Thursday, March 31, 2016

Senate gives Macri big win on holdouts

Head of the PRO party caucus in the Senate Federico Pinedo speaks with Vice President Gabrieal Michetti.

Support from divided Victory Front helps gov’t end 14-year old legal battle with creditors

The government celebrated its first major Congressional victory last night as the Senate approved its holdouts bill with significant support from the Victory Front (FpV).

The bill is necessary to bring an end to years of legal disputes with holdout creditors over debt that was defaulted in 2001.

As the Lower House gave a green light to an amended bill two weeks ago, an approval from the Senate would leave the legislation ready for President Mauricio Macri to swiftly enact it. As part of the multibillion-dollar deal established with holdout creditors at the end of February, April 14 is the deadline for the country to honour its agreements.

The bill repeals articles of the Padlock Law and the Sovereign Payment Law and authorizes the government to issue US$12.5 billion in bonds in order to pay its creditors.

The FpV has over 40 votes in the 72-seat chamber, and as such the government needs its cooperation in order to pass legislation. Yesterday’s vote was the first major test for the government in the Senate on a controversial measure. In the Lower House, the vote went the government’s way by a margin of 165 votes to 86.

On Tuesday Senator Miguel Pichetto — chair of the Victory Front (FpV) in the Senate — threw his support behind the bill despite the FpV’s almost total rejection of the initiative in the Lower House. Pichetto, a veteran senator who has been one of the government’s interlocutors since the presidential inauguration, also announced that the FpV would be split on the matter.

True to his word, high-profile FpV senators such as Rodolfo Urtubey (Salta), and José Mayans (Formosa) and Omar Perotti (Santa Fe) announced that they would be voting for the legislation to the chagrin of their Kirchnerite counterparts such as Senator Anabel Fernández Sagasti (Mendoza) and María Ester Labado (Santa Cruz).

Senator Juan Manuel Abal Medina (FpV-Buenos Aires) repeated that he would be voting against the government’s proposal but did not openly criticize those in the bloc who did support the bill. Far more critical was Senator Marcelo Fuentes (FpV-Neuquén) who said that Néstor Kirchner would “never have negotiated with these hurried conditions.” Pichetto courted controversy on Tuesday when he said that the late president would have supported the bill under review.

The first FpV senator to defend the measure was Urtubey, who justified the support on the grounds that the deal allows Argentina to return to international credit markets. A lawyer, Urtubey also said that the risk of litigation from creditors had been “limited” by the language in the bill and that any attempts by the Macri government to issue debt without review would be countered by the FpV’s large majority in the Senate.

Accusing her counterparts on the floor of suffering from Stockholm Syndrome, Senator Fernández Sagasti said that the government was “trying to sell us a crisis so that we buy expensive debt with bad terms. They are leading us straight to hell” she said when justifying her vote against the bill.

Tellingly, both sides of the FpV divide cited former presidents Néstor Kirchner and Cristina Fernández de Kirchner in their speeches. Senator Julio Cobos (Mendoza-UCR) led the defence of the bill for Let’s Change, calling it necessary to turn the page after years of litigation that ended up favouring the holdouts. “We are acting correctly. Could a better agreement have been reached? Perhaps, perhaps not. But we have a ruling against us, and it is very difficult to come to an agreement in such a scenario.” The senator also recalled that the punitive interests had been accumulating against the country as a result of that ruling.

Support from the bill came from the non-Peronist opposition as well, with GEN Senator Jaime Linares (Buenos Aires) insisting that while he would back the bill, “we are not responsible for any surrender, we are responsible for a rational vote that allows Argentina to have a platform of sustainable development.” He added that settling with holdout creditors was “a necessary but insufficient condition to resolve this matter, which is not a problem for the government, but for all Argentines.” In a repetition of the voting patterns seen in the Lower House, senators associated with Renewal Front leader Sergio Massa such as Senator Roberto Basualdo (San Juan) promised to vote in favour of the governments.