge funds achieved a stunning breakthrough when Judge Griesa ruled that whenever Argentina wanted to pay any of its creditors, it would have to also pay the holdouts. The move and its fallout led Argentina to default on its debt again in 2014.

That move will have far-reaching implications, many analysts say. With his ruling, the judge has laid the foundations for future investors to contest the debt obligations of other countries.

Anna Gelpern, a law professor at Georgetown University, said that the ruling created a new tool for investors.

“The tool is a kind of financial boycott” that would allow creditors to enforce equal payment in other instances, she added.

Mr. Guzman went further, saying that the settlement created “a problem of moral hazard in which this settlement incentivizes this type of behavior because it is profitable.”

Axel Kicilof, the Finance Minister of the last government and currently a Deputy in the Argentine Congress, heavily criticized the deals Macri's government has struck with the vultures.

He said, “Es la primera vez que yo veo alguien festejar que vamos a endeudarnos a lo loco. Todos sabemos lo que pasó cuando argentina abrió la tranquera del endeudamiento. Todos sabemos que eso no va para obras ni para el bolsillo de los que menos tienen” ("It's the first time that I've seen someone celebrating that we are going to go into debt like crazy"). (
Kicillof: "Es la primera vez que veo festejar que nos endeudamos a lo loco" Diario Registrado 29.02.2016)

David Dayen also points out the problems of this deal in
Hedge Fund Creditors' Deal With Argentina Sets Alarming Precedent The American Prospect 03/01/2016:

The Argentine government is certainly happy to crawl out from under the rock of default, and to unlock international credit markets to refresh depleted foreign reserves. A fresh infusion of capital will help with a treacherous inflation situation, and stabilize the country’s economy.

Of course, the first set of borrowing will go directly to paying off the holdouts, not Argentine public services or investment. That the holdouts succeeded this much, with the help of the U.S. judiciary no less, always represented to me a kind of punishment for Argentina rejecting the IMF-led consensus. They defied the world and lived to tell about it. The holdouts gave the international community a chance to punish the country for its intransigence, and only let them out of the vice grip when they elected a pro-business president.

Meanwhile, the precedent for this working out so well for the vulture funds is terrifying. A principle has been firmly established, that you can go around looking for sick countries and corporations and use all necessary means to use their pain for profit. It can be applied to Puerto Rico, where another similar tragedy is playing out. The ability to renegotiate debt, a standard tool in practically all borrowing relationships, will be hurt by the example of stubbornness winning out.

The vulture funds' fight with Argentina, which has now resolved itself in favor of the vulture funds, is a true example of international financial banditry.

Will anyone be surprised to hear that a leading figure on the side of the vulture funds, Paul Singer, is also a major donor and behind-the-scenes political player in the US Republican Party?

Greg Palast discusses him in
Rubio's Billionaire wins ransom from Argentina 02/29/2016:

Singer’s actions are outlawed in most of the civilized world. Hillary Clinton, as Secretary of State, attempted to stop Singer’s predatory act, but Singer did a brilliant end-run: he used his cash to help elect a new President in Argentina that would jump to his tune and pay him billions.

Now, he’s attempting to do the same to the USA: pick a president for us who will feather his vulture's nest. He’s the number one donor sugar daddy for Marco Rubio’s candidacy [See, "Who Hatched Rubio"]. Singer is also the big bankroller of Karl Rove, to make sure that, even if he can’t sell Rubio to the GOP base, at least The Vulture can use "Turdblossom" Rove to ensure that Hillary won’t become President and put him out the of vulture business.

Rubio, in fact, skirted some ethical lines in his attempts to pressure the State Department to side with his corpse-chewing donor against Argentina.

As I’ve said, Singer directs his fellow billionaires’ investments in candidates. So, it is not surprising to see The Koch's lend their top political operative, Marc Short, to Singer's man, Rubio.

Rubio’s affection for carrion-eating birds has no decent bounds. While Clinton and Sen. Bernie Sanders are currently siding with Puerto Rico against a whole flock of vulture financiers. Sanders and Clinton support [Puerto] Rico’s plea for the same bankruptcy protections afforded the 50 states (and afforded to Donald Trump).

Kenneth Vogel and Ben Schreckinger report that Il Duce Donald Trump pitched Singer to support him, unsuccesfully: Trump courted megadonors he now scorns Politico 11/04/15.

Harper Neidig reports on Singer's support for Rubio, who is currently faltering in the Presidential race, in Hedge fund billionaire gives $2.5 million to Rubio super-PAC The Hill 01/31/2016.

A Macri "shock doctrine" in Argentina?

Argentine President Mauricio Macri is applying his neoliberal economics doctrines rapidly, in what looks like a "shock doctrine" approach. As of Thursday, a week after his inauguration, Macri's government announced it would let the peso float, which represents in practice a sudden dose of inflation, possibly 30% or more. In the absence of corresponding increases in salaries, it will represent a significant reduction in real wages and salaries for a potentially large majority of the country.

This part of a larger move that also drops the de facto wage and price guidelines Cristina Fernández' government had maintained and a removal of controls on capital mobility into and out of the country. All this adds up to a boon for multinational banks and corporations at the expense of Argentine employment and some industries that had been protected under the previous controls.

Maximilian Heath and Hugh Bronstein report for Reuters (Argentina lifts currency controls, floats peso in bid to boost economy 12/16/2015)

Argentina said on Wednesday it was lifting its currency controls and would allow the peso to float when markets open, setting the stage for a sharp devaluation, following promises by President Mauricio Macri for reforms in order to increase exports and spur economic growth.

