Argentina is likely to default barring a last-minute breakthrough in negotiations with hold-outs or a court order. Argentina's grace period to pay bonds restructured after its 2001 default expires July 30th. United States District Judge Thomas Griesa ruled Argentina cannot pay the 92% of restructured bond holders unless Argentina also pays hold-out predatory hedge funds in full.
"Argentina is hours from default," said Eric LeCompte, Executive Director of the religious financial reform organization, Jubilee USA Network. "At this point, a deal seems unlikely. Argentina may decide that the cost of default is less than the cost of compliance."
Representatives from Argentina and the hedge fund, NML Capital, continue to meet with court-appointed mediator Daniel Pollack in an attempt to negotiate a settlement.
"At issue in the court's ruling is the question of parity," shared LeCompte. "The International Monetary Fund and the US Justice Department argue that the hold-outs should be paid the same amount that the 92% of restructured bond holders agreed to be paid."
The International Monetary Fund noted that the court's ruling could make it more difficult for countries to restructure their debts by making it more attractive for creditors to hold-out. The US government filed a brief on behalf of Argentina before the US Circuit Court of Appeals, arguing that a ruling in favor of the hold-out creditors would harm core US debt policy. The US government also argued that a ruling against Argentina might harm New York's standing as a global financial center as countries seek to sign debt contracts elsewhere to avoid the precedent set by this case. In June, the US Supreme Court refused to hear an appeal on the case. The court ruling could also impact related cases in New York concerning Grenada and the Democratic Republic of Congo.
"The impact of this case is global," said LeCompte, who serves on expert groups related to the case at the United Nations. "Argentina is the first victim from the court's ruling. It looks like Grenada and the Democratic Republic of Congo may be the next victims."
Read a history and timeline of the case. http://www.jubileeusa.org/truth-about-debt/vulturefunds/argentina.html
Read Jubilee's USA's filing urging the Supreme Court to take case. http://jubileeusa.org/fileadmin/13-990__-991_Amici_Brief_filed_3-24-14.pdf
Jubilee USA Network is an alliance of more than 75 US organizations, 400 faith communities and 50 Jubilee global partners. Jubilee's mission is to build an economy that serves, protects and promotes participation of the most vulnerable. Jubilee USA has won critical global financial reforms and more than $130 billion in debt relief to benefit the world's poorest people. www.jubileeusa.org