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Sorry Axel, Argentina’s Settlement With Holdouts Is Positive

By | [email protected] | March 2, 2016 11:58am


It’s a surreal feeling that Argentina seems to finally have reached a settlement with the ubiquitous “vulture funds,”  or holdout creditors. I personally feel like I’ve hashed and rehashed and re-rehashed this tale so many times that I’m just glad it’s over because quite frankly there’s nothing new left to write, and readers have already picked their “side” anyways. Team Edward is not defecting to Team Jacob.

Yet after slogging through former Economy Minister and current Congressperson Axel Kicillof’s over 1,000 words on the subject in Pagina 12, I am inspired to respond for two reasons:

First, I would like to say shame on you as an economist, Axel Kicillof. I used to look at Mr. Kicillof as an ideologue with whom I disagreed, but who maintained a respectable level of professionalism and did an adequate job of presenting the facts, yet drew different conclusions than me. Evidently the new job as congressperson has turned you into the definition of a low-level demagogue.

Second, I would like to draw attention to the only noteworthy observation that Mr. Kicillof made: the possibility that the current settlement agreement leaves Argentina vulnerable to future claims on the same debt. If you missed that when you read Axel’s article, that’s because it was buried so far below the jump in meaningless drivel and number soup the sole purpose of which was fear mongering.

The political opposition has an important role in a well-functioning government. Essentially, someone should hold the party in power accountable for its decisions and call it out when it fails to mention important information. So Kicillof and co. have a real job right now. Argentina’s resolution with the holdouts should include some guarantee against a small subgroup of holdouts bringing legal action again some years down the road.

But rather than highlight this clear gap in Macri’s economic team’s resolution, Kicillof instead uses his article as an opportunity to do the following:

  • Fear monger regarding the “gigantic” new debt Argentina is accruing in order to pay the settlement agreements
  • Call Judge Thomas Griesa’s request that Congress allow the deal to proceed “extortion”
  • Chastise “big banks” for making money for performing banking services associated with issuing and processing bonds
  • Throw around a non-binding UN resolution like it’s a law

Former President Cristina Fernández de Kirchner walked away from negotiations with the holdouts not because reaching a resolution was impossible, but because it was more politically beneficial for her to do so. She sold herself as the hero defender of Argentina against evil external powers seeking to destroy the country. She distorted the facts and it worked. For instance, last year I was unpleasantly surprised when I discovered the majority of people I asked couldn’t answer a simple question: Why is the vulture case in New York in the first place? The public’s knowledge of the dispute is shockingly spotty, in large part thanks to Cristina and her team.

Argentina’s default and subsequent lockout from global markets was bad, and finding the solution to this and to future problems related to sovereign default is something that everyone should want. Axel Kickoff should provide the public with tools to understand these conflicts in addition to making an argument.

Instead, he took a page out of Cristina’s book and inspired blind rage against multinational banks, Judge Griesa, the United States and the vulture funds. He had a chance to broaden public discourse and shine a light on the real flaws in the settlement with the holdouts, but what is that worth in comparison to a few extra people waving signs in the street?

Argentina made the right decision by negotiating with the holdouts and reaching a settlement. It will allow the country to address inflation and attract much-needed international investment. The settlement is not beyond criticism or without flaws, but it is a critical, and painful, step towards fixing Argentina’s most damaging economic problems.