Macri, a free-market advocate who took office last week, has vowed to regain investor trust in Argentina, shattered by its 2002 record default, a lack of trustworthy official economic data and heavy state intervention.

Argentina's previous leader, Cristina Fernandez, used central bank reserves to prop up the peso.

By lifting controls, Macri also hopes to spark a wave of investment in an economy that is battling low foreign reserves and double digit inflation.

"He who wants to import will be able to do so, and he who wants to buy dollars will be able to buy them," said Finance Minister Alfonso Prat-Gay, adding that this government intended to normalize the economy, after eight years of interventionism under Fernandez.

A fresh new experiment in neoliberal (Herbert Hoover-style) economics is underway, this one in Argentina.

Of course, Macri and his oligarchical supporters are pushing these as measure to boost the economy, which has entered a slowdown after a remarkable and sustained recovery since 2001 from the financial crash that ended the last long experiment in neoliberal economics there. This Financial Times report picks up on that framing (Daniel Politi, Argentine peso falls by almost a third as controls are lifted 12/17/2015):

The Argentine peso fell by as much as 30 per cent against the dollar on Thursday after Mauricio Macro, the country’s newly elected president, lifted capital controls late on Wednesday night. ...

... the unwinding of capital controls was understood by the market as a key — albeit painful — part of Mr Macri’s plan to open and reform Argentina’s ailing economy. [my emphasis]

As in the eurozone, "reform" in this context means neoliberal measures: deregulation of business, cutbacks in public services, weakening of labor unions, reduction of workers' and pensioners' incomes, subservience to international finance and business.

The move to undo what was popularly referred to as the “dollar clamp” is the biggest step taken yet by Mr Macri toward opening up Argentina’s economy since he was sworn-in as president on December 10.

The wholesale market closed at 13.4 pesos to the dollar, implying a devaluation of 27 per cent. The retail market closed at 14 pesos to the dollar, implying a devaluation of 30 per cent. But there were few operations, with most banks and foreign exchange houses not operating in the foreign currency market.

Not suprisingly, the new Finance Minister Alfonso Prat-Gay declared himself happy with the results on the first day.

Raúl Dellatorre (El país de la ciclovía financiera Página/12 18.12.2015) cautions about the large impact of the two measures of floating the currency and removal of capital controls, expected they are "destined to generate financial and exchange-rate instability" ("destinados a generar inestabilidad financiera y cambiaria"). He expects the effects will negatively impact a "large majority" of Argentinians.

The country's two most prominent union leaders, Hugo Yasky of the CTA (General de la Central de Trabajadores) and Hugo Moyano of the CGT (Confederación General del Trabajo), both rightly observed that without substantial salary increases, the result will be a major reduction in real wages. (Ajuste brutal con olor a los 90 Página/12 18.12.2015) Even though Mayano is party of the Peronist Partido Justilicialista (PT), he supported Macri in the election, while Yasky backed the Peronist candidate Daniel Scioli. Since Macri's margin of victory was 2%, Mayano's support and his hostility to Scioli's candidacy could well have been decisive for Macri's win.

Macri's government also dropped some export controls that were a key part of Cristina's government's plan to increase Argentina's domestic development. (Macri ditches wheat, corn, beef export taxes Buenos Aires Herald 12/14/2015)

Outside of the economy, Macri is also moving to modify the media law to allow more monopoly media concentration. He has taken a controversial step to start appointing judges by decree, bypassing the normal Congressional approval process. He is abrogating the memorandum of understanding with Iran that was put into place to facilitate the ongoing investigation of the AMIA Jewish Community Center bombing in Buenos Aires in 1994. And he's pushing for a closer association with Washington and promoting neoliberal "free trade" agreements that are mainly about reducing regulations and blocking labor and environmental protections.

Daniel Scioli and former Finance Minister Axel Kiciloff both participated in a large Peronist demonstration in front of the Congress Thursday to protest the changes to the media law, in particular. (Marcha del kirchnerismo frente al Congreso contra las primeras medidas de Mauricio Macri Infobae 17.12.2015)

Macri and his neoliberal experiment are not going to have a smooth ride politically the next four years.

Argentine Foreign Minister Héctor Timerman and the AMIA/Nisman/vulture-funds tangle

Raúl Kollmann in “Ellos dicen culpables sí, juicio no” Página/12 29.04.2015 reports on the resignation of Argentine Héctor Timerman from the Jewish organization AMIA and explains the immediate background of his decision:

La renuncia de Timerman es a la AMIA, la mutual a la que están afiliados una parte de los integrantes de la comunidad judía. La AMIA administra los cementerios, la red educativa, algunos comedores, la asistencia social, el respaldo a personas de la tercera edad y muchas actividades culturales. Los socios de la AMIA votan su comisión directiva, hoy en día en manos de los sectores más religiosos y ortodoxos. Al mismo tiempo, para las cuestiones políticas se supone que la representación está en la DAIA, donde convergen las instituciones (entre ellas la AMIA), los templos, las escuelas, los clubes. Cuando se elige la conducción de la DAIA, las instituciones y clubes con más socios tienen varios votos: la AMIA, por ejemplo, tiene cuatro de los 120 totales. Con la carta de renuncia dirigida a Leonardo Jmelnitzky, actual presidente de la AMIA, Timerman quiso dejar en claro que no quiere ser representado por la conducción de la AMIA y tampoco por la DAIA.

