U.S. Federal Judge Thomas Griesa called a hearing on Friday to discuss the case of Argentina and the vulture funds. In this hearing, Griesa reaffirmed his ruling of June 16 favoring the vulture funds. He also said that Daniel Pollack would continue as mediator. However, he did not clarify what would become of the frozen payments intended for Argentina’s cooperating creditors.
Argentine lawyer, Jonathan Blackman said that while Argentina is committed to the continuing negotiations, “The republic does not trust the process under (the intervention) of special master Pollack.” This mistrust is a result of Pollack’s statement that Argentina is in default. The act of declaring Argentina in default is quite meaningful in this case; it allows those holding insurance on Argentine debt to profit in the amount of $1 billion.
All things considered, it is difficult to see how Pollack could make this statement with a straight face. According to Argentina’s president, Cristina Fernandez,
“The causes of default are listed for the 92.4 percent of bondholders, in the bond, in the contract itself. There is no cause where default is an impossibility to getting paid, because default is not paying. Preventing someone from paying is not default. I told them they will have to invent a new word, and they will have to invent this word.”
What happened to the money Argentina set aside to pay its bondholders? Judge Thomas Griesa confiscated it! The Argentine government maintains that it is not in default, as it is willing to pay and remains in negotiations with creditors.” ((Griesa: Talks between Argentina and Vultures to Continue, Telesur, August 1, 2014. Avaliable: http://telesurtv.net/english/news/Griesa-Talks-Between-Argentina-and-Vultures-To-Continue-20140801-0045.html))
In a previous meeting on Wednesday, Argentina invited Elliot Management to join the 2005 and 2010 swaps by which the firm would profit 300 percent, but Elliot Management rejected Argentina’s offer. The enormity of this rejection can only be understood in light of Argentina’s history.
“To understand the dispute Argentina has with the Vulture Funds, one must go as far back as 1976, when Argentina was governed by a brutal civil-military dictatorship that introduced an aggressive neoliberal economic policy that ended in the severe economic crisis of December 2001.
In 1976, the dictatorship decided to extend the jurisdiction of foreign courts, a move that technically permitted judgments to be made abroad, thus causing Argentina to lose judicial and economic sovereignty.
In order to attract foreign capital to Argentina, the Carlos Menem government signed investment and trade agreements with different countries that gave even more power to international tribunals.
By 2001 Argentina’s economy was in a critical situation. Former President Fernando de la Rua and his then Economy Minister Domingo Cavallo implemented a financial operation called el Mega Canje, the Mega Swap, to ease the country’s economic strain. The proposal came from David Mulford, former Treasury Secretary of the United States. It turned out to be a scam which cost Argentina $55 billion and boosted its foreign debt even further. The scheme contributed to a tragic hike in poverty and triggered Argentina’s 2001-2002 economic, social and political outburst as well as its historic debt default.
A court case was opened to try those responsible, which include seven major banks, Cavallo, Mulford and de la Rua. Some 69 percent of the bonds that the vulture funds hold come from the scandalous 2001 mega swap.” ((Vulture Fund Rejects Argentina’s Offer Preventing Debt Repayment. Telesure, August 1, 2014. Available: http://telesurtv.net/english/news/Vulture-Fund-Rejects-Argentinas-Offer-Preventing-Debt-Repayment-20140801-0022.html))