Photo via La Nacion.

In a 54 to 16 vote, early this morning the Argentine Senate approved President Mauricio Macri’s bill authorizing paying the vulture funds, an affectionate name for the creditors suing Argentina over defaulted bonds who refused to accept the country’s restructured debt proposals in 2005 and 2010.

As expected, the Victory Front (FpV) caucus (by caucus we mean a group of representatives from the same party who vote along the same lines) was split on the issue, but a decisive 26 votes in favor of the bill helped tip the balance in Cambiemos’ favor. The 16 votes in opposition of the bill all came from FpV hardliners.

“We had to do this in order to begin to grow, that was the logic,” Finance Minister Alfonso Prat-Gay said this morning.

“A government that doesn’t have majorities in either legislative chambers won the support of almost three-fourths of the chamber and many of the senators who voted in favor were from the Victory Front,” he added.

holdouts graphic

The bill, called the “Public Debt Normalization and Access to Public Credit Law,” includes:

  • Ditching 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).
  • Ditching the Sovereign Payment Law, which requires payments to be made locally and not through the US.
  • Enabling the government to incur more debt, this time of up to US $12.5 billion, half of which will be destined to paying the holdouts

On March 16th, the Lower House approved the bill in a 165 to 86 vote. Now the bill must be signed by the President.

It all goes back to this: 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.

This is a major victory for President Macri.