Puerto Rico’s religious leaders have called for debt relief of the Caribbean U.S. territory in the face of the 72 billion dollar liability that represents 20,000 dollars of debt for every man, woman and child.

In a statement issued Aug. 31, the clergy called on the U.S. Federal Reserve to intervene if Congress fails to pass bankruptcy protection to the financially-strapped island.

“This debt crisis threatens to push more of our people into poverty and put people out of work,” said San Juan Archbishop Roberto González Nieves, leader of Puerto Rico’s mostly Catholic population.

“The religious community stands with vulnerable people and we call for the crisis to be resolved in a way that protects the poor and grows our economy,” he added.

At a press conference in San Juan, leaders of the major religious groups laid out six principles to resolve the crisis.

“Puerto Rico’s religious leaders are fighting for the lives of their people,” stated Eric LeCompte, executive director of the faith-based development coalition Jubilee USA Network.

Jubilee USA Network is an alliance of more than 75 U.S. organisations and 400 faith communities working with 50 Jubilee global partners. Jubilee’s mission is to build an economy that serves, protects and promotes the participation of the most vulnerable.

LeCompte visited Puerto Rico in mid-August to advise religious and political leaders on solutions to the crisis.  “We need to get Puerto Rico’s debt back to sustainable levels and ensure that the island has a path for economic growth,” he said

Some of the hedge funds, arguing for cuts in Puerto Rico’s economic growth, were or are currently involved in debt disputes in Greece, Argentina and Detroit, Michigan.

Two recent reports, one commissioned by a group of hedge funds which purchased the island’s distressed debt and the other authorised by Puerto Rico’s own government, suggest new austerity plans to pay off portions of the debt.

The reports note a range of “fiscal adjustments”, including reducing the minimum wage, education resources and healthcare costs. One of the principles promoted by the coalition of religious leaders is that any resolution to the financial crisis prevents further austerity plans.

The religious leaders raised concern over predatory hedge fund activity in their statement. Beyond the Catholic Church, other religious groups signing the statement include Methodists, Lutherans, Evangelicals, Pentecostals and the Disciples.

“As religious leaders, we see how desperate the situation is for Puerto Rico’s people,” said Reverend Heriberto Martínez Rivera, secretary-general of Puerto Rico’s Biblical Society and the leader of the religious coalition confronting the debt crisis.

“Too many of our people are already suffering from austerity policies and many brothers and sisters have left for the United States hungry for work and a better quality of life,” he added.

Beyond calling for debt relief and criticising austerity policies, the religious leaders’ statement asserts the need for greater Puerto Rican budget transparency and participation in future debt negotiations by people negatively affected by the crisis.

Edited by Phil Harris   

By Kinda Mohamadieh
GENEVA, Apr 6 2015 (IPS)

The world’s attention turned to the practices of vulture funds after the U.S. Supreme Court affirmed a lower court opinion in the NML Capital vs Argentina case, which forbids the country from making payments on its restructured debt.

Argentina had defaulted in 2001 and went through two rounds of negotiations to restructure its debt, both in 2005 and 2010. In June 2014, the court ordered Argentina to pay the ‘vulture funds’ that held out and did not accept the terms of the debt swaps.

Kinda Mohamadieh

The vulture funds had held out with the aim of achieving what amounts to a 1,600 percent return on their original investment. The funds concerned had purchased the Argentinian bonds in 2008 at 48 million dollars and the court ruling ordered Argentina to pay them 832 million dollars.

Nobel laureate Joseph Stiglitz noted that this was “the first time in history that a country was willing and able to pay its creditors, but was blocked by a judge from doing so”.

While this case brought the term ‘vulture funds’ into the public sphere, the predatory practices of these entities did not start with Argentina.

According to a former U.N. independent expert on the effects of foreign debt and other related financial obligations of states on the full enjoyment of all human rights, the term ‘vulture funds’ describes “private commercial entities that acquire, either by purchase, assignments or some other form of transaction, defaulted or distressed debts, and sometimes actual court judgments, with the aim of achieving higher returns.”

Basically, vulture funds are hedge funds whose modus operandi focuses on three main steps including: (1) purchasing distressed debt on the secondary market at deep discounts far less than its face value; (2) refusing to participate in restructuring agreements with the indebted state; and (3) pursuing full value of the debt often at face value plus interest, arrears and penalties, including through litigation, seizure of assets or penalties.“The African Development Bank has reported that at least twenty heavily indebted poor countries have been threatened with or have been subjected to legal actions by commercial creditors and vulture funds since 1999”

Many developing countries have been exposed to the predatory practices of vulture funds, especially African and Latin American countries.

The African Development Bank has reported that at least twenty heavily indebted poor countries have been threatened with or have been subjected to legal actions by commercial creditors and vulture funds since 1999. These countries include Sierra Leone, Cote d’Ivoire, Burkina Faso, as well as Angola, Cameroon, Congo, Democratic Republic of the Congo, Ethiopia, Liberia, Madagascar, Mozambique, Niger, Sao Tome and Principe, Tanzania, and Uganda.

Peru was targeted by NML Capital in the year 2000. According to media reports, the fund spent almost four years in the courts to win a ruling that forced Peru to settle for almost 56 million dollars on distressed debt, which the fund had initially bought for 11.8 million dollars.

The African Development Bank has documented that up until the year 2007, 25 judgments in favour of vulture funds had yielded nearly one billion dollars. Out of this amount, 72 percent of the judgments have been against African countries. The reported number of outstanding cases against debtor countries has doubled since 2004.

