MercoPress. South Atlantic News Agency

US remembers Argentina debts must be honoured and suspends trade benefits

Argentina regrets the decision, suggests US is under pressure from “vulture funds”

Buenos Aires released a statement on Monday “regretting” US President Barack Obama's decision to suspend Argentina from the US Generalized System of Preferences program, which waives import duties on thousands of goods from developing countries.

The resolution is part of a larger US effort to pressure Argentina to pay debts and other obligations to US investors a decade after it defaulted.

The Foreign Ministry lamented the “unilateral decision” and explained that the companies involved in the dispute at the World Bank's International Centre for the Settlement of Investment Disputes (ICSID) “never accepted the Argentine proposal to solve this dispute according to the rules of the CIADI. Instead, they chose to force us into a ruling that goes against our own legal system”.

The Argentine government says paying the fines demanded by US investors is ”unconstitutional“ and recalled that “the US did not accept a settlement and insisted on a system contrary to legal scheme in effect in Argentina.”

Argentina ”regrets an attempt to force our country into making a decision that goes against its laws,” the statement read.

“Our nation strongly repudiates the lobbying practices put in place by vulture funds to push the US government into making this decision,” said the ministry.

The White House statement said it was suspending trade benefits for Argentina because of Buenos Aires failure to pay more than 300 million dollars in compensation awards in two disputes involving American investors.

Obama suspended Argentina, effective in 60 days, from the US Generalized System of Preferences program, which waives import duties on thousands of goods from developing countries.

“I am providing notification of my intent to suspend designation of Argentina as a beneficiary developing country under the Generalized System of Preferences (GSP) program,” said the White House statement.

The United States imported 477 million dollars of goods from Argentina under the GSP program in 2011, which was about 11% of total US imports from the country last year.

Argentina's top exports under the program were grape wine, prepared or preserved beef, sugar confections and olive oil. Washington waived about 17.3 million in duties on those goods from Argentina last year.

Obama's decision helps Azurix Corp, a Houston-based water services company, and Blue Ridge Investment, a subsidiary of Bank of America, in their bid for compensation for actions the Argentine government took a decade ago.

It is first time a country has been suspended from the GSP program for failing to pay an arbitration award.

“We urge the Government of Argentina to pay the subject awards,” US Trade Representative Ron Kirk said in a statement. “This would allow us to consider reinstating Argentina's GSP eligibility and promote the growth of a mutually beneficial US-Argentina trade and investment relationship.”

The decision is part of a larger US effort to pressure Argentina to pay debts and other obligations to American investors a decade after Buenos Aires defaulted on more than 90 billion dollars of government bonds, the largest sovereign debt default in history.

Azurix and Blue Ridge Investments filed petitions with the US Trade Representative's office in 2010 asking that Argentina be suspended from the GSP program for failing to pay compensation awards they were owed.

The World Bank's International Centre for the Settlement of Investment Disputes (ICSID) ordered Argentina in May 2005 to pay CMS Gas Transmission Co. 133.2 million dollars, plus interest, for actions it took that damaged the Michigan company investment.

The following year, ICSID ordered Argentina to pay Azurix 165.2 million, plus interest, in a separate dispute. Argentina asked an ICSID committee to annul both awards, but this was denied.

CMS transferred its award to Blue Ridge Investments after Argentina lost its annulment bid and still refused to pay.