Eighth time unlucky
Cristina Fernandez argues that her country's latestdefault is different. She is missing the point
ARGENTINA'S first bond, issued in 1824, was supposed to have a lifespan of 46 years. Lessthan four years later, the government defaulted. Resolving the ensuing stand-off with creditorstook 29 years. Since then seven more defaults have followed, the most recent this week, whenArgentina failed to make a payment on bonds issued as partial compensation to victims ofthe previous default, in 2001.
Most investors think they can see a pattern in all this, butArgentina's president, CristinaFernandez de Kirchner, insists the latest default is not like the others. Her government, shepoints out, had transferred the full 539m it owed to the banks that administer the bonds. ItisAmerica's courts (the bonds were issued under American law) that blocked the payment, atthe behest of the tiny minority of owners of bonds from 2001 who did not accept therestructuringArgentinaoffered them in 2005 and again in 2010. These “hold-outs”, balking atthe 65% haircut the restructuring entailed, not only persuaded a judge that they should be paidin full but also got him to freeze payments on the restructured bonds untilArgentinacoughs up.
Argentinaclaims that paying the hold-outs was impossible. It is not just that they are“vultures” as Argentine officials often put it, who bought the bonds for cents on the dollar afterthe previous default and are now holding those who accepted the restructuring (accountingfor 93% of the debt) to ransom. The main problem is that a clause in the restructured bondsprohibitsArgentinafrom offering the hold-outs better terms without paying everyone else thesame. Since it cannot afford to do that, it says it had no choice but to default.
Yet it is not certain that the clause requiring equal treatment of all bondholders would haveapplied, given that Argentinawould not have been paying the hold-outs voluntarily, but on thecourts' orders. Moreover, some owners of the restructured bonds had agreed to waive theirrights; had Argentinamade a concerted effort to persuade the remainder to do the same, itmight have succeeded. Lawyers and bankers have suggested various ways around the clause inquestion, which expires at the end of the year. But Argentina's government was slow toconsider these options or negotiate with the hold-outs, hiding instead behind indignantnationalism.
Don't try to flee, Argentina
Ms Fernandez is right that the consequences ofAmerica's court rulings have been perverse,unleashing a big financial dispute in an attempt to solve a relatively small one. But hers is notthe first government to be hit with an awkward verdict. Instead of railing against it, sheshould have tried to minimise the harm it did. Defaulting has helped no one: none of thebondholders will now be paid,Argentinalooks like a pariah again, and its economy will remainstarved of loans and investment.
Happily, much of the damage can still be undone. It is not too late to strike a deal with thehold-outs or back an ostensibly private effort to buy out their claims. A quick fix would make iteasier forArgentinato borrow again internationally. That, in turn, would speed development ofbig oil and gas deposits, the income from which could help ease its money troubles.
More important, it would help to change perceptions ofArgentinaas a financial rogue state. Overthe past year or so Ms Fernandez seems to have been trying to rehabilitateArgentina's imageand resuscitate its faltering economy. She settled financial disputes with government creditorsand with Repsol, a Spanish oil firm whose Argentine assets she had expropriated in 2012. Thisweek's events have overshadowed all that. For its own sake, and everyoneelse's,Argentinashould hold its nose and do a deal with the hold-outs.
1.suppose to 认为是
例句:There's nothing to keep us here, is there?Isuppose not.
2.afford to 负担得起;付得起
例句:They could not afford to spoil those maps bycareless colouring.
3.agree to 同意，赞成
例句:You and I are going to have to agree to disagree then.
4.negotiate with 与…进行交涉
例句:The government will not negotiate with terrorists.