According to the World Bank and the International Monetary Fund (IMF), 54 court cases were instituted against 12 heavily indebted poor countries between 1998 and 2008. The IMF estimates that in some cases claims by vulture funds constitute as much as 12 to 13 percent of a country’s gross domestic product.  The World Bank estimates that nearly one-third of countries that are eligible for debt relief and other poverty alleviation programmes are the targets of nearly 26 vulture funds.

Concerned about the extent of the threat posed by such predatory practices and their systemic implications, several international authorities and multilateral institutions have voiced their concern about the matter.

The African Development Bank has warned that by precluding debt relief and costing millions in legal expenses, these vulture funds undermine the development of the most vulnerable African countries.

In June 2014, the heads of state and government of the Group of 77 and China, in their declaration issued on the occasion of the ‘For a New World Order for Living Well’ summit held in Santa Cruz de la Sierra, Bolivia, reiterated the importance of “not allowing vulture funds to paralyse the debt restructuring efforts of developing countries” and stressed that “these funds should not supersede the state’s right to protect its people under international law.”

The IMF had cautioned that upholding the decision against Argentina would harm future sovereign debt restructuring attempts. In 2013, the IMF stated that “if upheld, [the Court of Appeals decision] would likely give hold-out creditors greater leverage and make the debt restructuring process more complicated”.

In 2007, G8 finance ministers had expressed concern about actions of some litigating creditors against heavily indebted poor countries, and agreed to work together to identify measures to tackle this problem based on the work of the Paris Club.

In September 2014, a resolution on the activities of vulture funds and the effects of foreign debt and other related international financial obligations of states on the full enjoyment of all human rights, particularly economic, social and cultural rights, was presented by Argentina and adopted at the 27^th session of the U.N. Human Rights Council which took place in Geneva.

It is also worth noting that the 26^th session of the Human Rights Council in June 2014 had adopted a resolution titled ‘Elaboration of an international legally binding instrument on Transnational Corporations and Other Business Enterprises with Respect to Human Rights’.

This resolution sets in place a process of negotiations towards an international legally binding instrument on transnational corporations and their liability in the area of human rights. (END/IPS COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

* This column is based on a longer version published in published in the South Centre’s South Bulletin 83 of 12 February 2015.

Excerpt:

Screenshot of Argentine President Cristina Fernández during her Monday Jun. 16 televised address to the nation. Credit: TV Pública

By Diana Cariboni
MONTEVIDEO, Jun 17 2014 (IPS)

Argentina finds itself in a strange position since the U.S. Supreme Court rejected its appeal Monday to take a case in which a small group of creditors is suing this country for full repayment: it is on the brink of default even though it is one of the countries in the world that has done the most to dig itself out of debt.

The Supreme Court decision in the case Republic of Argentina v. NML Capital leaves in place a 2012 ruling handed down by the second district court of New York, ordering Buenos Aires to pay bondholders, immediately and in full, some 1.5 billion dollars – an amount that includes interest and penalties.

But it also sets a precedent with respect to all of the unpaid debt in the hands of other speculative bondholders, totalling around 16 billion dollars.

This amount, however, “is equivalent to just three percent of Argentina’s GDP,” economist Ramiro Castiñeira, with the Econométrica consultancy, told IPS.

“It doesn’t make sense for Argentina to default over that amount, when it is one of the countries that has advanced the most in reducing its debt in the past few years,” Castiñeira argued.

Brazil, for example, owes interest payments this year equivalent to five percent of GDP, on top of principal payments amounting to more than 12 percent of GDP, he said.

The problem is that Argentina does not have 16 billion dollars in cash – the equivalent of half of its foreign reserves, which were hit hard by a series of restrictive monetary policies that fuelled capital flight.

Argentine President Cristina Fernández complained about the Supreme Court ruling Monday night, calling it “extortion” while stressing that her country would continue to make repayments to lenders who had agreed on renegotiated settlements.

After Argentina defaulted on its foreign debt in late 2001 during the worst economic crisis in the country’s history, the government made enormous efforts to work its way out of debt, which had reached 160 percent of GDP.

It repaid the World Bank and International Monetary Fund (IMF) in full and restructured the debt held by 92.4 percent of bondholders, at a deep discount, in 2005 and 2010.

The debt shrank to manageable volumes. In late May, Argentina reached an agreement with the Paris Club of creditor nations for repaying overdue debts. And earlier this year, the government agreed on a package to compensate Spanish oil company Repsol for the 2012 nationalisation of its subsidiary YPF.

But the situation produced by the Supreme Court ruling could jeopadise everything achieved so far.

The sentence prohibits banks in New York from making interest and principal payments to creditors that accepted the restructuring unless the New York-based hedge fund NML Capital is paid.

On Jun. 30, Buenos Aires is to pay 532 million dollars for bonds issued under foreign legislation.

To avoid the embargo, payment jurisdicion could be modified by means of a voluntary swap. “The idea might seem tempting, but it is impracticable and would also mean falling into technical default” by changing the parameters set when bonds are issued, Argentine economist Leonardo Stanley, associated with the Centro de Estudios de Estado y Sociedad (CEDES) think tank , told IPS.

Although Fernández’s statement was ambiguous, Stanley’s interpretation is that the president expressed a willingness to pay. That means “negotiations will have to start with the holdouts [creditors who refused the restructuring], which could take place within the context of what the judge handling the case [in New York] is asking for,” he said.

Stanley said: “From here on out the decision is political. Just as it reached agreements recently with Repsol and the Paris Club, the government should sit down and negotiate with Paul Singer,” whose hedge fund, Elliott Management, is the parent company of NML Capital.

