Friday, October 17, 2014

Is Argentinië failliet?

Een van de zaken die Jan Pronk op onze Golfavond van 15 oktober 2014 aanstipte was hoe Argentinië in de tang wordt genomen door kapitalistische 'aasgier' fondsen, vulture funds, of hedge funds. Ik heb de afgelopen maanden regelmatig meegemaakt dat vrienden zeiden: "Argentinië is failliet, hè?" en dat ik dan nauwelijks mijn woede kon inhouden en probeerde rustig uit te leggen dat Argentinië niet falliet is... En daarbij dacht ik onmiddellijk aan hoe de regering-Allende in de tang werd genomen begin jaren zeventig, en dat dat mee leidde tot de staatsgreep van 11 september (9/11) 1973, en dat die staatsgreep door het leger werd uitgevoerd ten behoeve van een herstel van het kapitalisme in Chili.

Naar aanleiding van die woede schreef ik een paar stukjes op mijn FONDAD-blog Thoughts. U kunt die lezen door te klikken op "Argentina".

Een recent artikel hierover las ik vandaag in de Buenos Aires Herald, dat ik hieronder kopieer:

Thursday, October 16, 2014

Scioli confident about 'positive outcome' in vulture funds dispute

Buenos Aires province Governor Daniel Scioli trusts Argentina will manage to sail through the vulture funds crisis.
Buenos Aires province Governor Daniel Scioli has expressed his confidence that Argentina’s legal battle against “vulture funds” will reach a “positive outcome” by the beginning of 2015, leading to growth in the country.
“I see that by the beginning of next year there will be a positive outcome for Argentina’s interests in the external front and that will decompress the issues of foreign currency and inflation and will accelerate growth,” Scioli told reporters today.
In an interview with a radio show this morning, the leader of Argentina’s most populated province and a pre-candidate to run in the 2015 presidential elections affirmed “Argentina’s perspectives are very good,” adding it is a country that has got out of the red servicing its debt and reactivated its industrialization process.
According to Daniel Scioli, some sectors want to connect the country with a default scenario – following the dispute with vulture funds suing Argentina over its defaulted bonds more than a decade ago and a ruling by US Judge Thomas Griesa ordering the South American nation to pay these creditors in full -, but warned Buenos Aires “continues to pay” its debt.
Some opposition candidates, he said, want “the country to go into the red againt” and “request 20 billion dollars” to credit organizations. In a similar tone, he blasted anti-kirchnerite leaders who have questioned the nationalization of YPF, Argentina’s energy giant. “By the hand of YPF, energy sovereignty will be recovered and the dollar situation will decompress,” Scioli assured.
“I believe in a state that plays a present (active) role to give a push to those who need it,” the BA province governor told reporters, defending the national government strategy to face holdout creditors that refused the 2005 and 2010 debt restructuring and put an end to, what he called, "the nightmare of the karma of the (public) debt.”

Thursday, July 31, 2014

Capitalism is a Shame

The case of Argentina’s default shows it again: capitalism is a shame. Argentina has been declared in default, but the default is with them, the finance people ruling the world, supported by a judicial system that defends their interests.
Here is a report from Reuters:
 

Argentina braces for market reaction to second default in 12 years

BUENOS AIRES Thu Jul 31, 2014 1:58am EDT

A woman walks past a graffiti that reads ''No to the debt payment'' in Buenos Aires, July 28, 2014.    REUTERS/Marcos Brindicci
A woman walks past a graffiti that reads ''No to the debt payment'' in Buenos Aires, July 28, 2014.
Credit: Reuters/Marcos Brindicci

