Hidden costs of holdouts bill...

Former Central Bank governor Juan Carlos Fábrega and economist Mario Blejer appear at a Senate hearing yesterday.

Specialist Stella Maris Biocca warns of extensive list of legal expenses accrued by holdouts

Argentina will pay for a host of additional expenses, including those incurred by the illegal seizure of the ARA Libertad frigate in 2012 if Congress approves the holdouts bill, according to legal experts who voiced their concerns during a special committee meeting in the Senate yesterday.

According to international law specialist Stella Maris Biocca, the measure’s approval would force the country to pay for an extensive list of legal expenses accrued by holdout creditors during their long dispute with successive Argentine governments.

“Compensatory bonuses, administrative expenses, interest expenses and fees,” would also have to be paid by Argentina if the bill was approved by the legislature, Biocca said, adding that if the Senate passed the bill it would amount to capitulation before the predominantly US-based “vulture” funds.

The ARA Libertad detained on October 2, 2012 for 10 weeks at the Tema port in Ghana following hold out creditor NML Capital’s legal approval to seize sovereign assets until Argentina pays the up to US$1.6 billion owed the the “vulture” fund after it defaulted on debts purchased by NML — an Elliott subsidiary — during the 2001 economic crisis.

It was later released following an independent tribunal ruling which declared the seizure illegal under international maritime law.

“Senators, you were elected not to surrender the country,” she said. “It is very complicated to just sustain that this is good, and illogical to say it is inevitable,” she added in reference to President Mauricio Macri’s statements that there is no other option but to settle with the holdout creditors.

Biocca was supported by other legal and economic experts who attended the special committee at the Upper House and also warned of myriad additional expenses the Argentine state would be forced to pay, among them economist Néstor Forero.

“This is a tragedy for the Republic of Argentina. It’s an unconditional surrender to the power of international finance, incarnated in (Elliott Management hedge fund CEO) Paul Singer, a pirate who didn’t doubt for a moment the seizing of the Libertad frigate,” Forero said

Macri’s government reached an official agreement with most of the remaining holdout creditors earlier in the year, having promised to pass legislation to revoke previous laws introduced by the previous government which outlawed deals with private investors on Argentina’s external sovereign debt.

PEROTTI: SCIOLI WOULD HAVE PAID

In contrast to these concerns, however, Peronist (PJ) party Senator Omar Perotti, a close ally to former Victory Front (FpV) presidential candidate Daniel Scioli, said yesterday that the former governor of Buenos Aires province would have sought a deal with the holdouts if he had won the presidential election.

“If it was President Daniel Scioli he would have had to manage this situation,” Perotti said, echoing Macri’s discourse that a settlement to pay the holdouts could not be avoided.

During an interview with Rosario’s Radio 2, the former gubernatorial candidate for Santa Fe province said that the debate over whether Argentina should acquiesce and pay the “vulture” funds was already over — the only question was on what terms the country should settle with the holdouts.

“No one disputes that it must be paid. Some say you have to negotiate better but they do not say how. To not close this deal is to put at risk the deal with 93 percent of bondholders that did not start legal proceedings a year and a half ago, because no-one came to Argentina to receive payments when the jurisdiction was changed,” Perotti said.

The Peronist senastor also suggested that a failure to finalize the bill would exacerbate the sovereign debt question hanging over Argentina since the 2001 economic collapse. “There’s a risk of an acceleration of external debt,” he said.

The holdouts bill recently received preliminary approval by the Lower House of Congress and is expected to do so through the Senate too, where despite an opposition majority for the FpV, many of its Peronist senator favour the government’s plan to reach an agreement with the holdouts.

In a boost to those who support the bill’s successful passage, Perotti defended the Peronists’ idea to support the legislation, by maintaining that reaching an agreement with the overwhelmingly US-based holdout creditors was Kirchnerite policy during the previous administration of ex-president Cristina Fernández de Kirchner and pointing again to the minority of holdouts yet to settle.

“Kirchnerism managed to make a deal with 93 percent of the bondholders, while there were conflicts with the International Centre for Settlement of Investment Disputes (ICSID), with the Paris Club and Repsol. In addition, there were three attempts to negotiate with the vulture funds: it is not that it did not want to resolve the issue, it came close, but did not. It must be solved,” he said.

Earlier in the year, New York Judge Thomas Greisa raised the prospect of a deal between Argentina and the holdouts after his conflict with CFK’s government, saying that centre-right President Mauricio Macri’s election had “changed everything” and made a deal probable, setting a deadline of April 14 for Argentina’s legislature to ratify the agreement made between government officials and the “vulture” funds.

Among the speakers yesterday was Roberto Lavanga, the former Economy minister to former president Néstor Kirchner between 2002 and 2005, who said that the opportunity for Argentina to regain access to international credit should be seized.

“Not having access to international long-term credit is a problem for development,” he said.