The economic impact is inevitable, he added, “although the current government would not necessarily have to deal with it,” as Fernández’s term ends in December 2015. For that reason, “any proposal would have to be made in the legislative sphere,” which would help boost “transparency and credibility,” he said.

In her address to the nation Monday, Fernández said “this case has repercussions for the entire global financial system. [The ruling] validates a business model on a global scale which, if it continues to be reinforced, will produce unimaginable tragedies.”

Eric LeCompte, executive director of the religious anti-poverty organisation Jubilee USA Network, said in a statement that “For heavily indebted countries supporting poor people, this is a devastating blow. These hedge funds are [now] equipped with an instrument that forces struggling economies into submission.”

“Argentina may not have used the best options or strategies,” said Stanley. But the stance taken by the U.S. Supreme Court shows that “despite the institutional crisis, the lobbying power of the financial sector is intact,” he added.

And if countries begin to doubt the benefits of issuing a bond under New York jurisdiction, the ruling “could also hurt that sector, and the United States…which has gone from being the world’s creditor to one of its biggest debtors,” he argued.

Peter Hakim, president emeritus of the Washington-based Inter-American Dialogue think tank, said “Both the U.S. Treasury and the IMF were also concerned about the broader effect of what would be considered an Argentine default, and also worried about the impact on other debt negotiations.

“Remember the U.S. Treasury [along with the IMF], although it did not join the lawsuit, basically supported Argentina’s contention that it should be able to pay the holdouts the same amount as it was paying creditors who had accepted Argentina’s debt restructuring.
“ U.S. relations with Argentina… have improved in recent months as Argentina has pursued a more orthodox and moderate set of economic policies (including efforts to reform its notoriously manipulated economic statistics, repay its Paris Club obligations, settle the claims of Repsol, etc).”

But the immediate future of those ties depends on how Buenos Aires reacts in this case, for which a solution could be possible if the Argentine goverment demonstrates greater flexibility, Hakim said.

“The Fernández government will have to resist the temptation to turn the decision into a domestic political issue,“ he said.

But that seems difficult to do. For decades the management of the country’s debt has been a central factor in economic and political crises. In her speech Monday, Fernández summed up the history of this issue.

The portion of bonds that Singer and his allies are pressing Argentina to pay is illustrative on its own. In 2008, NML Capital purchased the bonds at a nominal price of 370 million dollars. But at the time they were only worth 48 million dollars.

Thirty percent had been issued during the administration of Carlos Menem (1989-1999), when the peso was pegged to the dollar.

The rest were issued during the “megaswap” – a financial operation cooked up in 2001 to give Argentina breathing space by stretching out the government’s principal and interest payments, which backfired and increased the public debt by tens of billions of dollars.

Former president Fernando de la Rúa (1999-2001) and his economy minister Domingo Cavallo were prosecuted for the megaswap and an international arrest warrant was issued for David Mulford, at the time chairman international of the Credit Suisse First Boston bank and former U.S. Treasury official.

The Casa Rosada, the seat of the Argentine government, which is seeking to reopen a debt swap to overcome the legal action brought by “vulture funds”. Credit: Marcela Valente/IPS

By Marcela Valente
BUENOS AIRES, Aug 29 2013 (IPS)

As a sign of Argentina’s willingness to repay its bondholders, President Cristina Fernández introduced a bill for a new swap of the foreign debt held by “holdout” creditors who refused earlier restructurings after the country’s late 2001 default.

This time around, most of the opposition backs the proposal.

In the initiative that the Senate began to discuss on Wednesday Aug. 28, the government seeks authorisation to reopen the debt restructuring process for a second time.

Although 93 percent of bondholders accepted the earlier restructurings, in 2005 and 2010, the remaining seven percent refused the offer of about 35 cents on the dollar, and insisted on full repayment.

Through the restructuring, Argentina renegotiated 90 billion dollars in debt.

The new swap, expected to be approved by Congress, would offer the same conditions as the previous deal. The difference is that it would be open-ended, whereas the earlier exchanges gave bondholders only a few months to swap their debt.

“Equity is a foundation stone of this debt restructuring process,” states the bill, which prohibits offering holdouts who have brought legal action more favourable treatment than those who did not do so.

The government initiative is in response to the Friday Aug. 23 ruling by the U.S. Court of Appeals for the Second Circuit in New York – the last step before the Supreme Court – that upheld an earlier decision that Argentina must pay the holdouts in full.

Fausto Spotorno, an economist with the Centre for Economic Studies, told IPS that the bill “is very reasonable.”

“They should never have closed the swap. But opening it now is a good political signal to the justice system and could get some more of the bondholders to agree to an exchange,” he said.

Spotorno said that if the case was accepted by the Supreme Court, a favourable verdict for Argentina was unlikely.

The hedge funds that sued in federal court in New York for full payment of 1.3 billion dollars in Argentine bonds had acquired them in 2008 at 20 to 30 percent of their nominal value.

They are known as “vulture funds” – opportunistic investors who purchase the debt of heavily indebted countries cheap and then sue for full repayment.

The lawsuit in New York is led by hedge fund billionaire Paul Singer’s Elliott Management.

The bill presented by the Argentine government stresses that the holdouts who sued represent only a small portion of the unrestructured debt. It also points out that if they were paid 100 percent of the nominal value, as they are demanding, they would make a profit of 1,300 percent.

The bill also states that “it is common knowledge that our country is the object of ruthless legal attacks and heavy political pressure by these vulture funds.”

