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Argentina's Supreme Court loss may serve as a wake-up call

Friday, June 20th 2014 - 06:42 UTC
Full article 15 comments

The following piece by Charles Lane published in the The Washington Post offers an interesting debate about future bailouts and sovereign debt restructuring, following on Argentina's case. Read full article

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  • reality check

    Very good article.

    Jun 20th, 2014 - 08:32 am - Link - Report abuse 0
  • ChrisR

    Very good article EXCEPT it relies on the good will of both parties to the agreement for it to work.

    When has The Dark Country ever showed goodwill to any other country, even her neighbour countries such as Uruguay?

    The despicable people will default sooner or later and I would put good money on that.

    Jun 20th, 2014 - 12:08 pm - Link - Report abuse 0
  • Sergio Vega

    2@ And as Chile......!!!

    Excelent artcle .....cristal clear about the responsabilities from both sides, also.

    All money borrowers known that debts must be paid, sooner or later.....and a restructuring of their debt comes just on the goodwill of the lenders who act on the promise of the borrower to pay all debt in the time agreed, except if clause is written with the agreed exceptions .
    As an averdue debtoor, a country can´t be arrogant and dull when ask for a restructuring of its debts but shows goodwill to pay as much and soon as it´s possible.....In that the national pride is involved because a default isn't something that any country can be pride of, rather an humilliation for its citizens and political & economic society.....

    In the other hand, lenders also have to keep in mind that the conditions for a lend can´t be impossible to be honoured when the markets conditions are “normal” and some facilities must be considered when the markets conditions go down, so the loss can be shared in someway (not 25 cents for a dollar, naturally) when the debtor shows a good previous payment record and estate its willingness to make its best effort to pay how much it can.

    Probably, from now on the rules will change based on the Argentina´s case that has broken all the known negotiation ways to this moment....on boths sides.

    Jun 20th, 2014 - 02:27 pm - Link - Report abuse 0
  • Jack Bauer

    I agree with the logic presented in the article, but as ChrisR rightly puts it, “it relies on the goodwill of both parties to the agreement for it to work”.....however, as this is far from being put into practise, it'll probably reach the point when Argentina starts to have her overseas assets siezed by creditors.
    On the other hand, the creditors are not entirely innocent either ...under the present structure, they should know what the risks are and who they are dealing with, and are quite content as long as they keep getting their pound of flesh, even if it means that the people, and not the irresponsible governments, will be bled dry to keep the payments going. And worse, considering that most loans disappear into thin air, the benefits (they should generate) are rarely seen .

    Jun 20th, 2014 - 02:52 pm - Link - Report abuse 0
  • golfcronie

    @4
    The problem in Latam is that most countries are corrupt. $US 250 million was set aside to cleanup the pollution on the Argentine side of the river and only $US 1 million was used, where did the rest go, in someones pocket.Corruption is endemic.

    Jun 20th, 2014 - 02:59 pm - Link - Report abuse 0
  • Jack Bauer

    @5
    In the middle of Lula's 2nd term, they created what was called the PAC (Programa de Aceleração do Crescimento), a Government project to accelerate growth, directed towards the building and the improvement of the deficient infrastructure in general (highways, hospitals, prisons, power plants, airports, seaports, education etc..). At the time, the amount destined to this program, was US$ 250 billion, and the program would be concluded in 5 years ; At the end of his 2nd term, to ensure Dilma's election, they invented a 2nd PAC, this time , another US$ 125 billion. Up to date, 5-6 years later, there is literally nothing - or very little - to be seen for it.....when questioned about specific projects, the government lies, claiming that the project is in its final stages of conclusion, but in reality it's nowhere near conclusion, or worse, hasn't even been started...and the money that was allocated ?? ...well, most of the three-quarters of a trillion dollars is gone !!
    They think we should heed the advice that Joana Havelange, daughter of João Havelange (president of FIFA before Blatter) and part of the Brazilian Football Commission, gave to those who were protesting against the excessive spending with the World Cup, “Stop protesting, the money's already been stolen”......

    Jun 20th, 2014 - 03:49 pm - Link - Report abuse 0
  • ChrisR

    The head of Aerolinas Argieland has stated he is not worried about having the planes taken off them because the international ones are leased!

    Their crap planes, which they own, will only fly within “friendly borders”. I wonder where they are?

    Jun 20th, 2014 - 08:04 pm - Link - Report abuse 0
  • St.John

    Nonsense from the article: “the Obama administration and the International Monetary Fund argue otherwise; according to them, a victory for the hedge funds creates a dangerous precedent for future sovereign debt crises.”

    Then they are more than 9 years behind reality.

    “Collective action clauses – which effectively eliminate the possibility of “holdout” litigation – have been included in 99% of the aggregate value of New York-law bonds issued since January 2005, including Argentina’s 2005 and 2010 Exchange Bonds. Only 5 of 211 issuances under New York law during that period did not include collective action clauses, and all of those issuances came from a single nation, Jamaica.” http://dealbreaker.com/2012/10/elliott-associates-winning-battles-against-argentina-on-land-and-sea/

    Jun 20th, 2014 - 08:22 pm - Link - Report abuse 0
  • Bisley

    This sort of thing, in nearly every country (not just Argentina), is fueled by greed and stupidity on both sides; the governments that borrow to buy public support, to keep themselves in power (knowing there is no possibility of repaying it), and those who buy the debt (also knowing the country's inability to pay), assuming that someone will bail them out and they can make some money anyway.

    The proper solution to this problem would be for both sides to lose (and the public, that ultimately pays for it all, win), by the creditors not getting their money back, and the government being forced to live within its means, because no one will loan it more money.

    Jun 21st, 2014 - 05:09 am - Link - Report abuse 0
  • Martin Woodhead

    #9
    Exactly
    Argentina was always a high risk
    Some you win some you lose.

    Jun 21st, 2014 - 10:09 pm - Link - Report abuse 0
  • Britworker

    I wonder if Argentina will survive as one nation after the next default ??

    Jun 22nd, 2014 - 02:45 pm - Link - Report abuse 0
  • yankeeboy

    12. They should sell Mendoza to Chile.

    Jun 22nd, 2014 - 05:21 pm - Link - Report abuse 0
  • Jack Bauer

    9 Bisley....Even if no one were to lend the governments more money, this , at least for the short / medium term, would not be a problem, as they would simply resort to printing what they needed... and it would only catch up with them when the resulting inflation bit them in the ass.

    Jun 22nd, 2014 - 08:14 pm - Link - Report abuse 0
  • Bisley

    13 Jack Bauer (#)

    Without borrowing, and spending continued at the same level, it wouldn't take long at all to push inflation to Zimbabwe-like heights, and bring it all down. Another good argument for returning to gold and silver money, so that the politicians and bankers can't steal from us by creating whatever they want, whenever they like.

    Jun 23rd, 2014 - 05:07 am - Link - Report abuse 0
  • Jack Bauer

    @14 Bisley,
    Agree. Going back to currency backed by gold reserves, and limit printing to whatever 'riches' the country produced, would guarantee the value of the paper currency and oblige governments to balance their budgets. But as it is, printing has become the solution, making everybody - except those in government (who steal) - poorer.

    Jun 23rd, 2014 - 03:02 pm - Link - Report abuse 0

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