Now that Judge Thomas Griesa has lifted the stay — an injunction that blocked Argentina from paying other creditors without also paying the holdouts — the Executive branch presented a bill named “the Public Debt Normalization and Access to Public Credit Law” late last night which, among other things, includes ditching the two laws needed to move forward with the vulture fund deals. While the government wants to get this out as quickly as possible, the opposition, headed by the Victory Front (FpV), is not keen on letting the bill go through.
Finance Minister Alfonso Prat-Gay defended the deal before the Finance and Budget Committee of Congress today, a group of deputies and senators who will assess the deals reached by the government and the holdouts over the past few months.
In presenting the costs, Prat-Gay mentioned that the original amount of money owed for the defaulted debt was US $6.1 billion dollars, which is now worth US $18.8 billion due to interest rates and litigation costs. The amount Argentina must pay is a total of US $11.825 billion to all creditors (holdouts and others).
“The magnitude of the problem is big because there are many creditors and different payments,” said Prat-Gay.
He also insisted that “this is a State issue that has to be solved because it does not let us grow [as a country].”
The two laws that have to be repealed in Congress in order to move forward with the holdouts deal are a) the Lock Law, which prohibits Argentina from offering a better deal to the holdouts than the one they presented in 2005 and 2010 (the restructured debt) and b) the Sovereign Payment Law, which requires payments to be made locally and not through the US. For more on these laws, check out this article by The Bubble.
However, as aforementioned, support from the opposition when the bill is debated in Congress may be hard to come by. The head of the FpV caucus in the Lower House, Héctor Recalde, has made his position clear (by “caucus” we mean a group of politicians from the same party who vote along the same lines):
“We will not allow quorum when it’s time to discuss the agreement with the vulture funds.”
In order for the Chamber to be able to hold a session, 129 deputies must be present: Recalde is saying that the FpV caucus will not allow for there to be a session when the holdouts come up.
Cue The Bubble’s beloved explanation of what the vulture funds mess is all about: After Argentina’s economic meltdown in 2001, the country defaulted on its international debt. A group of creditors purchased some of the defaulted bonds and refused to accept debt restructuring plans in 2005 and 2010 that would have exchanged the original bonds for bonds worth 30 cents on the dollar, insisting instead the debt be repaid in full. Hence former President Cristina Fernández de Kirchner’s nickname for them, “vultures”: she also swore that Argentina would “never” pay. New York Judge Thomas Griesa ruled in the holdouts’ favor and Argentina is now faced with negotiating the payment.