When she unveiled the proposal on Monday Aug. 26, centre-left President Fernández said the Aug. 23 U.S. court ruling was “unfair to our country” because it ignored the restructuring agreements reached with 93 percent of the bondholders.

She also said “we are serial payers, not serial debtors.”

Since the restructuring began, Argentina has serviced its debt punctually.

By 2003, the country’s debt represented 150 percent of GDP, the bill presented to the legislature states. The country has not had access to the global credit markets since 2002.

But as the economy began to recover from the 2001-2002 severe economic crisis, the debt situation began to improve as well.

According to the latest report by the Economy Ministry, as of late 2012 Argentina held 83 billion dollars in net debt, equivalent to 18.8 percent of GDP.

And with the payment of restructured bonds scheduled for September, the foreign currency denominated private debt to GDP ratio will drop to just 8.3 percent, Economy Minister Hernán Lorenzino said.

However, the country’s successful reduction of the debt burden is threatened by the small group of litigious hedge funds, which found their first ally in District Judge Thomas Griesa, who handed down the initial sentence in New York, in March.

The Aug. 23 ruling, which will be appealed by Argentina, dealt a blow to the restructuring process that Fernández’s late husband Néstor Kirchner, her predecessor, began while serving as president from 2003 to 2007.

If Argentina was forced to pay 100 percent of what the holdouts are owed in principal and accrued interest, the bondholders who agreed to the 2005 and 2010 restructurings could invoke the “most favoured creditor clause” and demand the same treatment.

Fernández also proposed that the voluntary debt swap invite holders of foreign-law bonds to exchange them for new debt that would be paid under Argentina’s local legislation, in order to evade eventual embargoes in case the Supreme Court upholds the Aug. 23 ruling.

The Radical Civic Union, the main opposition party in both houses of Congress, responded positively to the bill overall. But some of its leaders said the measure came too late, or contained overly critical language when referring to the holdout creditors and the judges.

The right-wing PRO also called the bill “reasonable.”

“Argentina has to do whatever it can to get the Court to open the case and turn around the sentence,” PRO lawmaker Federico Pinedo told IPS.

He said it was necessary to act “responsibly and in a serious manner, and to send out a message that we want to ensure equal conditions for all of the creditors. That is an argument that holds a great deal of weight with the Court.”

Many legislators, including members of the governing Frente para la Victoria, believe it will be difficult to get the vulture funds to agree to any kind of swap. But they say it is necessary to show a willingness to restructure the debt – as long as it is under conditions set by Argentina.

A recent U.S. court ruling over a fight between Argentina and its creditors on Wall Street will increase global poverty by making it easier for “vulture funds” to seize the assets of indebted nations, according to anti-debt campaigners who are urging the U.S. government to overturn the decision.

In 2001, Argentina suffered an extreme economic crisis that led it to default on nearly 100 billion dollars in debt. Since then the country has settled with 93 percent of its creditors on a plan to pay back about a third of what was originally owed.

The seven percent who are holding out, however, insist that Argentina must pay the full value of its defaulted bonds, despite the fact that many of those now holding those bonds never paid the full value themselves, having purchased the debt in the immediate wake of the 2001 crisis for a fraction of what they are now demanding.

The International Monetary Fund (IMF) has argued that a victory for Argentina’s holdout bondholders would undermine efforts to renegotiate debt held by other nations while also risking another major debt default in Argentina, which could have major consequences for global financial markets."[The case against Argentina] will set a precedent that will just have huge repercussions in terms of global poverty."
-- Eric LeCompte

In a Jul. 23 statement, the IMF said it was “deeply concerned about the broad systemic implications” of the case. The administration of U.S. President Barack Obama has similarly argued that how Argentina handles its debt is a matter of national sovereignty. However, the administration cancelled an IMF plan to side with Argentina in the U.S. legal system, maintaining that such support was premature.

That excuse may no longer hold. On Aug. 23, the U.S. Court of Appeals for the Second Circuit  – the last step before the Supreme Court – upheld an earlier decision that Argentina must pay its bondholders in full, to the tune of 1.3 billion dollars, rejecting claims of negative impacts on global financial markets as “speculative” and “hyperbolic”.

“We believe that the interest – one widely shared in the financial community – in maintaining New York’s status as one of the foremost commercial centres is advanced by requiring debtors, including foreign debtors, to pay their debts,” the court ruled.

The government of Argentina has appealed the case to the Supreme Court. Its creditors, meanwhile, have spent millions of dollars on a lobbying and public relations campaign aimed at increasing the political cost to the Obama administration of siding with Argentina before the high court.

Paul Singer – the billionaire CEO of Elliot Management and a major Republican donor whose subsidiary NML Capital is the lead plaintiff in the legal fight against Argentina – has singlehandedly spent millions of dollars funding right-wing think tanks, pundits and politicians who have painted Buenos Aires as an increasingly lawless ally of Iran, as previously reported by IPS.

The campaign has included position papers and letters from Singer-supported members of Congress suggesting Argentina may even be helping the Islamic Republic develop nuclear weapons.

A victory for Singer and Argentina’s other creditors could make Singer hundreds of millions of dollars. It could also have devastating consequences for the world’s poor.

Increasing profits and poverty

The hedge funds pursuing legal action against Argentina “are profiting off the backs of the poorest people in the world,” Eric LeCompte, executive director of Jubilee USA, told IPS. Wealthy by global standards, those suing Argentina also hold the debt of the some of the world’s poorest nations – and the case against Argentina is crucial to their long-term business strategy.

