The Hypocrisy of Argentina’s Real Birds of Prey

Vulture funds: Keep your claws away from Argentina!
“Vulture funds: Keep your claws away from Argentina!” (WDM)

EspañolOn June 23, the United States Supreme Court rejected Argentina’s appeal of a ruling by Judge Thomas Griesa of New York. Judge Griesa ruled in favor of the hedge funds in a trial pitting them against the South American nation. In rejecting the appeal, the Supreme Court upheld the investor’s claims, and they now intend to collect on those defaulted bonds. In addition, these creditors are calling for precautionary measures to ensure they are able to collect, such as the seizure of Argentinean assets.

NML Capital Ltd. and Aurelius, the plaintiffs in this case, bought Argentinean bonds from parties who refused to accept the terms proposed by the Argentinean government during the debt restructuring process carried out after the country’s gigantic default in 2001.

True to the style that characterizes many contemporary Latin-American leaders, President Cristina Kirchner immediately proceeded to insult these investors. She coined the term “vulture funds,” so as to denigrate the legitimate aspirations of these institutions and generate contempt towards them among the general public.

Since the chief executive chose to engage in this debate by introducing terms within the field of ornithology, let’s briefly review the characteristics of certain birds.

Vultures usually feed on dead animals. In other words, they are not the ones causing death and desolation. On the other hand, we have birds of prey — those that stalk, capture, kill, and devour. They are essentially a predator species.

Just as some people choose to mock legitimate creditors as “vultures,” certain government rulers could be considered aves de rapiña, or “birds of prey.” It’s also worth noting that the term “raptor” comes from the Latin word rapere which means to seize” or “take by force.”

This applies especially to the politicians that have ruled over Argentina during the last few decades, as they have become quite accustomed to such behavior. In particular, they have been remarkably reluctant to honor their financial commitments. That immoral attitude sometimes manifests itself in the crudest of ways, and other times its done much more underhandedly.

A prime example of their crass irresponsibility occurred in late 2001, when lawmakers loudly applauded the default on the debt. Besides such extreme cases, there is a pattern of behavior that has persisted over time. There are countless other examples. It is within this context that we must examine the reason why in 2005 and 2010, 93 percent of Argentina’s creditors agreed to the government’s proposal of a 50 percent cut in their repayment. Bondholders felt it was better to get back half of what was owed to them than lose everything. For that matter, whether or not they would even get that 50 percent back was always doubtful. With Kirchner and company, you just never know.

Some investors, like NML Capital Ltd and Aurelius, acquired the defaulted bonds at very low prices. The voluntary deal was mutually beneficial for both parties: those who sold the risky Argentinean bonds received quick and certain compensation. It should be noted that, due to their advanced age, many of the initial bondholders believed they would not live long enough to collect the money owed to them from the Argentinean government. The hedge funds that bought these bonds took a risk in order to gain larger profits in the future — a logical and legitimate practice.

What needs to be pointed out is that those who “killed” the small investors in this case were the birds of prey, not the vultures. The same political birds of prey that use legal force to take over people’s retirement funds, steal revenue from farmers with confiscatory export tariffs, and carry out expropriations and then refuse to pay.

A La Nación op-ed from December 2013 denounced Kirchnerismo for “misappropriating funds from the Social Security National Administration (ANSES) to finance government programs clearly meant to proselytize for the state, forcing more than 100,000 retirees to take on costly lawsuits to update their pension plans.… The federal government’s attitude toward the elderly has been to take advantage of them, as they are an easy, defenseless prey.”

Considering that record, it’s not surprising that Judge Griesa decided to disallow Argentina from making payments according to its own rules, as Minister of Economy Axel Kicillof intended to do.

Translated by Alan Furth and Daniel Duarte.

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