Related Topics

(Reuters) - Argentina defaulted for the second time in 12 years after hopes for a midnight deal with holdout creditors were dashed, setting up stock and bond prices for declines on Thursday and raising chances a recession could worsen this year.
After a long legal battle with hedge funds that rejected Argentina's debt restructuring following its 2002 default, Latin America's third-biggest economy failed to strike a deal in time to meet a midnight deadline for a coupon payment on exchange bonds.
Even a short default will raise companies' borrowing costs, pile more pressure on the peso, drain dwindling foreign reserves and fuel one of the world's highest inflation rates.
"It is going to complicate life for businesses like YPF which were going to look externally for financing," said Camilo Tiscornia, a former governor of Argentina's central bank. State-controlled energy company YPF (YPFD.BA) needs funds to develop Argentina's huge Vaca Muerta shale formation.
Argentina had sought in vain to win a last-minute suspension of a ruling by U.S. District Judge Thomas Griesa in New York to pay holdouts $1.33 billion plus interest. He ruled Argentina could not service its exchange debt unless it paid holdouts at the same time.
A proposal for Argentina banks to buy out the hedge funds' non-performing debt also fell through, sources told Reuters.
"This is a very particular default, there is no solvency problem, so everything depends on how quickly it is solved," said analyst Mauro Roca of Goldman Sachs.
As dire as it is, the situation is a far cry from the mayhem following the country's economic crash in 2001-2001 when the economy collapsed around a bankrupt government. Millions of Argentines lost their jobs.
This time the government is solvent. How much pain the default inflicts on Argentina, which is already in recession, will depend on how swiftly the government can extricate itself from its obligations.
Buenos Aires had argued that agreeing to the hedge funds' demands to pay them in full would break a clause barring it from offering better terms than those who accepted steep writedowns in the 2005 and 2010 swaps.
However, that clause expires on Dec. 31, after which the government would be able reach a deal with the funds. Many investors and economists still hope for a separate solution before then between the holdouts and private parties.
"Our base case is that a default would be cleared by January 2015," said Alberto Bernal, a partner at Miami-based Bulltick Capital Markets. He projected that a default would cause the economy to shrink 2 percent this year compared with a previous market consensus for a 1 percent contraction.
Failure to strike a deal will not cause financial turmoil abroad because Argentina has been isolated from global credit markets since its 2002 default on $100 billion, but domestic markets that had rallied on hopes of a deal in recent days will probably reverse course.
Yields on Argentina's key dollar bond due 2033 fell to the lowest level in about three and a half years on Wednesday, and the country's MerVal index .MERV hit a record.
"The correction will depend on perceptions of how long the default will take to solve," said Roca.
HOW DIRE A DEFAULT?
The default could get much messier and take longer to clear up if creditors force an "acceleration" for early payment on their bonds.
"How bad the outcome ends up being depends on whether bondholders accelerate," said Alejo Costa, strategy chief at local investment bank Puente.
"Acceleration would open a new legal battle for the government that could end up in a new restructuring."
Argentina has foreign currency restructured debt worth about $35 billion while its foreign exchange reserves stand at $29 billion.
U.S. ratings agency Standard & Poor's on Wednesday downgraded the country's long- and short-term foreign currency credit rating to "selective default". The default rating will remain until Argentina makes its overdue June 30 coupon payment on its discount bonds maturing in 2033, the agency said.
Holders of insurance against an Argentine credit default will have their eyes peeled for an announcement from the International Swaps and Derivatives Association (ISDA). If ISDA declares an Argentine default, the total amount of money that would be paid out is just over $1 billion.
After two days of talks with holdouts in New York, Argentine Economy Minister Axel Kicillof on Wednesday evening told reporters that Argentina was not in default because it had made the June $539 million interest payment to holders of exchanged bonds - even if this had not reached creditors by July 30, at the end of the month-long grace period.
Judge Griesa called the payment illegal and blocked the funds' onward transfer to creditors. It remains in limbo in the Buenos Aires account of trustee agent Bank of New York Mellon.
Argentines were sanguine about news of the default.
"We have been in a similar situation before, and we will make it through," said a 27-year old employee at an automobile firm who declined to give his full name. "The sun rises each day. It will get resolved, be it next week, or next month."
(Additional Reporting by Richard Lough and Eliana Raszewski; Editing by Ken Wills)
 

Tuesday, June 24, 2014

Argentina's debt restructuring attacked


Here is an interesting article in the New York Times about bondholders ('vulture funds') obstructing a reasonable restructuring of Argentina's debt.

