Paul Singer Is Right: Argentina Must Pay Their Debts

cristina-fernandez-de-kirchnerHedge fund manager Paul Singer of Elliott Management Corporation has been involved in a high-profile dispute with the Republic of Argentina for seeking repayment of the full face value of debts acquired at a deep discount during Argentina’s financial crisis.  While the latest ruling in the United States Supreme Court rejected Argentina’s appeal of the ruling, Argentina remains in default for not repaying $539 million in interest – and remains on the hook for $1.5 billion dollars.

Media reports indicate that a mediator recently noted that despite repeated court rulings, Argentina still has issues. A certain logic must prevail. Winners win, and losers lose.  If one invests and wins, in the civilized world they get paid – even if they are wealthy.  If this group of Singer-led investors would have bet wrong, one can bet they wouldn’t have gotten a penny back. Hence, they must be paid. Argentina can call them any bad words they choose – from vultures to whatever else – but spell the name right on the check.

It is really very simple – one must pay what they agreed to. Some quotes from wise people who should be listened to on this matter:

“To the U.S. Government, I would say that supporting the government of a country that does not play by the rules of a true democracy does not necessarily mean support for its citizens.” — Horacio Vazquez, an Argentine holdout bondholders

“I love it when he (Singer) wins, because it just validates who he is as a person. He’s a fighter. He’s not going to give up. And he’s not a villain: He’s a hard-nosed businessman, that’s it, and he sticks up for what he thinks is right. More people should do that.” — Ralph DellaCamera

“Since the country was largely cut off from international capital markets following its default in July, the government of President Cristina Fernandez de Kirchner — never a paragon of orthodox policy making — has resorted to even more self-destructive coping measures. As the foreign currency reserves that Argentina needs to pay for imports have diminished, the government has issued new rules meant to keep dollars from leaving the country.” “There’s one easy way for Argentina to avert such a scenario: Settle with its holdout creditors and regain access to global capital markets.” – Bloomberg Editorial, “Argentina’s Contempt for Its Citizens

“After being urged to invest in our country after its historic 2001 default (which was restructured in 2005) we were told that our investments were worth pennies on the dollar, and that the government would no longer honor its contracts and commitments.” — Horacio Vazquez, an Argentine holdout bondholders

“He doesn’t get into fights for the sake of fighting. He believes deeply in the rule of law and that free markets and free societies depend on enforcing it.” — Daniel S. Loeb.

“By negotiating in good faith with its creditors and respecting the rule of law, Argentina could repair its global standing and signal a new era to much-needed foreign investors.  Such a move would be a positive first step in repairing Argentina’s wretched economy for the benefit of all its citizens.” — American Task Force On Argentina

“As Argentina struggles with a poor economy and the risk of default, a consensus has emerged among Argentines, business groups and ruling-party lawmakers that the government should settle a $1.5 billion debt with holdout bondholders—and do so soon….” – Wall Street Journal

“Imagine how much capital a country like Argentina might attract – If instead of defaulting seriatim and affecting a pose of anger toward creditors, it borrowed responsibly and honored its obligations.” — Paul Singer (2005)

Even this PR Agency owner cannot spin Argentina’s case – Was Argentina issuing bonds with no intention of paying them back?  When they got the money did they simply not intend to pay it back? Governments receive money – and investors get paid even if they end up making a ton of money.

It is really rather simple: investors deserve to be paid.  That’s the way the world works.

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  • Joe The Gentile

    I hope Ron Torrossian is paying Frontpagemag for the plugs for himself and his PR firm that he inserts ‘seriatim’ into his articles. :)

  • Douglas Mayfield

    Yes, Argentina should repay its debts. But Argentina is governed by the Left wing which thrives on grabbing other people’s hard earned money at gun point to fund its ‘generosity’.
    Here in America, we’re headed straight for where Argentina is now. Give us 20 years of Democratic socialist poison, we’ll be right there with them.

