(/sites/default/files/uploads/2014/10/cristina-fernandez-de-kirchner.jpg)Hedge 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.
Freedom Center pamphlets now available on Kindle: Click here.