Wednesday, March 16, 2016
Lower House passes holdouts bill
The government manafed to overcome its sternest test yet in Congress, with lawmakers in the Lower House passing a bill aimed at bringing years of litigation in the New York courts with holdout creditors to a close.
The vote, which took place in the early hours of this morning, is crucial for the government of President Mauricio Macri, who has said his administration’s entire economic plan was at risk if the project was not approved.
Let’s Change (Cambiemos) yesterday put to the test its fragile coalition of dissident Peronists, progressives and regional parties that it has cobbled together in recent weeks by holding its first session of the year in the Lower House.
There was just a single item on the agenda — the approval of the “holdouts bill” which would repeal key articles of the Padlock and Sovereign Payment laws, approve the tentative agreements established with holdout creditors and authorize the issuance of almost US$12 billion in new debt to settle the issue once and for all.
The coalition held firm, with quorum reached with relative ease.
Like in the Senate, Let’s Change only has a minority in the Lower House with 89 out of the 257 seats.
Quorum is reached at 129 lawmakers, and despite some brinkmanship from Justicialists and the Renewal Front (FR) over the weekend, 147 lawmakers were in their seats yesterday when Speaker Emilio Monzó opened the session. That margin expanded too as proceedings got underway.
The FR and allies have about 37 lawmakers and the Justicialist caucus has 17 members — both have promised their support for the bill.
As they’d vowed, Victory Front (FpV) lawmakers declined to make up the numbers for the quorum count but the caucus filed in once it was clear that battle had been lost. They did so with small Argentine flags, in protest against the bill under discussion.
Let’s Change had expressed confidence in recent days that it had the necessary support to push through the legislation and yesterday it won a relatively insignificant vote that nonetheless provided a hint of how the balance of power has shifted in Congress.
Faced with a motion from FpV caucus chair Héctor Recalde that debate on the floor be suspended so that a binding referendum could be held on the issue, the Lower House defeated the request by a margin of 164 votes to 84.
As such the FpV and the chamber’s leftists were left isolated by the government and the non-Kirchnerite Peronist opposition — at least on this piece of legislation.
Both Let’s Change’s relative congressional weakness and the unsettling effect of Friday’s decision by a United States appeals court to put on hold a ruling by US District Judge Thomas Griesa hung over the chamber yesterday.
The US court has blocked the lifting of injunctions — previously ordered by Griesa — that have restricted Argentina from paying off some debts in light of the country’s US$6.5-billion offer to settle litigation over bonds in default since 2002. Argentina has until April 14 to pay the US$4.65-billion deal it has agreed with the largest holdouts.
To appease demands from the FR and other dissident Peronists, a cap of US$12 billion has been placed on the debt that the government can issue — that too will make its way into the revised bill.
As part of the last-minute negotiations to hammer out the text, Interior Minister Rogelio Frigerio was reported to have paid a visit to Congress and FR leader Sergio Massa said that a clause “stating that those who receive payment cannot litigate” had been added.
Opening the defence of the bill for Let’s Change, lawmaker Luciano Laspina called the negotiations led by Finance Secretary Luis Caputo “tremendously successful.”
“We are talking about a haircut of 26 percent ... including the Italian bondholders that have accepted the base offers, which comes to a reduction in the accumulated interests throughout these years of 38 percent,” he told the floor.
Sensitive to the persistent claims from the opposition that the settlement includes the risk of sustained litigation from multiple sources, Laspina said that “there is nobody that in private or public seriously thinks that there is a chance that the RUFO clause can be revived and that was recognized by important FR lawmakers.”
As he implored Congress to support the government as an alternative to drastic austerity plans or hyperinflation, Laspina blamed the Kirchnerite administrations for failing to resolve the holdout file. “This is about putting an end to the saga that has placed our country in a situation that even if unfortunate is also incredible ... and the lack of credit that people suffer, in particular those who have the least, those who need the infrastructure works to improve their quality of life with sewers, hospitals, schools that are needed throughout the country.”
Bristling at those accusations, former Economy minister and Victory Front lawmaker Axel Kicillof said that “saying that the RUFO clause is not in effect does not protect us from the 93 percent of (restructured bondholders) claiming the same thing as (Paul) Singer.”
Kicillof was referring to Paul Singer, head of one of the hedge funds that has led the charge against the country. “Let’s not rush to vote for Singer, Griesa or the disasters that may come. We would have backed the government if the agreement was made to defend our interests. But this is a bad agreement which was negotiated in a hurry,” Kicillof added. “It’s easy to pay cultures what they are asking for. It can be done in two minutes. The thing is to negotiate with dignity.”
Taking the middle road were dissident Peronists such as Diego Bossio and Marco Lavagna of the Justicialist and FR caucuses, who have been key for the government to win support in the Lower House.
Bossio, whom led a split from the FpV in February, said that “negotiating with the vultures is to negotiate with the worst scum of the financial world” and that he did not consider the negotiation a success story. But he and his caucus were “convinced that Argentina has to take a step forward and it is important that the Padlock Law and Sovereign Payment Law be repealed so that the Executive can move forward,” he added.
Lavagna, the FR’s leading economist in Congress, lamented that his caucus was not proud of the bill. However, he praised the additional amendments and said that “if we do nothing, we have great legal risks, but doing something also implies facing the risk of future legal attacks.”
Whereas the centre-left mixed criticism of former president Cristina Fernández de Kirchner’s handling of its issue with its avowed rejection of the so-called “vulture” funds, lawmakers such as Margarita Stolbizer (GEN) said that they would support the bill, provided that there was increased supervision of foreign debt levels.
In addition to the FpV, leftist parties were adamantly against the holdouts bills with Socialist Workers’ Party (PTS) lawmaker Myriam Bregman announcing that she would vote against the bill on the grounds that “this be the new government’s first law is a symbol of the political orientation that is openly pro-business tied to international capital. Threats of hyperinflation and austerity spoken from the highest level have brought us here to try to put us on our knees. We do not accept the extortion that they want to exercise on lawmakers.”
The bill will be now sentto the Senate immediately for its review before it is signed into law.