    • nimbii

      Agree. Sooner or later, the IMF (and the CFR/NWO) will extort a settlement of US debt by demanding a break-up the United States into the federal regions as separate countries with the debt distributed primarily on the regions least guilty for rolling up the debt. Much easier to handle Soros style…

    • Guest

      To honor the great English philologist George M. Crabb, as he
      divides
      between “honor” and “honesty” — while occupation as a landlord can be a
      thing done in honesty, not ever can it be honorable work, . . . and debt
      collection even less so, . . . in this article, there is nothing
      whatsoever manifesting awareness of anything of the higher
      characteristic which beckons man, but only the hard-scrabble of men lost
      in greed and gambling, . . .
      Our author here presents a case in
      argument very much as I think that, Satan would—and, the matter has little,
      or nothing to do with democracy or democratic institutions and ideals:
      Than
      what we have in this mere piece of an otherwise interesting topic, the
      fact of ever more significance is that, even as in the good ol’ USA, it
      is the larceny—and other appearances of corruption—in the hearts of the
      citizens which allowed their sitting administration to have gained the
      foothold which in a gamble for “free money”, they used to subject the
      people deep in a death-grip of confusing indebtedness.
      Our
      author might have used his opportunity to have explained why it was
      that, when Argentina’s antique sailing ship was seized, the court in
      that small, poor nation on the coast of Africa was able to assume
      jurisdiction concerning a matter of indebtedness which arose even on a
      different continent, . . .

      • Fritz

        It’s very simple, the Argentine ship was in the jurisdiction of that small poor African nation that you mention. When a judgment is made in a U.S court against a defendant, in this case Argentina, that judgement is usually observed and upheld in any country that the U.S has a treaty with, and the reverse is true as well. In any event the economic status of that African nation is completely non sequitur, what matters is due process and the rule of law, something that the African state in question clearly tried to observe more so then Argentina.

    • PhillipGaley

      To honor the great English philologist George M. Crabb, as he
      divides between “honor” and “honesty” — while occupation as a landlord can be a
      thing done in honesty, not ever can it be honorable work, . . . and debt
      collection even less so, . . . in this article, there is nothing whatsoever manifesting awareness of anything of the higher characteristic which beckons man, but only the hard-scrabble of men lost
      in greed and gambling, . . .
      Our author here presents a case in argument very much as I think that, Satan would—the matter has little, or nothing to do with democracy or democratic institutions and ideals:
      Than what we have in this mere piece of an otherwise interesting topic, the
      fact of ever more significance is that, even as in the good ol’ USA, it
      is the larceny—and other appearances of corruption—in the hearts of the
      citizens which allowed their sitting administration to have gained the
      foothold which in a gamble for “free money”, they used to subject the
      people deep in a death-grip of confusing indebtedness.
      Our author might have used this opportunity to have explained why it was
      that, when Argentina’s antique sailing ship was seized, the court in
      that small, poor nation on the coast of Africa was able to assume
      jurisdiction concerning a matter of indebtedness which arose even on a
      different continent, . . .

  • Hard Little Machine

    Argentina has done this before. It always results in several years of hyperinflation.

  • cxt

    Wonder what would happen if everyone behaved the way Argentina does?

    My guess is that they feel free to do so because largely everyone else will continue to play by the rules.

  • jcd0101

    i agree investors wont put their money into a country when they know
    the first thing that will happen is
    the communist liberals will blow all the money and then
    flip the investor the middle finger..

    now take this to america though and were in debt up to 19 trillion almost now
    We couldnt pay this all back if we tried..

    Its a mess – a giant mess and their is no way to pay it off..

  • Juan Malambo

    In the financial sense investments include the purchase of bonds, stocks or real estate property.
    Be sure not to get ‘making an investment’ and ‘speculating’ confused. Investing usually involves the creation of wealth whereas speculating is often a zero-sum game; wealth is not created. Although speculators are often making informed decisions, speculation cannot usually be categorized as traditional investing.

    A fundamental idea in finance is the relationship between risk and return. The greater the amount of risk that an investor is willing to take on, the greater the potential return. The reason for this is that investors need to be compensated for taking on additional risk.

    For example, a U.S. Treasury bond is considered to be one of the safest (risk-free) investments and, when compared to a corporate bond, provides a lower rate of return. The reason for this is that a corporation is much more likely to go bankrupt than the U.S. government. Because the risk of investing in a corporate bond is higher, investors are offered a higher rate of return. simple and basic

  • El Cid

    Years of magical fiscal policy has resulted in total mistrust of government and cycles of hyperinflation. Argentinians view their currency as “certificates of confiscation”.

    Everyone I know who still has a middle class life in Argentina thinks constantly about maintaining their money outside the country since the government controls how many dollars you can buy and at what official price. No one reports their income tax honestly. Most people I know have left during the last 20 years.

    Given Argentina’s vast mineral and agricultural wealth and educated population, none of this makes sense. Argentina should be an economic powerhouse.

    If understood correctly, Paul Singer is a hero for Argentina since he is
    demanding that Argentina face the reality of their situation.

  • arcturus

    Argentina must pay ITS debts. Watch your grammar.