Vulture verdict underscores the urgency of a new debt strategy: Audit, not more swaps, to stop paying what we do not owe
In
its 23rd August decision, the New York Second Circuit Court of Appeals once
again confirmed the mistakenness of the strategy adopted by the Argentine
government to address the issue of public debt. By accepting each and every one
of the so-called vulture funds` arguments in their effort to collect what they
never invested, the Court highlighted the urgent need for a thorough change in
Argentine strategy.
The government has let itself become trapped in
a terrain that by definition is unfavorable to the people of Argentina. It is a
strategy that has proved costly and will continue to inflate the bill if not
corrected. By ignoring the manifest illegitimacy of debt claims that are now in
the claws of recognized vultures (as well as other debt collectors), and
continuing to accept the unconstitutional jurisdiction of foreign courts such as
that of New York, the government delusively believes that the rules of the
market will work in defense of human rights and national sovereignty.
The New York Court makes it very clear when it affirms
that its decision favours the integrity and status of that city´s financial
markets, insofar as it strictly requires, without any consideration to the
contrary, that "debtors, including foreign debtors, pay their debts."[1]
However much we reject the implications of this decision for Argentina, and
possibly for other peoples who also suffer from the actions of these
speculators, no one should have expected anything different.
Unfortunately, the two measures announced last
night by Argentine President Cristina Kirchner only aim to deepen the strategy
that has turned our country into a "serial payer" - as she herself
confirmed -of debt claims whose legitimacy has never been established. Neither once
again lifting the “Lock Law” that ostensibly impeded payment on those bonds
that did not enter into the 2005 swap, nor offering to exchange bonds that now
face legal obstacles to continue to be paid in New York, for bonds that would
be paid in Argentina under Argentine law, resolves the debt problem for the
Argentine people.
Since the beginning of the Kirchner decade, the
Argentine government's debt strategy has been based on the unquestioned
acceptance of all claims, the renewal of submissiveness to foreign courts, and
the search for conditions that permit us to pay up and keep paying, with the declared
aim of regaining access to and better terms with the international capital
markets, in order to gain new loans.
Although it has not achieved the desired
objective, as the President also said last night, between 2003 and 2012
Argentina has made over 173 billion dollars in debt payments. This is more than
any previous government and the equivalent, at today´s official exchange rate, of
one and a half times the annual national budget, or seven times the revenue collected
via the controversial tax on earnings in 2012. Argentina also continues to
accumulate expensive lawsuits - and negative judgments – and despite all that
has been paid and all the propaganda about “de-indebtedness”, the debt is growing
rapidly, having reached the official sum of 209 billion dollars as of the end
of 2012.
It is this "willingness to pay" that the
government continues to defend with each and every action, whether in the face
of demands by so-called vulture funds, Paris Club governments, the IMF, ICSID
or through its repeated offers of generous restructuring. And because it is the
government that has effectively paid off more debt than any other, even at the
expense of both the needs of the Argentine people and a new and considerable
domestic borrowing through the use of pension monies and numerous other state and
para-state funds – it is precisely this that has stirred up so much anger.
Rather than respond to the heart of the matter, the Argentine government is
reacting incensed that the Court of Appeals has labeled the country a
"recalcitrant debtor.
A new
and more effective strategy must start from a different premise: the defence
and promotion of human rights over the claims of capital, as relevant domestic
and international law demands.[2]
It must begin by acknowledging the debt’s
fraudulent origins and then acting accordingly. The government complains of an "inherited"
debt that emanates from the dictatorship and the subsequent adjustment and
restructuring processes that included the bonds issued during the height of the
neoliberal, Menemist ‘90s, with the draconian conditions that now serve the
vultures as a golden plate. However, it now paradoxically boasts of paying back
instead of questioning that same debt, whilst ignoring among other things,
Judge Ballester’s verdict in the renowned "Olmos Case" as well as all
the other ongoing court cases in Argentina which denounce the illegitimacy and
illegality of the debt claims that Argentina religiously pays (as well as those
it has yet to pay). Performing a public and participatory debt audit and
investigating these complaints would be a much more effective strategy than begging
for the uninterested help of the U.S. government, the IMF or even God –before that
country’s Supreme Court.
In the same vein, the government must question
the unsubstantiated claim of the New York Court that Argentina "has
voluntarily submitted itself to the jurisdiction of (their) district authority."[3]
Instead, the need to respect and strengthen our own national sovereignty and
jurisdiction must be recognized as required by our Magna Carta. Undoubtedly, the
proposal announced Monday night to swap those bonds that were issued in 2005
and 2010 under New York laws, for similar bonds issued under national jurisdiction,
is an important recognition of the gravity of this problem. Nevertheless, Argentina´s
eagerness to please the markets is perpetuated further in recent contracts such
as the YPF-Chevron agreement and in the numerous bilateral investment protection
treaties which today implicate the state in multi-million-dollar law suits in nonlegal
forums such as the ICSID.
To comply with the ruling recently upheld by
the New York Court of Appeals would assuredly mean an unacceptable increase in
the social debt to the Argentine people. By itself, the USD 1.3 billion hedge
fund demand (not including interest arrears) now confirmed pending unlikely
U.S. Supreme Court action, is equivalent to 124% of this year’s national housing
and urban development budget, or 59% of the entire allocation for social welfare
and promotion.[4]
Argentina is thus right to reject any such payment,
and the international community must support its right to protect the public. Together,
they need to act effectively to stop systematic abuses of capitalist financial
power, starting with the so-called vulture funds.
But it is equally necessary that both the
international community and the government of Argentina recognize that the
country has every right and all the required evidence, to denounce and nullify both
the illegitimate debt contracts that have been imposed against the will and
rights of the Argentine people, as well as the renunciation of sovereignty and
jurisdiction made under the extorsive pressure of the same lenders who today find backing whether in the
courts of New York or London, the ICSID arbitration panels or any other
platform where the private interests of a few, outweigh the human rights of an
entire people. Only then can we move towards a truly legitimate justice and reparations
for the damage that has already been done.
NO TO VULTURE FUNDS
FOR A PUBLIC AUDIT
AND NO MORE ILLEGITIMATE DEBT PAYMENTS
SUPPORT THE JUDICIAL INVESTIGATIONS
AND PUNISH THOSE RESPONSIBLE
RESPECT NATIONAL SOVEREIGNTY
AND PEOPLES’ RIGHTS
REPARATIONS FOR THE
ACCUMULATED CRIMES AND DEBTS
DIALOGUE 2000 - JUBILEE SOUTH
ARGENTINA,
Buenos Aires , August 27, 2013
[1]“Our decision affirms a proposition essential to the integrity of the
capital markets: borrowers and lenders
may, under New York law, negotiate mutually agreeable terms for their transactions,
but they will be held to those terms. We
believe that the interest – one widely shared in the financial community – in
maintaining New York’s status as one of the foremost commercial centers is advanced
by requiring debtors, including foreign debtors, to pay their debts.” Decision 12-105(L), U.S. Federal Court of Appeals,
Second Circuit, in NML, Ltd. V. Republic of Argentina, 23rd August 2013, p.
24-25.
[2]See for example, the “Guiding Principles on External Debt and Human
Rights”, UN General Assembly, A/HRC/20/23.
[3]Idem, Decision 12-105(L), p. 5
[4]The amount budgeted nationally in 2013 for housing and urband evelopment
is AR$ 5.9 billion, and that for social welfare and promotion is AR$ 12.4
billion. At the oficial exchange rate of
AR$5.6/USD, the payment confirmed to the vulture funds would be around AR$7.3
billion.