“Essentially, it will set a precedent that will just have huge repercussions in terms of global poverty,” LeCompte said. Representing a coalition that includes organised labour and hundreds of religious groups and anti-debt campaigners, LeCompte said his group is urging the Obama administration to maintain its support for Argentina in the U.S. legal system while also pursuing a legislative solution in Congress.

If the hedge funds prevail, “poor countries will have less access to credit, and it will be much more difficult to restructure debt,” LeCompte said. If Argentine bondholders successfully hold out for the full value of their bonds, that could encourage the holders of other defaulted debt to do the same, miring indebted nations in poverty.

Even if a nation in default has already renegotiated its debt payments with the vast majority of its creditors, as has Argentina, all it takes is one firm to hold a nation hostage. Instead of funding domestic priorities such as education and health care, developing countries and others facing economic distress could be stuck paying off foreign creditors for a generation or more. The cost of credit for these countries will rise as financial institutions balk at the increased risk of lending.

This has happened before. In countries such as Zambia and the Democratic Republic of Congo, U.S. hedge funds used courts around the world to seize assets of poor nations they claimed owed them money. They are planning to do the same elsewhere.

“These vulture funds have been buying up distressed debt across Eastern Europe, in Greece, in developing countries, waiting for the precedent of this case being set,” said LeCompte. He hoped the Obama administration would not be cowed by the public relations campaign against Argentina and would continue to stand up for the right of sovereign nations to renegotiate their debt, before the Supreme Court and elsewhere.

“If the Supreme Court doesn’t take the case or takes the case and rules against Argentina,” said LeCompte, “we would hope the Obama administration would take executive action to protect the international financial system from this reckless behaviour.”

Paul Singer at the World Economic Forum in Davos, Switzerland, Jan. 23, 2013. Credit: WEF/cc by 2.0

By Charles Davis
LOS ANGELES, Jul 31 2013 (IPS)

Vulture capitalist Paul Singer has hundreds of millions of dollars at stake in his legal battle with Argentina over the country’s 2001 debt default.

The promise of a huge payday has led the Wall Street hedge fund manager to sink a small fortune into a campaign against the South American nation portraying it as a close – and anti-U.S. – ally of the Islamic Republic of Iran. (See series, Part One)

One way he has done this is by issuing press releases through the American Task Force Argentina (ATFA), a trade group he helped found, and buying full-page ads in major newspapers.

Giving money to politicians is another way to affect the debate in the United States.

Senator Mark Kirk, an Illinois Republican, has been a vocal critic of Argentina, writing a letter to the country’s president denouncing her agreement with Iran to investigate the the 1994 bombing of the Asociación Mutual Israelita Argentina (AMIA) in Buenos Aires. That letter was later quoted in an ATFA ad.

As it turns out, Kirk has received more than 95,000 dollars from employees of Singer’s firm, Elliott Management, according to the Centre for Responsive Politics. Indeed, many letters expressing concern about Argentina’s ties to Iran appear are signed by lawmakers who have received campaign cash from Singer and his close associates.

A Jul. 10 letter to Attorney General Eric Holder, for instance, urged the Justice Department not to side with Argentina in its legal battle before the Supreme Court, citing both the AMIA agreement and Argentina’s expanding trade with the Islamic Republic “at a time when the rest of the world (including the United States) is attempting to isolate Iran to pressure it to give up its nuclear programme.”

“Rewarding Argentina’s decision to flout well-established international principles regarding the orderly restructuring of sovereign debt has clearly emboldened its leaders to defy other international norms with impunity,” the 12 lawmakers wrote.

Those who signed the letter received more than 200,000 dollars last year from companies and PACs tied to Singer.

One signer, Congressman Michael Grimm, a New York Republican on the House Financial Services Committee, was reelected to Congress last year after receiving 38,000 dollars from Elliott Management, nearly twice as much as his next largest donor.

Grimm has cosponsored legislation demanding “full compensation” for Argentina’s bondholders – the sponsor of that bill, former Congressman Connie Mack, took in 39,000 dollars from Singer’s company – and has urged the Barack Obama administration to investigate Argentina’s relationship with Iran. ATFA has commended Grimm for his work.

Another lawmaker who signed the letter to Holder is Ileana Ros-Lehtinen, a Florida Republican who chairs the House Foreign Affairs Committee. She accuses the Argentine government of colluding with the Islamic Republic to cover up its alleged role in the AMIA bombing and undermining U.S. interests “by giving Iran a larger footprint in the Western Hemisphere”.

But she isn’t just worried about Iranian-backed terrorism. In a 2012 press release, she said it was “troubling that Argentina refuses to honor its outstanding debts, and evades U.S. court decisions.”

Ros-Lehtinen received 108,000 dollars last year from the American Unity PAC. The PAC was founded in 2012 with a one-million-dollar investment from Singer, accounting for more than a third of the group’s budget.

New Jersey Republican Scott Garrett, chair of the House Financial Services subcommittee on capital markets, also signed the letter to Holder. On Jun. 7, 2012, Garrett held a hearing to address the Obama administration’s support for “deadbeat foreign governments . . . at the expense of our own U.S. investors.”

At the hearing, he decried that “U.S. investors are taking billions of dollars in losses, despite Argentina having the money to pay the bill.”

Garrett received 35,000 dollars from employees at Elliott Management last year, more than all but one of his other campaign contributors.

On Jul. 9, a House subcommittee chaired by South Carolina Republican Jeff Duncan held a hearing entitled “Threat to the Homeland: Iran’s Extending Influence in the Western Hemisphere”, the primary purpose of which was to rebut a recent report from the State Department that said Iran’s influence was on the decline.