En las últimas semanas surgió un grupo importante de integrantes de la comunidad judía que concretaron la primera convocatoria de judíos progresistas que no se sienten representados por la AMIA y la DAIA. El ex director ejecutivo de la DAIA Jorge Elbaum produjo una enorme repercusión con dos notas publicadas por Página/12 en las que mostraba y testificaba sobre las presiones que recibió la DAIA para bloquear el memorándum con Irán. Se alinearon voceros del PRO, de las embajadas de Estados Unidos e Israel y, enseguida, las fundaciones financiadas por los fondos buitre, en especial por Paul Singer. El propio fiscal Nisman se movió activamente como “amigo” de la Fundación para la Defensa de la Democracia, también financiada por Singer. Todas estas movidas fueron rechazadas en el plenario de argentinos de origen judío, que tuvo la conducción de la periodista Miriam Lewin ....

[Timerman's resignation is directed to the AMIA, the mutual society to which a part of the members of the Jewish community are affiliated. The AMIA administers the cemeteries, the educational network, some dining facilties, social assistance, support for the elderly and many cultural activities. The members of AMIA vote for their board of directors, these days in the hands of the most religious and orthodox sectors. At the same time, for political questions the representations is assumed to be in the DAIA, where the institutions converge (among them AMIA), the temples, the schools, the clubs. When the leadership of the DAIA is decided, the institutions and clubs with the most members have various votes: AMIA, for instance, has four of the 120 total. With the letter of resignation directed to Leonardo Jmelnitzky, current President of the AMIA, Timerman wants to make it clear that he doesn't wish to be represented by the leadership of the AMIA nor by the DAIA.

In recent weeks, an important group of progressive members of the Jewish community has emerged that constituted the first announcement by progressive Jews who do not feel themselves represented by the AMIA and the DAIA. The ex-Executive Director of the DAIA Jorge Elbaum produced an enormous repercussion with two notes published by Página/12 in which he demonstrates and testifies about the pressure the DAIA received to block the memorandum on Iran. Spokespeople aligned from the PRO, the embassies of the United States and Israel and, promptly, the foundations financed by the vulture funds, particularly by Paul Singer. Prosecutor Nisman himself actively behaved as "a friend" of the Foundation for the Defense of Democracies, also financed by Singer. All of these moves were rejected by the plenary session of [the progressive group] of Argentines of Jewish origin, which was lead by the journalist Miriam Lewin. ...]

A sidebar article reports on the left-leaning group of dissenters from the AMIA/DAIA positions, Un foro “colectivo y democrático” Página/12 29.04.2015.

Kollmann further reports:

En su diálogo con este diario, Timerman contó los intercambios con los dirigentes comunitarios sobre el memorándum. “Nosotros les dijimos que era un paso adelante, como lo sostuvieron Interpol o Amnesty International. Era intentar destrabar la situación y juzgar a los sospechosos, que Irán no iba a extraditar. Ellos dijeron que sí al principio y después que no. La Presidenta les ofreció que traigan una idea alternativa. Y no trajeron nada, salvo la posibilidad de reformar la Constitución para juzgar en ausencia, algo que en la Argentina nunca se hizo. Por eso insisto en el texto que ellos, los dirigentes de la comunidad judía, no quieren avanzar en buscar formas de juzgar a los sospechosos. Ellos dicen culpables sí, juicio no.”

[In his conversation with this paper, Timerman recounted the exchanges with the community leaders about the memorandum {the agreement with Iran}. "We told them that it was a step forward, as Interpol or Amnesty International maintained. It was intended to unfetter the situation and try the suspects that Iran had not extradicted. They said yes at first and later no. The President {Cristina Fernández} invited them to bring an alternative idea. And they didn't come up with anything, except the possibility of reforming the Constitution to allow a trial in absentia, something that has never been done in Argentina. For that reason, I insisted in the text {of the resignation letter} that they, the leaders of the Jewish community, did not want to have progress in looking for forms of trying the suspects. They are saying guilty yes, trial no."]]

As I've commented on here numerous times, the AMIA case has become deeply involved in efforts by American neoconservatives, the Government of Israel and the Republican Party to get up a war with Iran. Paul Singer is one of the biggest donors to the Republican Party, whose enthusiasm for the Likud Party of Israel's warlike policies he apparently shares. He's also a supporter of neocon policies and is engaged in a landmark legal dispute with Argentina over "vulture fund" investments in defaulted Argentine bonds. And all of this has become embedded into differences of priorities and outlook within Argentina's Jewish community and with the partisan opposition to Cristina's government and her Peronist Justicialista Party.

The Washington Post, whose editorial stance has been staunchly neoconservative for years, in a recent editorial accused Cristina and her government of promoting anti-Semitism in defending itself over the Nisman/AMIA case, Argentina’s president resorts to anti-Semitic conspiracy theories 04/23/2015. From everything I can see, this is a ludicrous accusation.

Jim Lobe and Charles Davis respond specifically to the WaPo editorial in Following the Money: The New Anti-Semitism? LobeLog Foreign Policy 05/01/2015.

Obviously, Foreign Minister Timerman is Jewish, as is Cristina's Economics Minister Axel Kicillof. Those are the two most prominent ministers of her Cabinet on the international scene.

On these themes, see also:

Charles Davis, U.S. Hedge Funds Paint Argentina as Ally of Iranian ‘Devil’ – Part One Inter Press Service 07/29/2013

Charles Davis, U.S. Hedge Funds Paint Argentina as Ally of Iranian ‘Devil’ – Part Two Inter Press Service 07/31/2013

Graciela Mochkofsky, Why Alberto Nisman Is No Hero for Argentina — or the Jews The Forward 03/10/2015, who gives this summary of Nisman's background:

In 1997, when he first became involved in the case — known in Argentina by the JCC’s acronym, AMIA — Nisman was a young and ambitious prosecutor making a career in the newly inaugurated system of open trials.

His task was to make presentable the fabrication concocted by Judge Juan José Galeano. With forged evidence, Galeano and other authorities had accused a ring of corrupt police officers of being the “local connection” in the bombing.

