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Argentina prepared to comply with World Bank arbitration and pay corporations with bonds

Friday, October 11th 2013 - 07:52 UTC
Full article 21 comments
The administration of Cristina Fernandez so far had refused to comply with ICSID decisions   The administration of Cristina Fernandez so far had refused to comply with ICSID decisions

Argentina will offer 500 million dollars in sovereign bonds to resolve disputes with corporations at a World Bank arbitration panel, a financial daily newspaper reported on Thursday.

Ambito Financiero reported on its website, without citing sources, that the payment would be made in sovereign bonds to five companies that have filed complaints over a range of grievances at the World Bank's International Centre for Settlement of Investment Disputes.

The decision coincides with a sensitive time in Argentina’ battle in US courts with hedge funds that refused to take part in two debt restructurings following Argentina's 2002 default.

Argentina hopes the Obama administration will ask the US Solicitor General to present arguments to the U.S. Supreme Court on whether the case merits the court's attention, after a lower court ruled in favour of bondholders who will not accept reduced payments under a restructuring agreement.

The International Monetary Fund, France and some US officials have said they were concerned that if Argentina were to be forced to pay the non-participating investors, it would become more difficult for cash-strapped countries to restructure their debts in the future.

The Ambito Financiero newspaper said the companies to be paid include France's Vivendi SA, British electric and gas utility National Grid PLC and Continental Casualty Company, a unit of Chicago-based CNA Financial Corp. US-based water-company Azurix and Blue Ridge Investments, a subsidiary of Bank of America Corp, will also receive compensation, the report said.

Economy Minister Hernan Lorenzino, in Washington this week for World Bank and IMF meetings, aims to unlock up to 1.8 billion dollar credit lines from those institutions, the newspaper said.

Argentina's sovereign default in 2002 effectively ended the country's ability to tap global bond markets. Falling levels of foreign direct investment and a huge bill for gasoline imports have led to dwindling foreign reserves, making additional credit lines crucial to finance government spending and supply individuals and businesses with foreign currency.

In May 2012, the Obama administration suspended Argentina from the US Generalized System of Preferences program, which waives import duties on certain goods from developing countries, after Argentina failed to pay about 300 million dollars in compensation awards in disputes involving Azurix and Blue Ridge Investments. It was the first time a country had been suspended from the program for failing to pay an arbitration award.

The US imported 477 million worth of goods from Argentina under the program in 2011, which was about 11% of total US imports from the country that year.

 

Top Comments

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  • Welsh Wizard

    ARG bonds? So…an IOU…in dollars…which the government will pay. Fair enough if they accept it but I would probably want the cash upfront. Most people do. I tried this with one of my parking tickets and, unfortunately, the delightful chaps in the council offices for Kensington and Chelsea wouldn’t accept a bond from the Bank of WW and the Bank of WW has never defaulted on its payment obligations…

    Oct 11th, 2013 - 08:49 am 0
  • Viscount Falkland

    My word is my bond ,would apply in some case's..........but not this one :-)

    Oct 11th, 2013 - 11:26 am 0
  • yankeeboy

    This is an interesting proposition. Arg is desperate for loans from WB IDB and they can't get them until the ICSID judgements are satisfied. Bonds are not cash. RG bonds are especially worthless.
    I wonder who will take them in lieu of cash?
    My guess is not too many
    All this shows is what I have been saying for years,
    In the end Argentina will pay what it owes
    Blink

    Oct 11th, 2013 - 11:55 am 0
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