The Debt Vultures' Fell Swoop


WASHINGTON — Last week, the United States Supreme Court decided not to review a ruling in the Second Circuit Court of Appeals whose effect is that Argentina must pay “holdout” creditors who refused to participate in debt restructuring agreements that Argentina reached with the majority of bondholders following the 2001 default on its sovereign debt. Argentina’s lawyers warned that the court’s decision created “a serious and imminent risk” that the country would again be forced to default. But the ruling also has profound and disturbing implications for the functioning of the international financial system, and even the United States would most likely be adversely affected.
Parties as diverse as the International Monetary Fund and leading religious organizations wanted the Supreme Court to overturn the decision, and briefs supporting this position were filed by the governments of France, Brazil and Mexico, as well as by the Nobel Prize-winning economist Joseph E. Stiglitz. The I.M.F. — which has had mostly sour relations with Argentina since its involvement in that country’s 1998-2002 recession — was also planning to file a brief on Argentina’s side to the Supreme Court, but was blocked by the American government from doing so. This action may have influenced the court’s decision not to hear the case.
Argentina defaulted on its international debt at the end of 2001, following a deep recession. After years of negotiations, the government reached a restructuring agreement with its private creditors, in which the bondholders accepted a loss of about two-thirds of the value of their bonds. In 2005, 76 percent of the creditors had signed on; by the end of 2010, more than 90 percent had. Argentina has made all of its payments on the new, restructured bonds, on time.
The complication was over a group of “holdout” bondholders who did not agree to the restructuring. The plaintiffs in the New York case are widely known as “vulture funds,” because they bought the bonds after the default at a fraction of their value, hoping to use court rulings like this one to force payment at the bonds’ original face value.
The appellate court ruled that if Argentina was paying the holders of restructured bonds, it must also pay the holdout or vulture fund creditors in full — and its decision implies that the punishment for an attempted default could be never-ending. This raises the question of how many decades a people should be forced to suffer for the mistakes or transgressions of earlier leaders — whether elected or, as is often the case, unelected. (Much of the Argentine debt, in fact, was incurred by a dictatorship.)
Another key implication of the ruling is that governments that are bankrupt would now find it difficult or impossible to negotiate a settlement with their creditors. Who will take a haircut on their bonds if they can refuse the terms and sue for the full value?
In the United States, and most other countries, there are bankruptcy laws designed to allow for companies and individuals facing unpayable debt to make a new start. There is no such legal mechanism for countries, so these restructuring agreements are an important way of resolving problems of unpayable sovereign debt.
The court’s decision would make it difficult to issue the new bonds needed for restructuring, as well as further debt in the future. Just one holdout bondholder or vulture fund creditor could torpedo the process.
In addition, Argentina’s default and devaluation in 2001-2 is widely regarded as a success. The country’s economy shrank for just three months after the default, and then began a rapid-growth recovery. By the end of 2011, Argentina had achieved a record rate of employment, reduced poverty by nearly 70 percent and allowed for a tripling of social spending in real terms.
A decade after the devaluation, the Argentine economy has run into trouble — partly because the vulture funds have prevented it from borrowing on international markets — but there is no doubt that Argentines are vastly better off for the path that was taken. For comparison, look at Greece: After six years of austerity-driven recession, which included a 40 percent cut in health care spending, the unemployment rate stands at 26.8 percent (and more than double that rate for youth) and the net public debt has grown to 169 percent of the country’s gross domestic product.
Most experts agree that the appellate court ruling would have a destabilizing effect on international financial markets. There is economic justice to consider, too. Argentine bondholders were paid high interest rates on their bonds because there was risk. Capitalism is not supposed to be a “heads I win, tails you lose” bet — but the Second Circuit Court’s decision would make it that way for sovereign debt bondholders.
Argentina may find a way around the court’s decision, by issuing new bonds and making payments that are outside of the court’s jurisdiction. But this ruling in favor of the vulture funds will do continuing damage to ordinary people around the world that will show up in future debt crises.

Mark Weisbrot is the co-director of the Center for Economic and Policy Research and the president of Just Foreign Policy

You may also be interested in this interview.