The open trial began in 2001 and ended in disaster in 2004. The forgery was so apparent that it didn’t survive scrutiny. The policemen were exonerated. The judge, the prosecutors, the head of the intelligence service, a high-ranking police officer, former president Carlos Menem and the leader of the main political Jewish organization were eventually indicted for the cover-up (and are going to trial in a few months). Nisman somehow survived, and President Néstor Kirchner (Cristina Kirchner’s now late husband, who took office in 2007) appointed him as special prosecutor for the AMIA case. He had to rebuild it from scratch. In 2006, based mostly on foreign intelligence reports, Nisman accused the Iranians of sponsoring the attack, allegedly carried out by Hezbollah militants.

Nisman's witch-hunt against Cristina Fernández goes forward

An Argentine prosecutor is proceeding with the ludicrous charges against President Cristina Fernández brought originally against her by the late prosecutor Alberto Nisman: Prosecutor to question Argentine president in alleged bomb plot cover-up Aljazeera America 02/13/2015

Elias Groll also reports on this story in Prosecutor Forwards Case Against Kirchner in Probe of Bombing Cover-Up Foreign Policy 02/13/2015:

The Argentine government reacted angrily to the development Friday. It denied that leaders colluded with Iran to sabotage an investigation into who carried out an attack that left 85 people dead, and ranks as the worst act of terrorism in Argentina’s history.

“This is an active judicial coup,” said cabinet chief Jorge Capitanich, according to the Guardian. “There is no proof at all. The people have to know that this is a vulgar lie, an enormous press operation.”

Presidential spokesman Anibal Fernández called Friday’s developments a “clear maneuver to destabilize democracy.”

Those descriptions are correct. In this article, they appear as the last three paragraphs. "This side says, the other side says" just doesn't do it for a story like this.

Economics Minister Axel Kicillof, who is kind of the Yanis Varoufakis of Argentina, publicly rejected one of the key claims in Nisman's charge (Kicillof blasts Nisman’s ‘economic’ complaint Buenos Aires Herald 02/16/2015):

One of Nisman’s key accusations against the Fernández de Kirchner administration was that the president and Foreign Minister Héctor Timerman had agreed to lift Interpol’s arrest warrants against the Iranian officials accused of organizing the AMIA bombing in exchange for access to Iranian oil — which in turn would be traded for locally produced grains.

“The complaint suggests that all the alleged diplomatic manoeuvres the government adopted were made so they could exchange something that we don’t have — grains, since they aren’t owned by the state — for something we don’t need — crude oil,” Kicillof said. “It’s ridiculous.”

The Economy minister stressed that for this reason the complaint by the late prosecutor, filed some days before he was found dead in his Puerto Madero apartment building, was “economic nonsense.”

“It isn’t possible for Argentina to purchase oil from Iran because its crude oil has a high sulphur content, a type of oil which can’t be refined by the country’s oil refineries,” Kicillof said.

As for the grain argument, he said suggesting such a move by the national government was ridiculous because grains are owned by exporters and farm owners.

“The case doesn’t appear to have any merit, in anything that’s said,” Kicillof stressed, pointing out that after the 2013 signing of the Memorandum of Understanding with Iran, commercial relations with the Asian country deteriorated — so if that was the objective, it was a complete failure.

The end of RUFO, a Happy New Year's present for Argentina

One of the aspects of Argentina's debt agreements that made Nixon-appointed zombie judge Thomas Griesa's radical decision against Argentina and in favor of the vulture funds so dangerous was the RUFO clause (RUFO= Rights Upon Future Offers). It meant that if Argentina offered better terms to creditors who had not yet accepted restructuring of the debt than those who had agreed to it, all those who had previously agreed to restructuring could demand the same terms.

That means if Argentina agreed to the Nixon zombie judge's decision for the vulture funds, of which Paul Singer and his NML Capital are the main protagonists, all the other creditors could have demanded the same terms. And that would have put Argentina back into total default.

As of the new year, the RUFO clause has expired. The Buenos Aires Herald explains (RUFO clause expires at midnight 12/31/2014):

Expiration of the RUFO clause tonight, could technically allow President Cristina Fernández de Kirchner to improve the offer to holdouts but she has not made any secret that she does not like the idea.

“They said that after the RUFO clause was no longer an issue on January 1 we would run back to talks. But these vultures are losing their feathers,” the president told thousands of supporters shortly before the Christmas holiday. “And you know what? I reckon they’re going to end up looking more like clowns than vultures.” ...

Part of the reason why Fernández de Kirchner’s administration may not be in such a rush to come to an agreement is that since July, government intervention in the economy has reversed a sharp weakening of the black-market peso and shored up foreign reserves.

These two things alone could give Argentina enough financial flexibility to make it through until the October 25 vote.

While an attempted dollar bond top-up did not get as much adherence as the government was expecting this month, it underlined Argentina’s willingness to pay a high price to ease a liquidity crunch rather than settle with the funds.

TV Pública argentina reports on the expiration of the RUFO clause, Visión 7 - Cayó la cláusula RUFO: La negociación de la deuda 02.01.2015:





The RUFO clause could potentially still come back to haunt Argentina in some way, if another radical court decision declares that RUFO still applies because it was in effect when the decision was finalized.

The quotes that Tomás Lukin provides from Economics Minister Axel Kicillof indicate that Cristina's government isn't close to being ready to cave in to the vulture funds and their Nixon zombie judge.(Sin la cláusula RUFO, se abre otro escenario Página/12 2.01.2015)

2014: Argentina vs. the vulture funds

One of the most interesting and significant events of 2014 was the battle of Argentina against Paul Singer and the vulture funds trying to drive Argentina into bankruptcy with the assistance of the apparently senile Nixon-appointed zombie judge Thomas Griesa.

