Mexico, Brazil Support Argentina’s Dispute with Holdout Creditors
On Monday, Brazil and Mexico filed amicus briefs supporting Argentina’s government in its legal dispute with creditors, causing optimism that the country will not have to go through a second default in 13 years. At Argentina’s request, the US Supreme Court is reviewing lower-court orders that prohibit payments to restructured debt holders unless Argentina also pays holdout creditors from its 2001 default in full.
Brazil and Mexico argued that those rulings would set a precedent that would make it more difficult for countries to renegotiate defaulted debt. France also stepped in, filing a brief saying that the decision would restrict the ability of countries to carry out orderly debt restructurings. Joseph Stiglitz, a Nobel Laureate in Economics, also submitted a brief supporting Argentina.
JPMorgan Chase & Co. and Credit Suisse Group AG said the international support makes it more likely that the Supreme Court will ask for the Obama administration’s opinion, which may delay the case from reaching a conclusion until next year. That likely delay and outcome led to Argentinean bonds up 4.6 percent this month, representing the biggest increase tracked by JPMorgan for emerging markets.
In April 2012, the US government supported Argentina in its lower-court appeal, stating that the orders could jeopardize other restructurings by rewarding hold out investors and punishing the ones who comply with the agreed restructuring terms. Also, the Obama administration said the orders were “impermissibly broad,” and could harm US foreign relations.