Duncan received 10,000 dollars in 2012 from the Every Republican is Crucial PAC, which was heavily supported by the executives of Wall Street hedge funds, including Singer.

At the hearing, Douglas Farah, a former Washington Post reporter turned right-wing foreign policy analyst, testified that Argentina “is rapidly becoming one of Iran’s most important allies.”

He accused the government of Cristina Fernández de Kirchner of taking steps “aimed at absolving senior Iranian leaders of their responsibility in a major terrorist attack,” while also embracing “a series of seemingly irrational economic and political polices that favour transnational organised crime, are overtly hostile to U.S. interests, and could offer Iran a lifeline in both its economic crisis and its nuclear programme.”

That testimony was followed by a Jul. 11 letter to Secretary of State John Kerry, signed by a bipartisan group of politicians, including Singer-supported lawmakers Duncan and Grimm.

The letter, which warned that “Argentina may be seeking to aid Iran’s illicit nuclear weapons programme,” urged the secretary to weigh the Fernández government’s “ties with the world’s leading sponsor of terrorism” when considering whether the State Department will side with Argentina in its legal battle with U.S. hedge funds.

Farah, whose testimony was cited in the letter, wrote a Jun. 26 column for the Miami Herald in which he referred to Argentina’s “increasingly cozy relationship with the ayatollahs,” citing the 2012 Nisman report to claim Iran is using the country as a base from which to conduct intelligence and terror operations with the ultimate goal of “exporting the Iranian revolution”.

The column also asserts that the president-elect of Iran “would have been infinitely familiar with the planning” of the 1994 AMIA bombing, a claim echoed by other right-wing pundits but which Nisman himself rejected a day before the column was published.

The column was co-authored by Mark Dubowitz, executive director of the Foundation for Defence of Democracies (FDD), a neoconservative think tank that has been highly critical of Argentina’s relations with Iran. This year, FDD and its analysts have published more than a half-dozen such critiques.

“Why is Argentina letting Iran examine the 1994 AMIA bombing in Buenos Aires, a crime Hezbollah surely committed?” asked Lee Smith, an editor at The Weekly Standard and fellow at FDD, in a column for Tablet magazine. In The Atlantic, FDD’s vice president of research, Jonathan Schanzer, explored the “dark connections between Argentina’s government and Tehran”.

Since 2008, Singer has given FDD at least 3.6 million dollars, according to a 2011 tax filing seen by IPS.

Conservative connections

FDD is but one of many neoconservative organisations with ties to Singer. Since there aren’t that many neoconservatives to begin with, those who don’t recoil at the label all tend to know each other – and serve on each other’s boards.

William Kristol, publisher of The Weekly Standard, serves on the board of the Singer-funded FDD, as well as the Manhattan Institute, a New York think tank that advocates hands-off capitalism and an interventionist military policy; Singer is the chairman of the institute’s board.

In the small world of neoconservative politics, even when there aren’t necessarily financial ties, everyone still knows each other. Still, there are usually financial ties.

In March, Roger Noriega, another former Bush administration official, wrote a piece with José Cárdenas – another Bush official who now works at Noriega’s consulting firm – calling on the U.S. government to hold Argentina accountable “for its failures to abide by its obligations to international financial institutions” and “troubling alliances with rogue governments”. The piece was published by the American Enterprise Institute (AEI), an influential neoconservative think tank in Washington.

Noriega has been paid at least 60,000 dollars (in 2007) by Elliott Management to lobby on the issue of “Sovereign Debt Owed to a U.S. Company.” A tax filing that was mistakenly disclosed and reported on by The Nation shows that the publisher of Noriega’s piece, AEI, received 1.1 million dollars from Singer in 2009. Filings for subsequent years have not been made public.

Asked to comment, an AEI spokesperson told IPS that the think tank had “looked into the matter” and found Noriega “has no conflicts of interest in this regard”.

The other people and organisations named in this article did not respond to requests for comment.

Money is power

Singer has used his riches the way a lot of other wealthy people do: to get richer, of course, but also to promote what he believes – and fund the politicians and pundits who will promote it too.

At the very least, those who benefit from his generosity are going to think twice about opposing his interests; one doesn’t bite the hand that feeds. Some may even see the money they receive from Singer as a reason to actively promote his interests.

One thing is clear: no matter how his case against Argentina turns out, Paul Singer is going to be a very rich and powerful man. If he wins, though, he will be richer. And money in the United States means the power to shape the debate not just on financial matters, but war and peace.

Excerpt:

By Charles Davis
LOS ANGELES, Jul 29 2013 (IPS)

When Argentina defaulted on its national debt in 2001, U.S. hedge funds swooped in to buy the nation’s bonds at pennies on the dollar, confident they would eventually prevail in the U.S. legal system and force the country to pay out in full.

That battle is set to reach the Supreme Court later this year, but the country’s creditors on Wall Street – labeled “vulture capitalists” by their critics – are also making their case in Congress and the court of public opinion, with a current media campaign aimed at painting Argentina as an increasingly rogue nation in bed with Washington’s enemies.

The public relations effort, which focuses on Argentina’s increasingly friendly relations with Iran, comes as the administration of U.S. President Barack Obama is weighing whether to side with Argentina before the Supreme Court in its battle with Wall Street. According to The Washington Post, officials from the Justice Department, Treasury Department and State Department met Jul. 12 with lawyers from both sides to discuss the case.

In previous court filings, the Obama administration has argued that Argentina’s debt is not a matter for the U.S. legal system, reflecting concerns that a victory for its holdout bondholders could cause another default and complicate future debt restructuring plans for other nations.