This is a background report on the debt issue with which Argentina has been dealing, V7inter - Soberanía y reestructuración de deuda TV Pública argentina 20.09.2014:

Argentina has gained considerable international support for reforms in the international debt market to prevent such predatory banking and judicial practices as we've seen in this case (Argentina welcomes G20 call for work on debt restructurings Reuters 11/16/2014):

In Brisbane, Argentine Economy Minister Axel Kicillof welcomed the final G20 statement, which recognized the need to strengthen the "orderliness and predictability" of sovereign restructurings, and the challenges of litigation to the process.

"We are extremely satisfied", Kicillof said in comments posted on the government's YouTube page.

"Argentina denounced the actions of vulture funds and this is something that should be taken up by the leaders of countries because the truth is that limiting the reach of speculators ... must be a constant concern of the G20."

In October, the International Monetary Fund (IMF) urged a rethink of how sovereign bonds should be structured to avoid future debt restructurings turning into a repeat of Argentina's disruptive court battle with a few disgruntled creditors.

The IMF called for more robust so-called collective action clauses -- aimed at making restructuring agreements binding on all bondholders -- to remove the risk of some investors shunning debt workouts and taking legal action for years to squeeze cash from the debtor.

Argentina has so far been successful in preventing default and in maintaining its credibility in its international credit-worthiness. ("Un espaldarazo de confianza" Página/12 14.12.2014)

Political fights in Argentina: Cristina vs. vulture funds and opposition political schenanigans

Floyd Norris in the New York Times, a somewhat poorly titled piece called Argentina’s Case Has No Victors, Many Losers 11/20/2014. As Norris explains, Argentina hasn't caved in to the predatory hedge funds (vulture funds) and their compliant Nixon-appointed zombie judge Thomas Griesa:

Five months later, Argentina has not paid any money to the hedge funds. The judge has succeeded in blocking it from paying any money to holders of other bonds, but that just increases the number of losers.

In a way, the current fight is reminiscent of the battles more than 300 years ago in the American colonies over debtor’s prisons, which were widespread. Such punishment might have made sense for deadbeats, and it presumably had a deterrent effect, but prisoners were unable to earn the money needed to pay their creditors even if they wished to do so. [my emphasis]

Norris explains some of why the Nixon zombie judge's decision in this case was such a radical one:

For international bonds issued under New York law, as many are, it used to be that a country that defaulted could be sued and the courts would order it to pay. But sovereign immunity meant that decision could not be enforced. So most bondholders would eventually agree to some sort of debt restructuring, often involving the International Monetary Fund.

The Argentine ruling has clearly given bondholders an incentive to hold out in future international restructurings. Under Judge Griesa’s ruling, holdouts could do much better than those who agreed to the restructuring, and could not do worse.

If, that is, the decision can be enforced.

The judge, aware of that problem, has barred banks and other financial firms from doing anything to help Argentina evade the ruling. That has meant extending the ruling to cover not only bonds issued under New York law but also those issued under English and Argentine laws.

This is a report from TV Pública argentina, Visión 7 - Fondos buitre: El New York Times habla de excesos de la Justicia de EEUU 11/21/2014:

The political maneuvering for the 2015 Presidential elections in Argentine is intensifying, not surprisingly. Aside from Peronism being an exceptionally challenging political movement to understand, Argentina's political system has confusing fluidities within continuities in other ways. Argentine President Cristina Fernández' Peronist Partida Justicialista (PJ) governs with a legislative coalition called the Frente para la Victoria (FpV). The main opposition party is the Unión Cívica Radical (UCR). But the leading opposition figure right now is the governor of the City of Buenos Aires, Mauricio Macri. He has a separate political party called the PRO (Propuesta Republicana). But in a two-way match-up in a national campaign against a PJ candidate in 2015, he would very likely be supported by the national umbrella coalition called Frente Amplio UNEN, aka, FAUNEN. FAUNEN includes the UCR and the Argentine Socialist Party, both of which are formal members of the Socialist International. Both UCR and the Socialist Party are married to neoliberal economic ideology. UCR is the main political vehicle of the "oligarchy," the political villain that is perhaps the most significant constant in the political trend called Peronism. The Socialist Party is effectively their ally, promoting the same interests and policies with more left-sounding rhetoric. FAUNEN also includes several smaller parties.

In a national meeting this past week, the UCR decided that they would seek to put forward their own UCR candidate rather than seek a unified FAUNEN candidate. (A nivel nacional, en el FAUNEN Página/12 17.11.2014). This rules out an early formal alliance between Macri's PRO and the neoliberal-Peronist Sergio Massa, whose current political vehicle is called the Frente Renovador (FR). Massa's ideology is known as "federal" Peronism.

Also this past week, Jorge Capitanich, head of Cristina Fernanez' cabinet, attacked the opposition for "golpismo activo" (active coup activity [!]) in connection with allegations of corruption in connection with the Hotesur company. TV Pública argentina reports in Visión 7 - Capitanich denunció "golpismo activo" 11/21/2014:

The Buenos Aires Herald reports (Gov’t says Bonadío uses Hotesur raids to 'extort and play politics' 11/23/2014):

Justice Secretary Julián Álvarez has joined the group of government officials who have questioned recent judicial raids at the Hotesur company partly owned by President Cristina Fernández de Kirchner. Álvarez accused federal judge Claudio Bonadío – who ordered the raids - of “extortion” and a “clear institutional coup-mongering.”

