アルゼンチン 「ハゲタカ」の横暴が目に余る

The Yomiuri Shimbun
‘Vultures’ drive Argentina into default, turning debt relief accords to ashes
アルゼンチン 「ハゲタカ」の横暴が目に余る

The Argentine government has fallen into default, unable to keep up with interest payments on its debt.

It is important to deal with the latest turmoil and prevent it from developing into a serious and more widespread financial crisis.

The latest default resulted from the collapse of talks between the country and U.S. hedge fund creditors, which sought payment in full.

Argentina fell into its first default in 2001. Later, Argentina reached agreements with more than 90 percent of investors to wholly or partially write off obligations comprising about 70 percent of the country’s $100 billion debt as part of its restructuring plans. It has made interest payments since then.

But certain U.S. fund creditors, refusing to accept the debt reduction plans, sued the country. An earlier U.S. court decision that was recently upheld by the Supreme Court blocks Argentina from making interest payments to other bondholders who separately agreed to restructuring plans until the U.S. hedge funds get paid the full value of their bonds.

With the recent decision by the U.S. court, Argentina has become unable to make interest payments to other creditors no matter how much the country wants to do so.

The hedge funds in question snapped up Argentina’s junk bonds from original investors following the first default and then refused the restructuring terms, suing for repayment in full. It is hardly surprising for the Argentine financial authorities to criticize the hedge fund creditors as “vultures.”

Impact limited, for now

Currently, there is hardly any trading of Argentina’s national bonds on the market. Therefore the latest development is expected to have only a limited impact on the international financial market.

Yet Argentina’s economy will inevitably be affected by the impact of the peso’s decline in the currency market, due to the decline in the country’s creditworthiness. Close attention is needed as to whether the latest development may cause a negative chain reaction involving such emerging economies as Brazil, which is closely linked with the Argentine economy.

Prolonging the current turmoil may not be a good course of action to take for the U.S. hedge funds, either. No matter how hard they drive Argentina’s weak economy into a corner, they cannot expect much benefit for themselves. The hedge funds must search for a realistic middle ground with the Argentine government.

The problem is that, due to the funds’ attempt to rake in money, the agreements that other creditors reached earlier with Argentina to resolve the default crisis in 2001—even at the possible cost of suffering a loss—have turned to ashes.

Many are skeptical of the U.S. court decision, which gave credit to the U.S. funds’ unilateral assertions, despite the fact that a large number of creditors had agreed with Argentina over the restructuring plans.

The fact that an international agreement has been overturned by the judicial ruling of a single country has fueled concern among such financial institutions as the International Monetary Fund that it would become ever more difficult to compile assistance efforts such as debt reductions or exemptions, should such a crisis as debt default occur in other countries in the future.

Recently there have been many national bonds that have set, at the time of issuance, a provision that if a certain ratio of creditors agree with a debt reduction, all the creditors will have to comply with the agreement.

The IMF and the Group of Seven major powers have to expedite their efforts to draw up an international framework to help such agreements retain their validity even in the judicial arena.

(From The Yomiuri Shimbun, Aug. 5, 2014)

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