On the road for economic stability, Argentina faces a new aftermath concerning the U$S 100 billion moratorium called in 2001

BUENOS AIRES — In spite of having renegotiated around 93% of its debts and reducing values at an average of 70%, Buenos Aires is now being ordered by the Supreme Court of Justice of the United States to pay US $1.3 billion regarding public bonds linked to “vulture funds”.

The successful battle headed by the American multi-millionaire Paul Singer, who refused to accept the terms of renegotiation proposed in 2001, has overcome the national monetary and financial structure set up by Argentina’s president Cristina Kirchner. The final decision rejecting Buenos Aires’ legal appeals also demanded that full payments must be prioritised in relation to restructured ones, and that banks must comply with proper information requested by bondholders.

Kirchner classified the ruling as “extortion”, while claiming that the country is open to negotiation and will keep on honouring its obligations with restructured debts. Simultaneously to the refusal of promptly abiding the verdict, the president articulates a counter-defence to be proposed by the Economy Minister Axel Kicillof. Once USA’s highest court is able to rule in this matter, Argentina intends to transfer the restructured debts to national jurisdiction, which would avoid the freezing and seizure of assets and would allow payments in Argentinian currency. Nevertheless, there is little likelihood of implementing the measure. Kirchner needs to count on with 85% of creditors’ approval: being most of investors from USA, coping with Argentina to the detriment of American Justice’s decisions is said to be a reasonably remote possibility.

Meeting American Supreme Court orders may have a disastrous impact to the country’s economy. The constituted precedent may encourage legal requests to Argentina to review restructured debts originally corresponded to 15 billion dollars. The amount nowadays answers for more than half of Argentina’s national reservations (total of U$S 28 billion).

The International Monetary Fund (IMF) has expressed its concerns about the overwhelming power such legal decisions may give to creditors before countries in economic difficulties, undermining the process of restructuring sovereign debts in the whole world. Taking into account a systemic level of analysis, the Argentinian case may lead to a breakthrough of guidelines and procedures regarding contracts and resolutions at financial global market- for the good or for the bad.

— Verônica T. GlóriaCorrespondent (Politics)

Image Courtesy: Daderot, Released into the public domain | Wikimedia Commons