Argentina is blaming the US for its debt default, calling the mediator in failed talks “incompetent”.
Cabinet Chief Jorge Capitanich said Argentina was considering opening proceedings at international tribunals in The Hague after it was declared to be in technical default.
The announcement came just hours after last-minute talks in New York with a group of bond-holders failed.
The bond-holders are demanding a full pay-out of $1.3 billion.
Argentina says the bond-holders are “vultures” using the South American country’s debt problems to make a big profit.
The investors are US hedge funds that bought debt cheaply after Argentina’s economic crisis in 2001-2002.
Argentina is blaming the US for its debt default
They are also known as “hold-outs” because they did not sign up to a restructuring of debt which the majority of bond-holders agreed to in 2005 and 2010.
Under that deal, investors agreed to settle for about one-third of what they were originally owed.
However, hedge funds NML and Aurelius Capital Management bought up a large chunk of the remaining distressed debt at low prices.
They demand to be paid the full face value of their holding.
Jorge Capitanich said Argentina would denounce the “vulture funds” before the International Court of Justice at The Hague and the UN General Assembly.
He said the US was to blame for its “shameful” handling of the funds’ case against Argentina.
“The responsibility lies with a state, that of the United States of America,” he said in a news conference at the presidential palace.
Jorge Capitanich accused the US of “not acting in an adequate manner”.
The Argentine government had expected the dispute to go all the way to the US Supreme Court, which would have bought the country more time.
In June, the Supreme Court declined to hear Argentina’s appeal against the decision of a lower court that made it liable for the money.
Under that court’s ruling, Argentina cannot use the US financial system to keep paying the restructured bondholders unless it also pays the “vulture funds”, placing it in technical default.
However, Jorge Capitanich denied the country was in default at all, arguing that it has the money to pay the interest that became due to the restructured bondholders on June 30 but that it was barred from doing so by the court’s ruling.
He suggested that holders of its performing debt demand their money from the US judge who blocked the June 30 interest payment.
Jorge Capitanich also suggested one way out of the impasse would be for a third party to buy out the hold-out investors.
He said that move would allow them to side-step a clause that was seen as a major stumbling block on the way to a deal.
The clause, known as RUFO (rights on future offers) states that Argentina cannot favor the hold-outs over those who accepted the restructuring deals.
Jorge Capitanich also said that in the meantime Argentina would maintain its policies to stimulate the economy.
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Ratings agency S & P declared Argentina in default after the government missed a deadline for paying interest on $13 billion of restructured bonds.
Argentina has defaulted on its debt for the second time in 13 years after last-minute talks in New York with a group of bond-holders ended in failure.
So-called “vulture fund” investors were demanding a full pay-out of $1.3 billion on bonds they hold.
Argentina has said it cannot afford to do so, and has accused them of using its debt problems to make a big profit.
A US judge had set a deadline of 04:00 GMT on Thursday for a deal. The crisis stems from Argentina’s 2001 default.
Late on Wednesday evening, Argentina’s Economy Minister Axel Kicillof said the investors had rejected the government’s latest offer.
Argentina has defaulted on its debt for the second time in 13 years after last-minute talks in New York with a group of bond-holders ended in failure
“Unfortunately, no agreement was reached and the Republic of Argentina will imminently be in default,” Daniel Pollack, the court-appointed mediator in the case, said in a statement on Wednesday evening.
The fresh default is not expected to affect Argentina’s economy in the same way it did in 2001, when dozens were killed in street protests and the authorities froze savers’ accounts to halt a run on the banks.
“The full consequences of default are not predictable, but they certainly are not positive,” Daniel Pollack said.
Speaking at a news conference in New York, Axel Kicillof said Argentina would not do anything illegal.
The investors, also known as “hold-outs”, are US hedge funds that bought debt cheaply after Argentina’s economic crisis.
They never agreed to the restructuring accepted by the majority of bond-holders.
President Cristina Fernandez de Kirchner has described as vultures the minority bond-holders – including Aurelius Capital Management and NML Capital.
She accuses them of taking advantage of Argentina’s debt problems to make large profits.
S&P noted that it could revise the rating if Argentina were to find some way to make the payments.
The hedge funds are demanding Argentina make interest payments on debt which it defaulted on in 2001, even though it was bought at less than face value.
The US courts have blocked payments to other bondholders who agreed a separate deal with Argentina, until agreement with the “hold-outs” is reached.
Axel Kicillof said he planned to return to Argentina after the news conference, saying the country would do what is needed to deal with what he called an unfair situation.
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Economy Minister Axel Kicillof has returned to the negotiating table in a last-ditch attempt to prevent Argentina defaulting on its bonds.
Axel Kicillof’s talks with “hold-out” investors ended late on Tuesday night in New York without agreement.
They are demanding a full pay-out of $1.3 billion on the bonds they hold.
Argentina can’t afford to pay the so-called hold-out creditors and risks a new bond default (photo Reuters)
A US judge has ruled that the “hold-outs” must be paid by Wednesday night if no deal is agreed.
The government’s rhetoric has been clear.
The “hold-outs” are US hedge funds that bought debt on the cheap during Argentina’s darkest hours and never agreed to restructuring.
President Cristina Fernandez de Kirchner calls them vultures, accusing them of taking advantage of Argentina’s debt problems to make a big profit.
What makes the problem worse is that if the “hold-outs” get their way, other bondholders who agreed to take cuts of up to 70% in what they are owed may also demand full repayment.
Despite the defiant tone of the government, many people seem resigned. Argentina has defaulted before and most probably will do it again.