In our previous article The Default Shall Be Televised we mentioned that Argentina has reached yet another default cycle and that it will be fun to watch. Well… the comedy has begun and this is the first episode.
Argentina is hopelessly indebted to, well, pretty much everybody. Because the debt is in effect unpayable, Argentina defaults every 5 to 7 years (approximately). The precise speed depends of the level of economic idiocy of its politicians. Once this happens, Argentina "re-structures" its debt, which is the politically correct way of saying that it makes its bondholders an offer they can refuse: accept a monstrous discount on our debt or accept nothing. Most people do. This time however, a few hedge funds did not. Furthermore, they took Argentina to court, the New York court to be precise and the judge said: pay up!
Of course, Argentine lawyers fought a good fight in NY and they lost as it was expected and right on cue. Then, the Argentine government threw a tantrum to the scream of Iiiitttt'sss Noooooooo Faaaaaiiiirrr and took the US (the country) to court. Which court? The International Court of Justice in The Hague (ICJ). That's right. That court that is completely irrelevant, has no practical power whatsoever in the real world and to which "sovereign" countries are not obligated to abide by its ruling. Yes. That one. What follows is the summary of this mid-winter (or mid-summer) comedy. The accusations are as follows.
Argentine accuses the US of violating its international obligation to respect Argentine sovereignty; specifically its sovereign immunity. This is really, really funny. Let's see. Who is the nation that has been submitted to the Guinness Book of World Records as the country that executed the largest number of foreign interventions? US. If we count all interventions excluding:
- mobilizations of the National Guard
- offshore shows of naval strength
- reinforcements of embassy personnel
- the use of non-Defense Department personnel (such as the Drug Enforcement Administration)
- military exercises
- non-combat mobilizations (such as replacing postal strikers)
- the permanent stationing of armed forces
- covert actions where the U.S. did not play a command and control role
- the use of small hostage rescue units
- most uses of proxy troops
- U.S. piloting of foreign warplanes
- foreign or domestic disaster assistance
- military training and advisory programs not involving direct combat
- civic action programs
- and many other military activities.
We end up with the following list from this website:
Now, realistically speaking, what are the chances a country that has been behaving as an enforcer for the mob for the last 200+ years will suddenly change its ways and become a priest? Give us a break!
Disrespecting sovereignty. Funny as hell! Argentina should be grateful if it has not yet been invaded… or perhaps that's the master plan. Get invaded by the US in order to get at least some resemblance of order.
Applying economic and political pressure
Argentina accuses the US of violating its international obligation not to apply or stimulate economic or political actions in order to force the sovereign will of other Nations. Let's get real here. US? Applying economic or political pressure? To get some other nation to do its bidding? Noooooo. It can't be. We are shocked! Socked! We tell you. This is not possible in "The Land of the Free and the Home of the Brave". This must be a mistake.
Now, seriously, the US started doing whatever it felt like doing (officially) since the Monroe doctrine was issued in 1823 decreeing that Latin America was, for all intents and purposes, US's playing ground.
Oh… man…this stuff about applying economic and political pressure is funny, really funny we tell you. The Argentine government must have a really good script writer.
Exercising judicial functions in bad faith
This one requires a bit of explanation. The official accusation reads that the US violated its international obligation to "exercise in good faith and In accordance with the law the judicial functions to which the Argentine Republic has accepted within the exclusive framework of that acceptance".
Allow us to translate.
Argentina always had foreign debt, even before it separated from Spain in 1810. If our information is correct, the original debt contracted before 1810 with UK (Baring Brothers) has not yet been paid (or at least in its current, restructured form). However, the massive amount of current debt accrued in the 70's, when the "glorious" Argentine military who brought the "lead years" (lead as in bullet) ruled supreme. During that decade and subsequent years Argentina was the IMF's (International Monetary Fund) economic lab rat. First, massive amounts of Petrodollars were pumped into Latin American countries by US (and other) banks. They did so with many payment deferring provisos and with one clause: the jurisdiction of competency were the New York tribunals. In other words, anything happens will see you in NY.
Over time all the military regimes in Argentina came to an end and with it the new-and-improved (yeah… right…) democratic governments ascended to power. These governments initially began to investigate the massive debt… process which was promptly stopped in a still very much obscure event. All documentation mysteriously disappeared. All the illegal debt that the military took on was rubber stamped by democratically elected governments ever since. Nobody really understands why but there are many allegations. The most probable one is that US banks threatened to cut-off all credit to Argentina. This would precipitate a large economic debacle. Of course, it was a bluff. If you owe 10 EUR to your banker, you have troubles. If you owe 10 billion EUR to your banker, the banker is in troubles.
And so returning to reality, what Argentina is accusing US of doing is not to intervene in the New York court to stop a federal judge from issuing judgements that were clearly within the law and according to contractual loans signed by Argentina. In other words: Iiiiitttttsssss Noooooooo Faaaaiiiiirrrrr!!!
Let's make a deal
The Argentine lawsuit also states that if US does not accept the competence of the ICJ then the US must find a suitable mediator according to the UN and OAS charters to resolve the issue in a peaceful manner. By the way, they say peaceful twice. Hint… hint… hint… In other words, please, please, please daddy don't get upset and get us out of this mess. There is an old joke in Argentina that reads "Yankee go home… but take me with you!"
What's going to happen
We are going to put forward our inconsiderable powers of forecasting and guess the future. The US will simply ignore the whole event and play dumb and stupid. Why should it do otherwise? To agree to a "special" deal for Argentina means that it is open hunting season on all US banks (and world-wide banks for that matter too) to which money is owed. Nobody would pay. Not a chance this is going to happen.
We told you so
We told you that this new iteration of the Argentine default is going to be funny. So far it is. We have ludicrous arguments, broken phones and economic and political realities. We are also very sure that there are all kinds of back-alley conversations going on and that eventually a new deal (which will solve nothing) will be reached. Meanwhile, don't change the channel. Stay tuned (as they used to say).
PS.: if you have the stomach and understand Spanish, you can find the full press release from the Pink House attached at the bottom.
Note: please see the Glossary if you are unfamiliar with certain words.