“When we speak of Bonadío, we are not talking about a paladin of justice, we are talking of someone who uses cases to extort and to play politics,” Álvarez stated during an interview with Página/12 newspaper.

The official described the judge’s raids as “clear institutional coup-mongering” and said that they are the result of the magistrate’s reaction against the “nine motions for his impeachment he faces in the Magistrates Council.” [my emphasis]

Santiago Rodríguez interviews Álvarez for Página/12 in “Usa causas para extorsionar y hacer política” 17.11.2014. Rodriguez reports that Hotesur administers a hotel owned by Cristina, a somewhat different description than the Buenos Aires Herald piece just cited provides. Álvarez claims that Judge Bonadío is an "activist" (militante) of the FN and is in active discussions with Massa about posts he might get under a Massa Presidency. Citing Bonadío's history as a loyal supporter of neoliberal causes as a judge and a long history of association with the neoliberal strand of Peronism says, "Cuando hablamos de Bonadio no hablamos de un paladín de la justicia, sino de alguien que utiliza las causas para extorsionar y hacer política." ("When we're talking about Bonadio, we're not talking about a paladin of justice, but rather about someone who uses court cases to extort and to make policy.")

Argentina vs. a touchy vulture

The Masters of the Universe are amazingly touchy about being criticized. Or being called out for being demonstrably wrong.

Paul Singer, who has been the main face of the vulture funds trying to drive Argentina into default, and probably not incidentally, to undermine Argentine President Cristina Fernández' government in the process, is experiencing a lot of getting things wrong and being touchy about it.

The decision that Singer and the vulture funds persuaded Nixon-appointed zombie judge Thomas Griesa to render in favor of the vulture funds against Argentina, which the Supreme Court allowed to stand this year by refusing to review the case, is having repercussions other than the ones the Singer likely expected. Peruvian economist Oscar Ugarteche, author of Arquitectura financiera internacional: una genealogía de 1850 a 2008 (2014?), tells Página/12 (Julia Goldenberg, “Tendría que existir un tribunal internacional de arbitraje para deuda soberana” 17.10.2014):

La nueva arquitectura que se está delineando tiene otra base, no está supeditada a las Instituciones Financieras Internacionales (IFIS) basadas en Washington. El banco de los Brics y el Banco del Sur no necesariamente utilizan el dólar como moneda para préstamos; no utilizan la ley de Estados Unidos ni a Nueva York como jurisdicción para los contratos, abriendo el camino a un futuro de una arquitectura financiera no dominada por un solo país. En mi trabajo de la Arquitectura financiera internacional: una genealogía de 1850 [a] 2008, se puede apreciar que en el tiempo cambian las instituciones cuando las existentes se vuelven obsoletas, sea porque dejan de responder a las necesidades sistémicas de estabilidad o porque las bases que las sostienen se debilitan.

[The new architecture that is being delineated has another basis, it is not dependent on the International Financial Institutions (IFIS) based in Washington. The bank of the BRICS and the Bank of the South {both recently initiated} will not necessarily use the dollar as the currency to make the loans; they won't utilize the law of the United States nor that of New York as a jurisdiction for the contracts, opening the path to a future of a financial architecture not dominated by a singly country. In my work on Arquitectura financiera internacional: una genealogía de 1850 a 2008, one can appreciate that in time the institutions change when the existing ones become obsolete, whether because they cease to respond to the systemic necessities of stability or because the bases that sustain them have become debilitated.]

Ugarteche argues that the Argentine confrontation with the vulture funds has made a problem of the international financial system visible in a new way, "que es un problema que tiene por lo menos 30 años, es que la jurisprudencia estadounidense se transformó en jurisprudencia universal, sin que haya mediado un acuerdo internacional para convertirla en jurisprudencia universal" ("which is a problem that it has had for at least 30 years, [which is] that American jurisprudence has been transformed into the universal jurisprudence [in matters of sovereign debt], without having been mediated by an international agreement to convert into a universal jurisprudence.")

The truly radical decision of the Nixon zombie judge in the vulture funds favor demonstrated dramatically how damaging that situation can be, even redounding against the real interests of the United States, if that interest is taken to be anything more than whatever financial buccaneer is implementing some money-making scheme for their private benefit at the moment. The implications for the restructuring of Greece, Portuguese, Spanish and Italian debt could be enormous.

Ugarteche observes, "Este caso es fascinante porque ha instalado además que este juez no cree en las reestructuraciones de deuda. Tira abajo 200 años de historia financiera" ("This case is fascinating because it had shown that this judge [Thomas Griesa] doesn't believe in the restructuring of debt. That shoots down 200 years of financial history.") Ugarteche is being conservative in the 200 years estimate; I've seen at least one estimate claiming it violated eight centuries of precedent in sovereign debt.

Ugarteche also calls attention to Singer's role as one of the top donors to Republican Party campaigns in the United States. Most likely aware of the irony of South American countries needing to scold the US for corruption, Ugarteche says, "Cambiar leyes a favor tuyo poniéndoles dinero a los congresistas en nuestros países se llama tráfico de influencias" ("Changing laws in your favor by giving money to Members of Congress in our countries [Argentina and Peru] is called trafficking in influence"). In the US, we call it normal politics, probably never more so than in the Citizen's United era. Peru has also tangled with Singer's Elliott Management Corporation vulture funds.

He endorses what he identifies as Argentine Economics Minister Alex Kicillof's belief that the current international system represents first and foremost the interests of big banks.