Saturday, June 21, 2014

March in London against austerity

Een bericht uit The Guardian:

Tens of thousands march in London against coalition's austerity measures

An estimated 50,000 people in London addressed by speakers, including Russell Brand, after People's Assembly march
Russell Brand
Russell Brand told the marchers there will be a 'peaceful, effortless, joyful revolution' against austerity in the UK. Photograph: Rex Features
Tens of thousands of people marched through central London on Saturday afternoon in protest at austerity measures introduced by the coalition government. The demonstrators gathered before the Houses of Parliament, where they were addressed by speakers, including comedians Russell Brand and Mark Steel.
An estimated 50,000 people marched from the BBC's New Broadcasting House in central London to Westminster.
"The people of this building [the House of Commons] generally speaking do not represent us, they represent their friends in big business. It's time for us to take back our power," said Brand.
"This will be a peaceful, effortless, joyful revolution and I'm very grateful to be involved in the People's Assembly."
"Power isn't there, it is here, within us," he added. "The revolution that's required isn't a revolution of radical ideas, but the implementation of ideas we already have."
A spokesman for the People's Assembly, which organised the march, said the turnout was "testament to the level of anger there is at the moment".
He said that Saturday's action was "just the start", with a second march planned for October in conjunction with the Trades Union Congress, as well as strike action expected next month.
People's Assembly spokesman Clare Solomon said: "It is essential for the welfare of millions of people that we stop austerity and halt this coalition government dead in its tracks before it does lasting damage to people's lives and our public services."
Sam Fairburn, the group's national secretary, added: "Cuts are killing people and destroying cherished public services which have served generations."
Activists from the Stop The War Coalition and CND also joined the demonstration.
The crowds heard speeches at Parliament Square from People's Assembly supporters, including Caroline Lucas MP and journalist Owen Jones. Addressing the marchers, Jones said: "Who is really responsible for the mess this country is in? Is it the Polish fruit pickers or the Nigerian nurses? Or is it the bankers who plunged it into economic disaster – or the tax avoiders? It is selective anger."
He added: "The Conservatives are using the crisis to push policies they have always supported. For example, the sell-off of the NHS. They have built a country in which most people who are in poverty are also in work."
The People's Assembly was set up with an open letter to the Guardian in February 2013. Signatories to letter included Tony Benn, who died in March this year, journalist John Pilger and filmmaker Ken Loach.
In the letter, they wrote: "This is a call to all those millions of people in Britain who face an impoverished and uncertain year as their wages, jobs, conditions and welfare provision come under renewed attack by the government.
"The assembly will provide a national forum for anti-austerity views which, while increasingly popular, are barely represented in parliament."
The Metropolitan police refused to provide an estimate. A police spokesman said the force had received no reports of arrests.
A spokesman for the prime minister declined to comment.

Saturday, May 31, 2014

Students call for a more serious way of studying economics and bringing it back into the service of society

"...it is time to reconsider the way economics is taught. We are dissatisfied with the dramatic narrowing of the curriculum that has taken place over the last couple of decades. This lack of intellectual diversity does not only restrain education and research. It limits our ability to contend with the multidimensional challenges of the 21st century - from financial stability, to food security and climate change. The real world should be brought back into the classroom, as well as debate and a pluralism of theories and methods."

The quote above is from the international student call below. This is positive news, students who take the social science of economics more seriously than most of their teachers. It is something I have hoped for since long, and it is a theme I have written and spoken about since long. I only copy the beginning of their Open Letter, you can read the rest here or by clicking on the links in the text below. The Press coverage of the student call is also encouraging.



An international student call
for pluralism in economics

 

It is not only the world economy that is in crisis. The teaching of economics is in crisis too, and this crisis has consequences far beyond the university walls. What is taught shapes the minds of the next generation of policymakers, and therefore shapes the societies we live in. We, over 65 associations of economics students from over 30 different countries, believe it is time to reconsider the way economics is taught. We are dissatisfied with the dramatic narrowing of the curriculum that has taken place over the last couple of decades. This lack of intellectual diversity does not only restrain education and research. It limits our ability to contend with the multidimensional challenges of the 21st century - from financial stability, to food security and climate change. The real world should be brought back into the classroom, as well as debate and a pluralism of theories and methods. Such change will help renew the discipline and ultimately create a space in which solutions to society’s problems can be generated. 

United across borders, we call for a change of course. We do not claim to have the perfect answer, but we have no doubt that economics students will profit from exposure to different perspectives and ideas. Pluralism will not only help to enrich teaching and research and reinvigorate the discipline. More than this, pluralism carries the promise of bringing economics back into the service of society. Three forms of pluralism must be at the core of curricula: theoretical, methodological and interdisciplinary.
(...)