Argentine president may take drastic measures to deal with debt
By Catholic Online (NEWS CONSORTIUM)
8/25/2014 (3 years ago)
Catholic Online (www.catholic.org)
Argentinian President Cristina Fernández praised her nation's financial system as being "one of the most solid in the world" during a speech at the Buenos Aires stock exchange last week. Many disagree, saying that they fear the mercurial president may go to drastic lengths to deal with her South American nation's debt.
Argentinian President Cristina Fernández praised her nation's financial system as being "one of the most solid in the world" during a speech at the Buenos Aires stock exchange last week.
LOS ANGELES, CA (Catholic Online) - Fernández had previously announced a plan to dodge a U.S. court order to pay so-called "holdout" creditors in New York. The ruling had pushed Argentina into default last month for the second time in 13 years.
Economists warn that the plan to use an Argentine state bank to make debt payments and to invite creditors to swap their foreign law bonds for new ones subject to Argentine law will only prolong Argentina's isolation from international markets. The country defaulted in 2001, and a second one would plunge the economy deeper into recession.
Many doubt the plan is even feasible. One of the holdout hedge funds, Aurelius Capital Management, said Argentina's leaders had "chosen to be outlaws" with the plan. New York Judge Thomas Griesa said it was "illegal", although he stopped short of declaring Buenos Aires in contempt of court, "for the moment."
Many fear that Fernández is adopting an increasingly hardball strategy.
"The president has decided to stop being orthodox and is going all-out radical," one foreign executive in Argentina said. He was referring to attempts over the past year to normalize relations with international creditors in order to regain access to external financing as central bank reserves plumbed record lows.
Hundreds of supporters of Cristina Fernandez de Kirchner hold a rally at 'Luna Park' in Buenos Aires, Argentina, August 12, 2014.
Now apparently stymied by the default, the plan included an agreement to compensate Spain's Repsol with $5 billion after expropriating its Argentine assets in 201. The plan also intends to pay a long overdue $10 billion debt with the Paris Club of creditor nations.
The executive complained of a series of "scary" moves against the private sector, such as threats to sanction a U.S.-based company after it filed for bankruptcy and closed down its local operations, which Fernández claimed was really an attempt backed by the "vulture funds" to spread fear among the population.
Business groups are incensed about a "supply" law being debated in congress that has been described as "retrograde" and "unconstitutional" by business leaders.
Even more worrying, observers fear a conflict is brewing on the scale of Fernández' damaging clash with the farming sector in 2008.
Copyright 2017 - Distributed by THE CALIFORNIA NETWORK
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