Holders of Argentine debt to take 70% 'haircut'

[Say_What]

<clips>

NEW YORK, BUENOS AIRES -- Wall Street grudgingly accepts that up to 80 per cent of holders of defaulted Argentine debt could cash in their paper for new bonds by today in what will amount to the biggest sovereign "haircut" in modern history.

But analysts and investors warn the estimated 70-per-cent loss of net present value on about $102-billion (U.S.) in principal and past-due interest from the country's 2002 default will set a dangerous precedent for future sovereign restructurings.

"The apparent lesson of the Argentine restructuring is that governments can dictate whatever terms they want on bondholders, independent of their capacity to pay," Walter Molano, head of research at BCP Securities, a Latin American broker-dealer based in Connecticut, wrote in a research note. "Finance ministers across the emerging markets are having second thoughts about making fiscal sacrifices in order to continue servicing their external obligations."

Argentina is offering about $41-billion of new bonds to replace about $102-billion of defaulted debt and interest.

http://www.theglobeandmail.com/servlet/ArticleNews/TPStory/LAC/20050225/IBARGENTINA25/TPBusiness/International

[gratuitous]

1. "Governments can dictate whatever terms they want"

Oh boy, that's a hot one! For years, countries have had their fiscal policies dictated to them by the World Bank and the International Monetary Fund, regardless of the impact it had on their citizens, just so that the investors don't take a bath.

Now, Argentina finally says "Enough!" And the rapacious investors glumly pronounce that it's all the fault of the governments that they can plunder societies anymore . . .

[KittyWampus]

2. Haircut?

[Joe Turner]

23. Yes, that's no Haircut, Scalped is the better word n/t

[HuckleB]

3. Good for Argentina...

Why do investors think they can do whatever they want to countries, while taking on no risk whatsoever? They've been using debt to control nations for far too long. It's time that the people of those nations, who are the ones who suffer, take control. It appears that this might be happening in Argentina.

[Tempest]

4. A warning to China and Japan

Bush is capable of doing the same thing and since China and Japan are the largest holders of U.S. debt, they should be very nervous about now.

[Zenlitened]

12. Exactly. How long until the headline reads "USA Bails On Debt"? - n/t

[bemildred]

5. Financial colonialism takes one in the chops.

Attaboy Nestor.

[Judi Lynn]

6. How much did George H. W. Bush's friend, Carlos Menem contribute

to Argentina's financial hardships?

Menem’s ‘Disneyland’

First Page - by Uki Goñi - Buenos Aires - 9 March 1997

One international runway in the middle of the desert. One professional golf course so secluded it is visible only from the air. A mountain hideaway with exotic fauna and an artificial lake. A palatial home with sauna, gym, swimming pool and tennis court. Most of it financed with private “donations” for the exclusive enjoyment of President Carlos Menem of Argentina, in his home town of Anillaco, population 900, a lonely, sleepy hamlet in the sparsely populated province of La Rioja, in the Andean foothills of northern Argentina.
DISNEYLAND

“Menem is building himself a private Disneyland in Anillaco,” says Roman Lejtman, the investigative journalist who put together a television report on Menem’s regal domains which has shocked Argentina. “He can hunt, play tennis, golf, all next to a runway which can accommodate Boeing 737s.”
Once the Anillaco runway is completed in about two weeks, Menem will be able to descend almost directly from the flight ladder of his presidential jet Tango 01 to the backyard of his new 750-square metre mansion.

From there it is only a short helicopter hop to his mountain refuge, where he can fish in an artificial lake, hunt for the exotic species which he has received as gifts from fellow heads of state on his foreign travels and later rest on a bedspread made of fox furs.

Or he could swing his club on an 18-hole golf course, built in the middle of nowhere. “We had to fly by plane to reach the golf course,” says journalist Lejtman.