However, Argentina’s bondholders, including one of the top financiers of right-wing politics in the U.S., have a string of victories under their belt. In October 2012, a federal appeals court ruled that the South American nation and member of the G20 must pay out more than 1.3 billion dollars to its creditors.

Meanwhile, the International Monetary Fund (IMF) announced Jul. 24 that it would not formally side with Argentina in its U.S. legal battle. An IMF statement cited opposition from the Obama administration.

That the White House is backing away from its earlier defences of Argentina indicates that the millions of dollars U.S. hedge funds have spent lobbying members of the administration, Congress and the press are starting to change the debate, with Iran about as popular as Iraq was in 2002.

“We do whatever we can to get our government and media’s attention focused on what a bad actor Argentina is,” Robert Raben, executive director of the American Task Force Argentina (ATFA), recently explained to The Huffington Post.

An assistant attorney general under President Bill Clinton (1993-2001), Raben’s group was founded by Argentina’s holdout bondholders and, to date, has spent at least 3.8 million dollars on its efforts to paint Argentina in a bad light. But the money it has spent pales in comparison to what ATFA’s funders stand to gain.

In 2008, hedge fund NML Capital – whose parent company Elliott Management, led by major Republican donor Paul Singer, is spearheading the legal and political battle over Argentina’s debt obligations – paid 48 million dollars for bonds that prior to the country’s default had been valued at over 300 million dollars.

After the default, more than 92 percent of Argentina’s bondholders agreed to accept a fraction of what they were originally owed as part of a negotiated settlement. NML, however, insists Argentina pay out the full 370 million dollars, which would be a return of more than 770 percent on the firm’s initial investment.

Singer has done this before, purchasing bonds worth around 30 million dollars from the world’s poorest country, the Democratic Republic of Congo, and suing for repayment of over 100 million dollars. In the case of Argentina, the groups behind ATFA stand to gain more than 1.3 billion dollars.

Including fights going on in other jurisdictions, however, Singer alone ultimately stands to gain more than two billion dollars in his battle with the South American nation. But it’s not just about debt anymore.

A request for comment from ATFA was not responded to by deadline.

Fear of an Iranian planet

Paul Singer is a very rich man – one of the 400 richest in the world. According to Forbes, the hedge fund manager and founder of Elliott Management has a net worth of 1.3 billion dollars. That wealth has enabled him to become one of the top funders of the Republican Party.

In 2012, he gave more than one million dollars to the party’s failed presidential candidate, Mitt Romney, and millions more to those lower down on the ballot. Employees of his firm, meanwhile, gave more than three million dollars to various politicians, making his company one of the top 100 funders of U.S. politics. And those politics are decidedly to the right.

In 2007, Singer described himself as a believer in American exceptionalism, noting that he has given “millions of dollars to Republican organizations that emphasize a strong military and support Israel.” Speaking to the New York Times, Singer explained that he believes the West “finds itself at an early stage of a drawn-out existential struggle with radical strains of pan-national Islamists.”

In the case of Argentina’s relations with Iran, which have grown to more than one billion dollars per year in trade, he finds his financial interests and fear of radical Islam perfectly aligned: by stoking fear of the latter, the U.S. government may be less inclined to interfere with the former.

“What’s the TRUTH About Argentina’s Deal With Iran?” asks a recent full-page ad from ATFA placed in The Washington Post. The deal in question concerns an agreement announced by the governments of Argentina and Iran to open a “Truth Commission” examining the 1994 bombing of a Jewish community centre in Buenos Aires, the Asociación Mutual Israelita Argentina (AMIA), which killed 85 people and injured more than 300.

Another ATFA ad featuring photos of Argentina’s president Cristina Fernández de Kirchner and outgoing Iranian president Mahmoud Ahmadenijad poses the question: “A Pact with the Devil?”

A 2006 report from Argentine prosecutor Alberto Nisman fingered Iran as the culprit, allegedly using the Lebanese group Hezbollah as a proxy. That led to INTERPOL arrest warrants being issued for several high-level Iranian officials.

An updated 2013 report from Nisman, oft-cited in the media campaign against Argentina, claimed the attack was but one piece of evidence for the existence of an extensive Iranian intelligence apparatus throughout South America that has only grown since the AMIA attack, a conclusion that contradicts the US State Department’s recent assessment that any influence Iran had in the region is now “waning”.

No one has ever been convicted in the AMIA case, which has been hampered by a botched prosecution and judicial corruption. Concerns have also been raised about the veracity of Nisman’s report, which claims Iran’s Supreme Leader, Ayatollah Khamenei, approved the bombing at a meeting in Tehran just months prior to the attack, a finding that is based on the testimony of a former Iranian intelligence official known as Aboghasem Mesbahi who defected from the Islamic Republic in 1996.

That defector previously told U.S. officials that Iran had funded and facilitated the Sep. 11, 2001, terrorist attacks in New York and Washington, claiming he was made aware of the authorisation by secret messages in newspapers. His testimony was dismissed by the 9/11 Commission.

In its ad, ATFA quotes a letter from Senators Kirsten Gillibrand, a Democrat from New York, and Mark Kirk, a Republican from Illinois, to President Kirchner expressing concern that the opening of the commission “will lead to a dismissal of charges and the whitewashing of this heinous crime”.

The ad also quotes a defiant Iranian politician stating that under “no circumstances” will the Islamic Republic allow its senior officials to be questioned by any Argentine judges or prosecutors.

