Tuesday, June 17, 2014

US Supreme Court Sides Against Argentina in Debt Fight

The U.S. Supreme Court has rejected Argentina’s appeal of its case with holdout creditors, ordering the country to repay $1.5 billion to investors and raising fears of another default like the one that contributed to political and economic turmoil there in 2001.

The New York Times notes that the appeal rejection was one of two major blows delivered by the Court, the other being a 7-to1 decision which allows bondholders to use court orders to trace Argentine assets abroad. The ruling goes against the recommendations of the Obama administration, which argued that doing so would harm international relations and trigger reciprocal action against the U.S.

While President Cristina Fernandez has long fought against paying what she calls “vulture funds” that refused offers to negotiate debt, her options are limited moving forward. The ruling orders her administration to pay the holdouts in full before making payments to other bondholders, and a payment to the latter is due on June 30. From the Financial Times:
Argentina now faces four choices, analysts say. It could pay the holdouts, which it is loath to do, while also continuing to service holders of so-called exchange bonds. However, this seems unlikely, as “the government has indicated that it cannot afford to make such a payment in the wake of a sharp fall in foreign exchange reserves during the past year”, David Rees from Capital Economics, a London-based consultancy, said. 
Alternatively, it could attempt a negotiated solution with the holdouts. The problem here is that a local law, called “the lock law” and which is binding until the end of the year, forbids Buenos Aires from offering better terms to holdouts. Third, it could try to reroute payments to exchange bondholders outside the US, thereby escaping US legal rulings, but this is difficult logistically. 
Last of all, it could default on all its bonds.
In a nationally televised “cadena” speech yesterday evening, Fernandez said the country would not default on its restructured debt, though it was not clear how she would respond to the ruling. The president claimed she was willing to “negotiate,” but that she would not “submit the country to extortion.” While Fernandez said her country would honor commitments to make payments on its restructured debt, she characterized the terms of the U.S. Court ruling as “absurd and impossible to carry out,” La Nacion reports. She failed to give specifics about Argentina’s next move, however.


News Briefs
  • Following his victory in Sunday’s elections, Colombian President Juan Manuel Santos has surprised some observers by announcing that he will send a bill to Congress that would eliminate reelection and restrict presidential terms to “five or six years,” depending on what lawmakers decide. The move would undo a 2004 constitutional amendment that paved the way for Uribe to seek reelection in 2006, a change that Reuters notes has fueled concerns that power is being concentrated in the executive branch.  El Espectador reports that the bill will be presented after the winners of March legislative elections assume office on Friday.
  • After his visit in Brazil, in which he met with President Dilma Rousseff in an attempt to “rebuild trust” following last year’s NSA spying revelations, U.S. Vice President Joe Biden arrives in Colombia today. According to the AFP, President Santos told reporters that Biden is particularly interested in discussing new developments in the peace process, in addition to cooperation on security, trade, and regional diplomacy.
  • The L.A. Times has an editorial praising the Obama administration’s recent actions in response to the surge in unaccompanied child immigrants crossing the southern border, which include seeking as much as $2 billion in congressional funding to address the crisis and launching a new AmeriCorps branch that will provide unaccompanied minors with legal counsel. Today’s New York Times, meanwhile, looks at the role that delays in processing the deportation of pregnant women and parents with children has played in fueling a wave of undocumented immigration.
  • Mexico’s Animal Politico reports on the results of an official survey on “governmental quality and impact” conducted by national statistics agency INEGI, which points to widespread mistrust of the country’s judicial and political institutions, with  eight out of ten Mexicans identifying the police as the most corrupt force in the country.
  • NPR has an interesting look at the efforts of Ecuador’s U.S. ambassador to improve relations despite President Rafael Correa being branded in Washington as what some characterize as the “bad left” in the region.
  • Despite the media attention that anti-World Cup protests received in the lead-up to the soccer tournament, so far they have been small and scattered, especially in comparison with last year’s major demonstrations.  The AP reports that fears of unrest have dissipated as the Cup heats up, claiming it could “turn out to be the best in over half a century.” The New York Times notes that some analysts believe that a harsh crackdown on protests by police has dissuaded participation in the protests, in addition to genuine public interest in the games. Sociologist and political scientist Ruda Ricci, however, told BBC Mundo that the drop in attendance at protests has more to do with would-be middle class participants being scared off by the confrontational, even violent tactics used by some demonstrators, especially by the so-called “black bloc” anarchist groups.
  • Although the protests have been comparatively muted, this has not stopped Brazilian authorities around the country from seeking to de-incentivize them. O Estadão reports that lawmakers in the state of Minas Gerais held a special session yesterday in which they approved a controversial law that bans the use of masks by demonstrators. São Paulo-based human rights group Conectas, meanwhile, has accused police in that city of repressing freedom of speech and generally acting as if a de facto “state of exception”  had been declared.
  • A new poll by Florida International University has found evidence of increasing support for warmer relations with Cuba in the Cuban-American enclave of Florida’s Miami-Dade county. The survey found that majorities of respondents favored lifting the embargo (52 percent) and lifting travel restrictions (70 percent), even though 63 percent said they favored keeping Cuba on the list of countries that support terrorism, the Miami Herald reports.
  • Venezuela’s Maria Corina Machado was questioned yesterday for nearly eight hours by prosecutors in an investigation into an alleged plot to assasinate President Nicolas Maduro. Afterwards, the opposition politician said she could not go into detail about the case, but said there was no basis to charge her with any crime, El Nacional reports.