Most amazing of all is the runway itself, built for a town of only 300 homes, but the same size as the main runway for the city airport of Buenos Aires, Argentina’s capital, with twelve million inhabitants.
(snip/...)

http://ukinet.com/media/text/anilla1.htm

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

...The current problems of Argentina started with the corrupt and now extremely wealthy ex-president Carlos Menem. Carlos Menem had very close ties with both George Bush Sr. and Bush Jr. as well as with Enron Corporation through a gas pipeline deal in Argentina. Menem's friendship with Bush Sr. helped Argentina get credit from the IMF. President Menem was popular at first because he was sustaining the Argentinean economy with borrowed money from the international money lenders. The Argentinean people did not know, however, that he was "hocking" the nation. The high interest rates that the international "loan sharks" demanded eventually started piling up on the country. Carlos Menem and his close-knit network of other corrupt politicians and "paper-pushing" bureaucrats meanwhile lived high-on-the-hog and to this day are some of the wealthiest people in South America. The tab is now left for the Argentinean people to pay. This is not much different to what happened to the Enron employees. Many lost all their retirement funds but the executives made billions of dollars which are now in Swiss and other secret bank accounts.
(snip/...)

http://www.aztlan.net/imfsharks.htm

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

News articles - Argentina


CNN.com March 18/2004
Argentina calls for France to aid in corruption probe

Geneva: Cash-strapped Argentina needs more help from rich nations to track tens of millions of dollars allegedly stashed abroad by former President Carlos Menem and his associates, the country's justice minister said Thursday.
Noting Switzerland's cooperation in two cases related to Menem's 1989-1999 rule, Gustavo Beliz said he hoped neighboring France would likewise act soon to investigate claims of accounting irregularities and bribes involving an Argentine subsidiary of the French defense firm Thales.

"It's not just a question of getting the money back," Beliz said. "Tracing the route taken by the money will enable us to get to the heart of corruption in our country. We expect developed countries to help us."
(snip)

Menem has consistently denied corruption allegations, saying they are politically motivated.

Bank accounts belonging to Menem and his associates – containing just under $10 million – have been frozen in Switzerland for the past 2½ years, as Swiss authorities investigate two separate cases.
(snip/...)

http://www.odiousdebts.org/odiousdebts/index.cfm?DSP=content&ContentID=9771

...Over the years, Menem was also a frequent guest of the Bushes. In 1995, for example, he received an honorary degree from the University of Houston, a Bush family fiefdom. Former President Bush introduced him as "a visionary" and told the audience that he had enjoyed working with him from the first time they met. In December 1999, Menem met with George W. Bush in Austin, shortly before Bush launched his presidential campaign; the elder Bush joined them at an Austin country club for a round of golf.

When George W. Bush was inaugurated, Menem was the only Latin American politician in attendance. The elder Bush had hand-delivered the special inaugural invitation to him during lunch at a fancy Las Vegas restaurant a few days earlier. (Both men were in town to attend the Safari Club International hunters convention.)

Menem and his girlfriend, the former Chilean Miss Universe, Cecilia Bolocco, were also special guests at a private pre-inaugural party thrown in Washington, D.C. by James P. Baker in honor of former President Bush. Gente, the Buenos Aires version of People magazine, breathlessly reported that the party was attended by "1,800 members of the Republican elite." Menem and Bolocco were married two weeks ago in Argentina.

During Menem's presidency his close personal ties with former President Bush and his clan were mirrored by Argentina's close alignment with the United States, which Menem's foreign affairs minister felicitously described as "carnal relations."

Menem, who wants to run again for President in 2003, and his Peronista party supporters, were banking on the Bush-Republican connection, among other things, to bulldoze over De la Rúa's shaky center-left coalition. But all that is beginning to look like a gauzy dream. The State Department's distancing act earlier this week may well signal that the Bushes are as adept at dropping old friends who have outlived their usefulness, as they are at cultivating them.
(snip/)

http://www.globalresearch.ca/articles/SIM202A.html

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Don't Cry for Bush, Argentina

.....Shortly before Bush announced his own campaign for president, he had received a visit from Carlos Saul Menem, the right-wing leader of Argentina for the past decade. The two men retired to an Austin country club, where they were joined by Bush's father. Governor Bush had the flu, so he contented himself with riding along as the former president and Menem played a round of golf.

The capitol press corps trailed along, dutifully recording the governor's cordial relationship with a visiting head of state. Unknown to the assembled reporters, however, was the story of how Bush and his family became immersed in Argentine politics. The little-known tale begins with George W. making a phone call to secure a $300-million deal for a U.S. pipeline company -- a deal that provoked a political firestorm in Argentina, drawing scrutiny from legislators and a special prosecutor. The episode marked one of George W.'s first ventures into foreign affairs, demonstrating the fundamental rule by which the Texas governor and his family conduct business: Always know that the Bush name is a marketable commodity.
(snip/...)

http://www.motherjones.com/news/feature/2000/03/argentina.html

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

From the August 2001 issue of World Press Review (VOL. 48, No. 8)

Argentina: Menem Under Arrest
Robert Taylor

The June 7 court order confining former President Carlos Menem to house arrest has transformed the inquiry into illegal Argentine arms shipments during the 1990s into a landmark test of the nation’s judicial independence and democratic institutions.

