(Adds global grains market context, link to story)
By Hugh Bronstein
BUENOS AIRES, July 4 Argentina on Friday accused
a U.S. judge of being biased in favor of hedge funds that have
sued the South American country for full repayment of defaulted
bonds, cementing the tough stance it has taken ahead of debt
talks set for New York next week.
A series of rulings by U.S. District Court Judge Thomas
Griesa leave Argentina just three weeks to clinch a deal with
the funds before falling into another default, which would heap
financial stress on its already shrinking economy.
The government of President Christina Fernandez denounces
the funds as vultures bent on crippling Argentina, Latin
America's third largest economy, for the sake of profit.
"A lot of officials in the United States say its judicial
branch is independent," Argentine cabinet chief Jorge Capitanich
said. "But it is not independent of the vulture funds because
its decisions show clear partiality."
The legal fight stems from Argentina's 2002 default on about
$100 billion in bonds. The financial crisis thrust millions of
middle-class Argentines into poverty. The economy snapped back
from 2003 to 2008 before being weighed down by high inflation
and heavy-handed trade and currency controls.
More than 92 percent of the country's investors agreed to
receive less than 30 cents on the dollar in bond restructurings
carried out in 2005 and 2010.
A group of funds rebuffed those terms after buying bonds at
deep discounts and sued in U.S. federal court demanding 100
cents on the dollar. They won a judgment from Griesa in 2012 for
$1.3 billion, and Argentina's appeals have failed.
The government is sending a team to New York on Monday to
set conditions for talks by way of a court-appointed mediator
aimed at settling the case. If the negotiations fail, Argentina
would enter default, extending its 12-year absence from
international capital markets.
Lack of foreign bond financing has pressured central bank
reserves to eight-year lows of $29.5 billion and stymied
investment in roads and ports needed to keep shipments of
soybeans and corn flowing from Argentina, the world's No. 3
exporter of the two crops.
Argentine farmers say they will stockpile soy due to
financial uncertainty if the government is unable to cut a deal.
Hoarding could push world food prices higher.
On June 30 the government was stopped from making a payment
on its restructured bonds after Griesa ruled Argentina could not
pay any of its creditors until a deal is clinched with the funds
that went to court seeking better terms.
The June 30 coupon payment was in limbo after being
deposited with the government's transfer agent, Bank of New York
Mellon, but not paid out.
Griesa wants the $539 million deposit returned to
Argentina's accounts, but the government says the money now
belongs to the holders of its restructured paper. Bank of New
York Mellon is seeking advice from Griesa on how to proceed.
"As far as we are concerned, Argentina has fulfilled its
obligations," Capitanich said.
(Additional reporting by Jorge Otaola; Editing by Sandra Maler
and Leslie Adler)