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Argentine Morality and Vulture Funds: Really So Vulturous?

By | [email protected] | September 15, 2014 10:36pm



Argentina currently finds itself in a world of economic hurt.

Sad as it may be, morality is meaningless in this situation.

Arguing whether or not the Argentine government should pay or settle with the holdout creditors based on the morality of the strategy of NML Capital Ltd.’s investment amounts to questioning whether or not it is moral for the sun to rise each day. It doesn’t matter what you think. As little orphan Annie made it very clear, it’s going to happen – the sun will come out tomorrow. Vultures can’t stop, won’t stop, being vulturous.

The longer Cristina Fernández de Kirchner, Economy Minister Axel Kicillof and their team of economic wizards explore different strategies of avoiding Griesa’s injunction:


  1. The longer and more deeply uncertainty and stagflation (rising inflation concurrent with falling output and employment) will cripple the Argentine economy.
  2. The longer there will be downward pressure on the value of the peso
  3. The longer a(n illegal) parallel currency market will exist
  4. The longer it will be more expensive and difficult for corporations and sub-sovereigns (in Argentina this means provinces, cities, and other public or municipal bodies that could issue debt) to issue and pay back debt


The list goes on. This is fact, not morality, and not opinion.

An opinion would be that of the copper mining executive who recently told me that “everything depends on the election in 2015.” After asking how then, sir, do you plan ahead, he responded, “In Argentina, you don’t plan ahead. It’s not possible. But it doesn’t change anything. We’re used to this shit.”

But aren’t all of Argentina’s ills due to the July attack by evil speculators from the United States? It is easy to get wrapped up in the moral argument that the buitres (vulture funds, but really just “holdout creditors”) serve no socially productive purpose and that perhaps Paul Singer should spend more of his time identifying successful companies or actually performing (performing = paying and not in default) corporate or sovereign debt to invest in. As with all things worth discussing, such arguments are never quite so black and white.


Let’s set the record straight. A lot of financial publications (and the Argentine government) explain how Elliott purchased Argentine debt immediately after the country defaulted in December 2001. I imagine this fuels the morality fire for a lot of people (which it shouldn’t,) and it seems  pretty aggressive and perhaps perverse, no? At that time, The Republic’s bonds were non-performing and therefore sold at as low as 18 cents on the dollar as opposed to their current, higher price, which last week floated around 83 cents. This is  why many sources refer to Elliott’s actions as buying Argentine debt when it was priced at “cents on the dollar” or “on the cheap“. So the narrative focuses on painting NML and Aurelius, who have spearheaded the legal campaign against Argentina, as “vultures” or buitres in Spanish because they circled the corpses of defaulted Argentine bonds and then began to peck away via legal battles, all while earning accrued interest.

Back in July, 21 days before default and before he even agreed to meet face to face with the holdouts even though the holdouts agreed to meeting, Kicillof enlightened us to another little-known ornithological fact: “Vulture funds do not negotiate: that is why they are vultures.” I didn’t know vultures drove such a hard bargain, while other birds are prone to negotiating. Thanks, Axel.

But what if the vultures had purchased the debt before Argentina defaulted in 2001? As in, Argentina issued debt in the hopes of raising money for public purposes and agreed to the terms of this debt with the intention to pay it back, since, you know, debt is a loan designed to be paid back with interest. Well, it would appear that this is at least partially true. The Wall Street Journal has a correction at the bottom of an article stating that Elliott purchased Argentine debt (at least initially) before default in 2001. For emphasis:

Corrections & Amplifications
Elliott Management Corp. first invested in Argentine bonds before the country defaulted in 2001 and began suing the government for payment in 2004. A previous version of this article incorrectly said Elliott first bought the bonds in 2004 and began litigation in 2005.


Bloomberg notes that Elliot purchased the debt between 2001 and 2003, and also that the debt in question was issued between February 2000 and July 2000 – a full year and a half before the December 2001 default. The Financial Times provides the same window as as our friends at Bloomberg – the relevant bonds were purchased between 2001 and 2003, and shows that the debt was sold at just over half of face value (value at issuance).

Axel’s Financial Times op-ed here claims that, on the contrary, NML purchased the bonds in 2008 and then immediately sued. Axel, I’ve said it before and I’ll say it again. YA SUSPECT.



So if you still think that the holdouts are immoral vultures or buitres even if they (may have) purchased Argentine debt pre-December 2001, and therefore did not, as a result, “prey” on Argentina’s defaulted, ailing economy… then cool. Let’s move on.

But that mental exercise is still crucial to the tide of public opinion in this case, especially when so many different and opposing facts and details are thrown around by the Argentine government, the plaintiffs, lobbying firms (American Task Force Argentina), and news publications.

Oh, and now me. Eric Boole will not fall prey to lies and deceit.


(Featured Image from Pixar’s For The Birds)