With federal Judge Jorge Urso’s ruling to detain the former president pending further investigation into his role in covert Argentine arms sales to Croatia in 1991 and Ecuador in 1995, “Menem becomes the first ex-chief executive who has been imprisoned in Argentina during a democratic period as the result of a judicial case investigating acts of corruption,” reported the center-left Clarín of Buenos Aires (June 7).

Menem’s house arrest marked the climax of a lengthy investigation that has produced testimony and documentary evidence linking high officials in his administration to the illicit arms sales by the government-controlled Fabricaciones Militares. The inquiry also has led to the jailing of presidential adviser Emir Yoma, former Defense Minister Antonio Erman González, and former army chief of staff Gen. Martín Balza.

Buenos Aires’ conservative La Nación (June 5) reported that a “visibly dejected” González conceded in early June that the orders authorizing the arms sales constituted executive branch decisions. A central allegation in the case against Menem, La Nación added, is that “the maneuvers were carried out under the shelter of three secret presidential decrees signed by Menem and his ministers in 1991 and 1995, which established that the arms were going to Panama and Venezuela when, in reality, they were shipped to Croatia and Ecuador.”
(snip/)

http://www.worldpress.org/Americas/151.cfm

[ozymandius]

7. Sounds like a familiar M.O.

President Menem was popular at first because he was sustaining the Argentinean economy with borrowed money from the international money lenders. The Argentinean people did not know, however, that he was "hocking" the nation.

41 and 43 seem to be following his example.

[Up2Late]

8. (BBC) Argentina closes $102.6bn debt swap

(America, this could be you, soon):evilfrown:

Friday, 25 February, 2005, 18:01 GMT

Argentina is set to close its $102.6bn (£53.51bn) debt restructuring offer for bondholders later on Friday, with the government hopeful that most creditors will accept the deal.

The estimated loss to bondholders is up to 70% of the original value of the bonds, yet the majority are expected to accept the government's offer.

Argentina defaulted on its debt three years ago, the biggest sovereign default in modern history.

The country is set to announce the

take-up of its offer by 1 or 2 March.

It has been in default on the $102.6bn - based on an original debt of $81.8bn plus interest - for the past three years.
(more at link)
<http://news.bbc.co.uk/2/hi/business/4299005.stm>

[cascadiance]

9. Buy or rent "The Take" for more info on this story...

A great documentary by Canadians Naomi Klein and Avi Lewis!

"Occupy! Resist! Produce!"

Really speaks to the heart of a need for grass roots efforts to fix things when they're bad and get rid of jerks like Mennem.



Official web site is at:
http://www.nfb.ca/thetake/

The DVD's a bit hard to find, and it's equally hard to find local theatrical showings too, but you can get it at www.amazon.ca (current sales rank there is #162) at:

http://www.amazon.ca/exec/obidos/ASIN/B0006I0RPO/qid=1109357374/ref=sr_8_xs_ap_i1_xgl/702-2590800-2116846

and Canada's cinemaclock.com at

http://www.cinemaclock.com/aw/cdva.aw/p.clock/r.ont/m.Toronto/j.e/i.7356/n.1/THE_TAKE.html

Not sure if it isn't licensed yet for U.S. distribution or not yet, but that didn't stop me from getting a copy from Amazon.ca when they still had some coupons left.

American Samizdat at it's best!!

[daleo]

10. Kind of surprising, to see investors shorn.

Usually the people of the country would get it first. One suspects that investors "in the know" had a nice long opportunity to get out first.

How long until world investors get a "bush-cut"?

[bemildred]

11. They are getting the Bush Cut now.

The decline in the dollar has the same effect, so they are already
holding the bag for a 30-35% loss. Inflation and currency declines
are the classic way to dispose of unwanted debt, and this is not the
first time our goverment has resorted to such methods.

[Zenlitened]

13. Would simply printing more money have the same effect?

I half-suspect that's in the cards from the Bushies, too. :scared:

[bemildred]

16. They are doing that too, but that is mechanism, not purpose.

Greenspin has had them running full bore ever since Shrub was
first selected.

[daleo]

14. That's true.

Slow and steady gets the job done, I guess.

