Argentina's pride may come before another fall
Argentina's President is pulling the country into another debt crisis - if she doesn't pay, average Argentinians will suffer
A decade after the largest sovereign default in history, one leader seeks to remove themselves from the international court of both opinion and law in an attempt to shore up their country’s finances.
No, we’re not talking about Nigel Farage and his bid to remove the United Kingdom from the unaccountable European Union. Today, Argentina is seeking to extricate itself from the debt it owes by challenging a ruling that would have the country repay over $1.3 billion by December 15th.
Cristina Kirchner, the President of Argentina, has landed herself in hot water time and again as of late, firstly with the international community, then with the people of Argentina, the media, and of course, us here in Britain too – but her belligerence in appealing before the US Second Circuit Court of Appeals shows that she is simply not willing to play ball with international markets or legal proceedings.
Instead, the holding out on principle and interest payments now worth around $3 billion is Kirchner’s version of sticking two fingers up at the markets.
Having referred to the Falkland Islands recently as a colonial outpost, Kirchner’s representatives have switched the attention of these tired old phrases towards the United States, calling the New York court’s ruling, “a kind of judicial colonialism”.
This kind of terminology is often the last gasp of criminals or dictators seeking to undermine Western judgments on decisions pertaining to what they feel is their sovereign territory. But the debt is not Argentinian sovereign territory. It is owned by American firms and therefore, the seeking of remuneration through the US judicial system is entirely legitimate.
"It may be an issue of process, but Argentina will struggle to justify why it refuses to pay the $1.3 billion," Eurasia Group analyst Daniel Kerner wrote last week. "Argentina has the resources to meet the payment, so in the end it will be a political decision (and) there does not seem to be any political support for paying the holdouts at all."
Argentinian protestors outside the embassy in the United Kingdom last month told The Commentator how they felt Argentina’s position on the debt will likely cost them in the long-run, with international markets shying away from dealing with the government or Argentine businesses in the future. This very real concern is likely to hit the average worker in the pockets again, at a time when social unrest is ramping up both inside the country, and from the expat community.
Meanwhile, Kirchner appartchiks such as Mario Blejer are quick to defend Argentina’s decision, all the while mixing facts with opinion about the role of creditors who reject restructuring deals made by the Argentinian government.
It remains true, despite what some may think, that those who are owed money have a right, legally and morally, to claim what is owed to them. They are under no obligation to accept smaller sums, give discounts or indeed absorb the risk themselves.
Kirchner now has two options – to pay or not pay. Refusing could trigger yet another default, sending markets the message that Argentina is, once again, closed for business. This would cripple Kirchner, the country and likely end in her political demise. The other option is quite simply to pay up, take the medicine and go forward in producing growth for Argentina.
But pride often comes before a fall, and knowing what we do of Cristina Kirchner, it’s entirely possible that she will put her own stubbornness before the interests of her country.
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