Though not mentioned in the ad, Iran’s refusal to submit to the Argentine legal system is the ostensible reason for the “truth commission”, which would create a panel of independent jurists from third-party nations to assess the case and, alongside Argentine jurists, interview suspects in Iran.

The details of Argentina’s relationship with Iran – which consists mostly of agricultural exports – are not terribly important to ATFA, however. Instead, as its executive director put it, that group would simply like to know: “Why is Argentina willing to negotiate with Iran, but not with its law-abiding creditors?”

Argentina has of course successfully negotiated with nine out of 10 of its creditors. But the holdouts, led by Singer, think they can get the whole pot. (See series, Part Two)

Excerpt:

The fate of countries with major debt problems is at stake in federal courts in New York, which are to decide in April whether or not they accept Argentina’s proposal to the bondholders who rejected two restructurings of sovereign debt.

Since Argentina defaulted on nearly 100 billion dollars in debt in late 2001, close to 93 percent of the bonds have been restructured at a deep discount, with lower interest rates and at longer terms.

But a group of hedge funds that refused to participate in the 2005 and 2010 restructurings sued for full payment of 1.3 billion dollars in Argentine bonds in federal court in New York.

On Tuesday, the 2nd U.S. Circuit Court of Appeals in New York declined to grant a full-court rehearing of a decision by a three-judge panel that went against Argentina in October, ruling that this country had to deal with all of its debt holders equally.

The suit not only threatens to return Argentina’s debt restructuring process to square one. Experts warn that it could have an impact on the decision-making capacity of other countries that run into severe financial difficulties at times of global crisis.

The government of centre-left President Cristina Fernández has until Friday Mar. 29 to present a solution for making the payments to the hedge funds.

The government says it will offer the holdouts the same conditions as the ones accepted by the rest of the creditors in the 2010 restructuring: discounts, lower interest and longer terms.

But that would involve a new debt swap, which would require congressional approval because a law passed after 2010 banned the reopening of debt restructuring.

Argentina is now financially stable and makes its debt payments on time, despite the fact that it lost access to global credit markets after the December 2001 default, which was announced in the context of an economic and social meltdown.

According to the latest report by the Economy Ministry, as of mid-2012 Argentina holds 183 billion dollars in debt, equivalent to 41.5 percent of GDP, one of the lowest proportions in Latin America. The report did not include the defaulted bonds.

Up to now, the Fernández administration had refused to settle with the hedge funds, referring to them as “vulture funds” – opportunistic investors who purchase the debt of heavily indebted countries cheap and then sue for full repayment.

The lawsuit in New York is led by hedge fund billionaire Paul Singer’s Elliott Management. The hedge funds acquired the Argentine bonds at 20 to 30 percent of their nominal value.

If the courts finally come down on the side of the hedge funds, Argentine assets could be embargoed internationally.

Some experts in Argentina believe the U.S. court will accept the Fernández administration’s proposal, in order to put an end to the dispute and to defend the credibility of global payment systems.

But others are more sceptical.

Fernando Porta, an economist with Centro Redes, a research institute in Buenos Aires, told IPS that if the courts in New York refused to recognise Argentina’s restructuring proposal, “a huge level of uncertainty would be introduced in the system.”

“The potential negative impacts would go beyond Argentina and would throw into question the operation of the international debt restructuring system when countries are having trouble meeting their payments,” he said.

Porta said that with respect to debt restructuring, there are no multilateral agreements setting rules, but merely precedents that give the process predictability.

For that reason, he believes Argentina’s proposal “will be accepted in the end,” although several other obstacles may have to be overcome first.

But analyst Fausto Spotorno with the Orlando Ferreres y Asociados consultancy was less optimistic. “I don’t think this proposal will be accepted by the holdouts,” he said.

In Spotorno’s view, the New York appeals court is unlikely to accept Argentina’s offer if it does not have unanimous support among the creditors. “The holdouts have the first-instance ruling in their favour, which means they aren’t going to accept a proposal with discounts and longer terms now,” he said.

The analyst said it was naive to believe that the court would take into account the impact that its decision could have on future cases of debt restructuring. “New bond issues contain clauses that prevent this problem,” he noted.

He was referring to collective action clauses (CACs), first proposed by Mexico in 2003, which since then have been included in bond issues to facilitate eventual restructuring.

CACs allow a majority of bondholders to agree to a legally binding debt restructuring. By forcing potential holdouts to accept the restructuring if a large majority of other creditors do so, it provides protection against vulture funds.

The clauses were used controversially by Greece in 2010, when it introduced them retroactively to restructure the country’s debt and avoid default, according to “Un ensayo sobre las Cláusulas de Acción Colectiva”, a paper on collective action clauses published in Mexico.

The study, published this year by Mexican economists Alejandro Castañeda and Pablo Newman in the Gaceta de Economía journal, says the new mechanism became widely used as a result of the threat posed by opportunistic creditors in the cases of Argentina and Peru.

The European Union has required the inclusion of CACs in all new eurozone bond issues since January.

But they had already been incorporated by most countries in Latin America and other regions, with varying minimum percentages of support required from bondholders.

In their report, the Mexican academics point out that the bonds issued by Argentina in its debt swaps contain CACs, but older rules requiring unanimous acceptance of new conditions apply to the bonds held by the holdouts.

Under the older rules, if one single bondholder rejects the proposed new financial terms, the process can be blocked by litigation which, if successful, can also benefit the rest of the bondholders – and seriously affect the state issuing the bonds.

But there are still countries with bonds issued in the 1990s that would be affected by a resolution against Argentina.