[Up2Late]

20. 30-35% loss?! Try 65-70%

The Euro hit $0.82 to the Dollar, on October 26, 2000 (Selection day was November 7, 2000). Then the European Central Bank tried to prop up the Euro, but it started to fall again, just before the selection, and it's (the U.S. Dollar) been on a fairly steady fall, ever since.

And don't think for second that it hurt "The Rich" and the big time investors, in this country, anyone who is still rich, has long had their Millions and Billions invested an locked away in European and "off Shore" banks for years now.

Warren Buffet has already moved $20 Billion to the Euro.

[bemildred]

21. I was only looking back about two years.

That's what I have convenient access to.

But OK, call it $1.30 now. You have $1.30 - $.82 = $.48.

And 130/82 = 1.59, so the Euro has appreciated 59% relative to the
dollar, and the dollar is worth 1/1.59 = .63 = 63% of what it was
then, relative to the Euro, so it has lost 37% of it's value.

If you look back two years, the Euro had gone from around a dollar to
around $1.30, so it's appreciated around 30% relatively speaking. That
is the number I was thinking of. That would give 1/1.30 or a 23% loss
for the dollar.

[Up2Late]

22. I under stood where you got the 30%, but on the 4 yr #, you're not ...

...doing the math correctly.

$.82 x .60 (60%)=0.492
$0.49 + $0.82 =$1.31

Euro peaked (so far) at $1.36

$0.82 x .66 (66%) = 0.5412

$0.54 + $0.82 = $1.36

I wasn't very good at Math, but I'm pretty sure that's how you figure Percentages.

[bemildred]

24. That's the "1.59" part.

The Euro has gone up about 60%. The decline in value
of the US$ is the inverse of that. The percentage decrease of the
dollar is not that same as the percentage increase of the Euro.
They are inverse to each other.

If the Euro is worth $.82, the dollar is worth 1/.82 = 1.22 Euros.
If the Euro is worth $1.30, the dollar is worth 1/1.30 = .77 Euros.
.77/1.22 = .63 or 63%, so it's lost 37% of it's value relative to the
Euro (100% - 63%).

The inverse of .63 is 1.59, which is the number you have.

[SoCalDem]

15. Perhaps the indebted American Middle Class is ready for a "haircut"

The middle class "splurge" is all that's keeping the economy above water, so maybe we should be asking oour own government for a haircut..

Imagine how well off your own budget would be if you could "settle" your debt for 30 cents on the dollar.. That's a deal MOST people would take :)

[bemildred]

17. They got a good "haircut" when the market tanked a couple years ago.

This is essentially the same thing, a loss on an investment,
but these big shots think it's not suppose to happen to them.

[lovuian]

18. Take a good look at Argentine cause it could be the US!!!

Their Politicians stole all the peoples money!!!

[Say_What]

19. Argentina Squares Off With International Financiers

<clips>

President Nestor Kirchner of Argentina is locked in a standoff with the International Monetary Fund on the third anniversary of a popular uprising. Just before Christmas, 2001 protesters surged through the streets of Buenos Aires demanding that the entire political class and its international financial backers be tossed out. The IMF along with private banks like the Bank of Boston and Citibank were denounced for their role in the country’s economic crisis. In less than two weeks the country had five presidents.

Argentina became a caldron of social ferment. In neighborhoods and municipalities, 'popular assemblies' emerged to debate issues and to protect local interests. Some assemblies have urged people not to pay their property taxes and instead to turn the revenue over to neighborhood hospitals.

The assemblies also discuss international issues. According to assembly organizer, Lidia Pertieria: 'One of the rallying cries coming from our communities is "no more foreign loans". New loans only mean more swindling and robbery by our government officials.'

The piquetereos, or picketers, are the most persistent and intransigent of the protesters. Comprised of the underclass that is suffering the brunt of the country’s unemployment rate that has officially reached as high as 20 per cent, they pour into the streets, blocking traffic, demanding jobs, government help for their families, and land to grow their own food.

...Kirchner and the IMF have fought fiercely over the terms of new loans and the repayment of the country’s international debt. In an agreement with the IMF last year, he insisted that no more than three per cent of the budget would be used to pay down the debt. The poor and unemployed had to be a priority – as well as public investment. The IMF reluctantly agreed to these terms. Since then the Argentine economy has bounced back and is on track to post an 8 per cent growth rate in 2004. Now the Fund wants to increase the country's debt repayments, citing increased growth as a reason to siphon more money from the economy.

http://www.zmag.org/content/showarticle.cfm?SectionID=42&ItemID=6906