Kiciloff carried the fight against Singer and the vulture funds to the G-20 Summit that has been meeting in Australia. And got some nominal support in an official G-20 declaration. (Capitanich praises G20 debt restructurings clause Buenos Aires Herald 11/17/2014)

Paul Krugman discusses Paul Singer's touchiness about being wrong about the threat of impending inflation inThe Uses of Ridicule 11/06/2014)

Singer was depicted by Bloomberg Businessweek this year devouring Argentina (Max Abelson and Katia Porzecanski, Paul Singer Will Make Argentina Pay 08/07/2014); the URL indicates that a one time the title of the story was projected to be, "Argentina's vulture Paul Singer is Wall Street freedom fighter."

Krugman writes:

But Singer will get very angry if you make fun of him; in fact, he denounces reporting that points out how wrong he and others have been as the “Krugmanization” of the media, a term I’ll adopt with pride. It’s yet another illustration of one of the remarkable revelations of recent years, the incredibly sensitive feelings of the superrich, who are so hurt at any suggestion that great wealth does not also go with great wisdom and great virtue that they threaten to take the economy with them and go home. [my emphasis]

Krugman links to Matt O'Brien's This billionaire thinks the Fed is missing the hyperinflation in the Hamptons Washington Post 11/06/2014. And Krugman returns to Singer in Rage of the Traders 11/13/2014:

Sometimes the absurdity of what passes for economic wisdom surpasses even my highly adapted expectations. I really, truly expected that even Wall Street would consider Paul Singer’s hyperinflation in the Hamptons rant embarrassing, and try to pretend that it never happened. But no; apparently it’s being passed around eagerly by traders and big shots who think it’s the greatest thing since sliced foie gras. ...

Oh, and really rich people often have no idea when they look ridiculous. After all, who in their entourage is going to tell them?

As Roy Edroso says in another context, "Some ideas, if we're so generous as to call them that, are just too stupid for anything but cold buckets of derision." (Who'll Stop the Derp? Alicublog 11/12/2014)

There seems to have been a great deal of wishful thinking in Singer's approach to the Argentine case. He and those supporting his suit, not least Nixon zombie judge Thomas Griega, seem to have seriously underestimated who they were dealing with in Cristina Fernández and Axel Kicillof.

Argentina: harder to roll than US hedge funds and their Nixon zombie judge thought

Argentine Finance Minister Axel Kicillof is looking forward the expiration of the RUFO clause in their debt agreements "which prevents Argentina from voluntarily offering holdout creditors better terms than those of its 2005 and 2010 restructurings. This clause ends on January 31 next year." ('Vulture funds are the ebola of the financial system' Buenos Aires Herald 11/06/2014)

Once that clause expires, the vulture funds and their friend the Nixon-appointed zombie judge Thomas Griesa will have a much harder time forcing Argentina into actual default. The Buenos Aires Herald also reports:

A negotiation would possible in January considering a different scenario in Argentina’s debt dispute with vulture funds could emerge, Economy Minister Axel Kicillof said calling the groups of creditors suing the country over its defaulted bonds more than a decade ago the “ebola of the financial system.”

“Starting in January, it is possible that after so many pressures they tried to apply, with the position of the President (Cristina Fernández de Kirchner) very clear, attending the law and (refusing) to not giving some bondholders more than what has been given to others, facing that situation they (vulture funds) have not been able to turn, we will probably find another scenario,” Kicillof said in statements to media.

Argentina's Finance Minister on the state of the vulture fund fight #GrieFault #GriesaFault

Tomás Lukin interviewed Argentine Finance Minister Axel Kicillof, who has been in Washington for the meeting of the International Monetary Fund (IMF) and the World Bank there. (“El sistema financiero mundial está bajo reforma” Página/12 12.10.2014)

The title comes from something Kicillof told him, "Hoy el sistema financiero internacional está bajo reforma por el caso argentino. Hasta el FMI cuestionó la interpretación que hizo el sistema judicial de Estados Unidos.” ("Today the international financial system is being reformed because of the case of Argentina. Even the IMF has questioned the interpretation made by the judicial system of the United States.")

He's referring, of course, to the radical decision by the Nixon-appointed zombie judge Thomas Griesa in favor of the vulture funds holding defaulted Argentine debt, a decision that would have forced Argentina into actual default, not just into the #Griefault, if they had been willing to go along with it passively and have the vulture funds pummel the Argentine economy because they found a senile judge, at least intellectually corrupt, to go along with them.

Argentina has a won a majority of countries in the US General Assembly to demand a reform of the sovereign debt system to prevent people like the vulture funds and Nixon zombie judges from doing crazy and massively destructive things like they tried to do this year with Argentina.

The IMF's Monetary and Financial Committee recently referred to the problem raised by the vulture funds' attack on Argentina - in bland bureaucratese, of course: "We welcome the work on modified pari passu clauses and strengthened collective action clauses, and call on the IMF, its member countries, and the private sector to actively promote their use in new international sovereign bond issuances." (Communiqué of the Thirtieth Meeting of the International Monetary and Financial Committee (IMFC) 10/112014; El FMI y “las fallas” de Griesa Página/12 12.10.2014)

A novel treatment of the pari passu clauses in the defaulted Argentine debt agreements was one of the features of the Nixon zombie judge's radical ruling.

IMF Chairwoman Christine Legarde addressed an issue related to the Argentine debt fight with the vulture funds at the IMF/World Bank meeting (The IMF at 70: Making the Right Choices—Yesterday, Today, and Tomorrow 10/102014): "A world of large capital flows means that we need a large global safety net. Regional arrangements—including the new BRICs contingency reserve arrangement—certainly have an important role to play."

The IMF also formally recommends a reform of the sovereign debt restructuring process, as the Buenos Aires Herald reports in IMF calls for reforms to avoid holdout cases 10/07/2014:

The International Monetary Fund urged a rethink of how sovereign bonds should be structured to avoid future debt restructurings turning into a repeat of Argentina’s disruptive court battle with a few disgruntled creditors.

