Argentines want debt deal as economic woes pile up

BUENOS AIRES Wed Jun 18, 2014 4:26pm EDT

Argentina's Economy Minister Axel Kicillof announces what the government will do following a major setback in its long-running legal battle against ''holdout'' investors in Buenos Aires June 17, 2014.    REUTERS/Enrique Marcarian

Argentina's Economy Minister Axel Kicillof announces what the government will do following a major setback in its long-running legal battle against ''holdout'' investors in Buenos Aires June 17, 2014.

Credit: Reuters/Enrique Marcarian

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BUENOS AIRES (Reuters) - Argentina’s decision to talk with holdout creditors to end its long-running bond dispute and possibly avoid another damaging default is likely to be popular in a country that is sliding into recession, even as many Argentines say they despise the hedge funds involved.

A lawyer for the nation’s government told a New York court hearing on Wednesday that Argentine officials would be coming to New York to hold negotiations next week to resolve the situation.

The hedge funds that Argentina calls "vultures" refused two swaps on $100 billion in debt defaulted upon during the 2001-02 crisis, which wiped out the savings of millions of Argentines and plunged many into poverty.

Although over 90 percent of debtholders accepted swaps that paid them less than 30 percent of what they were owed, the holdouts insist on full payment and have won a string of U.S. court rulings putting Argentina on the brink of default.

President Cristina Fernandez's left-wing government previously had broad support to take a tough line against the hedge funds, but that sentiment appears to be sliding along with her approval ratings and the nation's economic growth.

A scarcity of polls make it difficult to quantify public opinion on the issue, but analysts and ordinary Argentines say they are starting to favor making a deal even if the government insists that it would just spark new legal battles.

"I don't like the vulture funds ... but we have to negotiate," said Oscar Conquero, a 54-year-old employee of an accounting firm in Buenos Aires. "It's the only alternative."

Conquero, who struggled for years to find a job after losing one in the wake of the crisis, said he probably would not have taken that position in 2001.

U.S. District Judge Thomas Griesa has ordered Argentina to pay the hedge funds back in full, to the tune of $1.33 billion.

Fernandez has resisted the order, saying it would trigger new demands from other bondholders that could bankrupt the country, but higher courts have backed Griesa.

Fernandez's government said on Tuesday it could place restructured debt under local law to continue paying those creditors who accepted swap deals in 2005 and 2010.

It is not clear, however, whether Argentina could do that before the next debt service payment is due on June 30 or even whether those bondholders would accept the change. Lawmakers are upset the administration has not given them more details of the plan.

With inflation eating away at salaries and jobs becoming harder to find, many Argentines now say a deal is better than a default.

"Argentina has already lived through the fight stage," said Ricardo Rouvier, an analyst who has previously conducted polls that showed support for the government's position. "The attitude of the Argentine society today is not one of a fight."

    

DROPPING THE GUNS

Few Argentines have followed the specifics of the complex debt fight, which so far has not affected their daily lives.

Most are much more interested in the World Cup in Brazil, where soccer star forward Lionel Messi carries their hopes of winning the title for a third time.

The debt fight "doesn't interest me; they talk and they talk," said Martin Maguicha, a 38-year old who works two jobs in separate parking lots.

"This only matters to people who have money," he added, complaining of rising prices at supermarkets.

Private analysts place annual inflation in Argentina at around 30 percent, and the economy is expected to shrink this year as industrial output declines and consumption flags. All this contributes to the sentiment that taking on international creditors may be one battle too many.

The economic slide has taken a heavy toll on Fernandez' popularity, which has fallen to 30 percent, and many are furious that the debt saga is still dragging on.

"I'm embarrassed for my country," said 22-year-old law student Maria Emilia Cargnel. "Holdouts are right. The government needs to negotiate. But where are they going to get the money from?"

Experts say a default this time around would not be nearly as disastrous as it was in 2001-02. The economy then had already shrunk 10 percent over three years, commodity prices were much lower, and the country was running a trade deficit. In the year after the default, gross domestic product slumped another 10.9 percent.

Still, the shift in attitudes does not mean Argentines now back the funds' position. Many remain deeply resentful, seeing them as speculators happy to torpedo Argentina's development for the sake of profit.

Dozens of people have protested in front of the U.S. embassy in Buenos Aires this week, while #SayNoToTheVultures became a trending topic on social media site Twitter.

"They don't deserve the money," said Yanina Cantero, a 21- year-old restaurant receptionist and single mother who says she struggles to support her young son. "They don't use the money to help people who really need it."

(Reporting by Alexandra Ulmer; Editing by Kieran Murray, John Pickering and Lisa Von Ahn)

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Comments (1)
foiegras wrote:
The hedge funds – the vultures – bought the distressed Argentine debt for pennies on the dollar when nobody would touch that debt with a ten foot pole. It was a bet, plain and simple – speculation. Are the bondholders, the hedge funds, in the right to demand full payment now. Legally, yes. Are the Argentines – the Kirchners – in the right to screw their creditors? Probably not.

Argentina has been effectively shut out of the international debt markets because of their default. Argentina is gaming the system to see what they can get away with – 30 cents on the dollar? The vultures are gaming the system.

This is just the free market working efficiently. Everybody is free to screw everybody else and to see how much they can get away with. Don’t distract me. I’m watching the soccer game.

Jun 18, 2014 6:33pm EDT  --  Report as abuse
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