A detailed IMF paper laid out a series of recommendations that centred on enhancing so-called collective action clauses (CACs) embedded in most sovereign bond contracts, on modifying clauses on the pari passu equal treatment of creditors, and on the IMF’s role in promoting the use of such clauses.

The reports comes after United States District Judge Thomas Griesa’s decision to hold Argentina in contempt of court because of the country’s attempt to pay bondholders in Buenos Aires and change trustee. [my emphasis]

Enhanced CACs that allowed restructuring agreements reached by some specified percentage of the bondholders to be made binding on all bondholders would take away the kind of rent-seeking speculation opportunities of which the vulture funds availed themselves thanks to the availability of a compliant Nixon zombie judge and the willingness of the Roberts Court to let his radical ruling stand. The IMF proposal suggests 75% of the bondholders agreeing as the threshold for such CACs.

As the BAH article notes, "The absence of such a [collective action] clause in Argentina’s original bond contracts is what has allowed hedge funds NML and Elliott to pursue the country for full repayment on debt it restructured in 2005 and 2010. Those restructurings were accepted by 93 percent of bondholders."

IMF Supports Reforms for More Orderly Sovereign Debt Restructurings IMF Survey Magazine 10/06/2014:

The IMF is engaged in a number of reforms designed to reduce the costs of sovereign debt restructurings—for the benefit of debtors, creditors, and the system more generally. These reforms include possible changes to the IMF’s lending framework that are designed to give the IMF a broader range of policy responses in the context of sovereign debt distress. Separately, there is a recognition that, in circumstances where a sovereign and its creditors have reached the conclusion that a debt restructuring is necessary, the existing legal framework may not be sufficiently robust to prevent “holdout” creditors from undermining the restructuring process. Recent developments, including the Argentine litigation in the United States, have highlighted these vulnerabilities. The IMF recently endorsed reforms to sovereign bond contracts that are designed to address these issues. [my emphasis]

The IMF's report itself is Strengthening the Contractual Framework to Address Collective Action Problems in Sovereign Debt Restructuring Oct 2014. Pages 8-9 provide a chronology of the Argentina/vulture funds legal conflict and the decisions of the Nixon zombie judge.

Press Release on the report: IMF Executive Board Discusses Strengthening the Contractual Framework in Sovereign Debt Restructuring Press Release No.14/459 10/06/2014:

Directors acknowledged that the recent New York court decisions with respect to Argentina may exacerbate collective action problems, although most felt that the extent of their impact on the restructuring process is still unclear. Directors welcomed the recent modification of pari passu clauses in certain sovereign bond issuances to explicitly exclude the obligation to effect ratable payments. Accordingly, they supported the widespread use of these types of modified pari passu clauses in new international sovereign bonds so as to enhance legal certainty and consistency across jurisdictions. [my emphasis]

The "ratable payments" technicality was part of the Nixon zombie judge's ruling.

Axel Kicillof in his interview said that nothing would come of further mediation under Daniel Pollack with the vulture funds. Argentina seems to no longer regard him as any kind of honest broker.

Página/12 asked Kicillof if Argentina actually needed to go back to international bond markets. Kicillof replied, "Una cosa es recurrir y otra es no tener la posibilidad" ("It's one thing to go back and another to not have the possibility.") In other words, Argentina is able to maintain its payments with the 92% of restructured bondholders and does not need to borrow more money now. But the current administration wants to preserve Argentina's credit standing by making good on the 2005 and 2010 agreements with the restructured bondholders.

Argentine debt drama with the vulture funds

Part 4 of an Argentine documentary on sovereign debt and the vulture funds, Deuda: Historia de una extorsión (4 de 5) TV Pública argentina 20.09.2014. This segment features an interview with Argentine Economics Minister Axel Kicillof.

See previous posts for earlier parts.

The Buenos Aires Herald has reports on some public diplomatic jockeying between the US and Argentina.

US says ties with Argentina going through 'tough period' 09/26/2014:

Last week, the Argentine government summoned Business attaché for the US embassy in Buenos Aires Kevin Sullivan after he stated Argentina has to “get out of the default to re-gain economic growth perspectives.”

Foreign Minister Héctor Timerman said sanctions will be applied if the US insists on the comments, as the government considers Argentina is not in default, as it has “honored its debt”.

Timerman: 'Argentina not upset with US, Germany' 09/26/2014:

[Argentine Foreign Minister] Timerman rejected one more time statements made by Germany's Finance Minister Wolgang Schauble and reproduced by an ad recently published in Argetnine media and signed by the American Task Force Argetnina [sic] group.

"The German minister made untrue statements," he told a news agency, adding "but we are not upset."

Germany tones down clash over ‘vulture funds’ 09/26/2014:

“We want to solve any pending matters with Argentina in a constructive way, and we count on the cooperation from Argentina’s government,” a spokesman for the German Foreign Ministry told German agency DPA.

The conflict was originally ignited after the Vulture Fund-backed lobbying group American Task Force Argentina (ATFA) quoted Schäuble placing the blame of the debt conflict on Argentina’s shoulders, painting the country as an irresponsible nation that ‘lived for decades beyond its means‘, prompting a strongly-worded response by Cabinet Chief Jorge Capitanich against Germany’s position on debt matters.

German diplomacy distanced itself from ATFA’s ad, stating yesterday that the government “has no relationship or contact with its authors. The Hedge Funds that obtained a favorable ruling in New York against Argentina aren’t based in Germany. The German government doesn’t take sides in the dispute between Argentina and the holdouts.”