Revealed: The vulture capitalists willing to destroy a nation for a good return

Nick Dearden reveals the vulture funds that are willing to bring Argentina back to the brink for a return on their 'investment'.

 

One could be forgiven for thinking the BBC had a crusade against Argentina, now that it’s the run-up to the anniversary of the Falklands War. Nick Dearden, of the Jubilee Debt Campaign, writes about this morning on the Today programme, when a representative of a group of vulture funds was invited, unchallenged, to attack the country.

Nancy Soderberg represents the American Task Force Argentina, a group of ‘hold-out investors’ who refused to take the deal offered to them by the Argentinean government when that country defaulted on its debt in 2001. These investors include vulture funds, who bought Argentine debt once the country had already gone into crisis, precisely in order to profit from the misery of Argentina’s people.

Back in 2001, Argentina was in a situation much like that of Greece today.

Its debts were completely unpayable, its economy was in turmoil and a large section of its population had been pushed into poverty. Argentina was following a set of policies laid down by the International Monetary Fund which had sent things from bad to worse.

Despite three years of recession, the economy kept contracting. Over half the population – 20 million people – was living below the poverty line.

Under current international law, a country cannot go bankrupt because, unlike a company or individual, a state can theoretically go on squeezing its people and resources forever. But at Christmas 2001, the people of Argentina said enough was enough.

The government lost control of the country and, in a scene reminiscent of the streets of Greece today, President de la Rua had to be flown out of the government palace in a helicopter. Over those two weeks, Argentina had five Presidents, and defaulted on its debts.

Despite the claims of Soderberg, default was undoubtedly the right thing to do. After several years of stagnation Argentina’s economy started growing within a few months. Argentina became the fastest growing economy in the Americas. Eleven million people were pulled out of poverty and unemployment more than halved in the successive 5 years.

After default, Argentina offered its bondholders a deal – new bonds of lower value in exchange for the old bonds they held; in effect a steep discount on the amount owed. Many took the offer, but the American Task Force Argentina represents those that did not; wanting to be repaid in full on the reckless loans they had made.

One of these companies, NML, recently took court action against Argentina in London. NML, based in the Cayman Islands, has been harassing Argentina through foreign courts for years.

It is a subsidiary of Elliott Associates, a US hedge fund that pioneered ‘vulture fund’ activity by winning a case against Peru in the 1990s, getting back 400 per cent of what they paid for Peru’s debt.

There is no moral legitimacy to the company’s claims against Argentina, because it bought Argentina’s debt for only half its face value in the full knowledge that Argentina was in crisis and would likely default.

Argentina’s recovery could only happen by some of Argentina’s creditors taking a write down.

Financial investment always involves risk. When investing in a company, bankruptcy means investors are unlikely to get their money back. The creditors who have least right to complain are those like NML who bought the debt on the secondary debt market in full knowledge of the default.

They play a high-risk game at the expense of people in countries like Argentina. In this case the vulture funds got what they deserved.

But the American Task Force Argentina is still helping companies like NML by persuading the US government – and now it seems the UK government as well – to apply diplomatic pressure to Argentina to come to a settlement on this dodgy debt.

Their activities include pressuring governments to ensure no World Bank funds are given to Argentina and trying to throw Argentina out of the G20. In other words, they aim to capture foreign policy in order that this handful of creditors get paid.

In confronting this strategy, we should ask how Argentina’s debt became so enormous in the first place. Surely Argentina bears some responsibility? In an article in the Daily Telegraph, Soderberg points out that it is not only private investors who claim Argentina owes them money. The UK and other Western countries do too.

To understand this we have to go back to before the Falklands War, when countries like the UK seem to have had no problem lending money to Argentina.

This was a period when Argentina was run by a brutal dictatorship which conducted a ‘dirty war’ against its own people. 30,000 people were ‘disappeared’ in this period, but loans flowed into the country, fuelling military spending, speculation and capital flight.

A court case in 2000 found that loans to Argentina under the dictatorship were part of:

“A damaging economic policy that forced [Argentina] on its knees through various methods … and which tended to benefit and support private companies – national and foreign – to the detriment of society.

In the years before the Falklands War, the UK was actually selling goods and running up debts to this regime that they would soon be fighting. These loans should not have been given and the debt should not be repaid. They are the responsibility of Western governments and banks, not the Argentine people.

However, Argentina did repay substantial amounts of these debts – and this is a key reason why it began running up new debts in the financial markets throughout the ‘80s and ‘90s.

US banks benefited handsomely from the indebtedness of the ‘dirty war’. And they continued to benefit as the debt was recycled through bonds – such as the bonds owned by companies represented by the American Taskforce.

I doubt many people would be sympathetic to Nancy Soderberg had they received the full story this morning. But the BBC seem unable to accept that there can be more than one perspective when it comes to covering Argentina at the moment. Their patriotism about the Falklands is clouding their minds when it comes to everything else.

See also:

Greece is a smokescreen to hide the mother of all bank bailoutsNick Dearden, February 21st 2012

The Left has to raise its voice on the FalklandsJames Hallwood, February 12th 2012

Public sector pensions no more gold-plated than those in private sectorNigel Stanley, November 28th 2011

How the bond markets shackled European democracyGeorge Irvin, November 15th 2011

Is it really best if Greece goes bust?Ben Fox, June 22nd 2011

40 Responses to “Revealed: The vulture capitalists willing to destroy a nation for a good return”

  1. TUCGlobal

    Revealed: The vulture capitalists willing to destroy a nation for a good return: //t.co/jb4Gl9wg by @dropthedebt's Nick Dearden

  2. Marcus A. Roberts

    Revealed: The vulture capitalists willing to destroy a nation for a good return: //t.co/jb4Gl9wg by @dropthedebt's Nick Dearden

  3. Foxy52

    Revealed: The vulture capitalists willing to destroy a nation for a good return: //t.co/jb4Gl9wg by @dropthedebt's Nick Dearden

  4. Martin Steel

    Revealed: The vulture capitalists willing to destroy a nation for a good return: //t.co/jb4Gl9wg by @dropthedebt's Nick Dearden

  5. leftlinks

    Left Foot Forward – Revealed: The vulture capitalists willing to destroy a nation for a good return //t.co/cOPUrhSn

  6. Political Planet

    Revealed: The vulture capitalists willing to destroy a nation for a good return: Nick Dearden reveals the vultur… //t.co/xo5v36Gb

  7. Pulp Ark

    Revealed: The vulture capitalists willing to destroy a… //t.co/bzWMmujd #Sustainable_Economy #Argentina #bailout #muslim #tcot #sioa

  8. Patron Press - #P2

    #UK : Revealed: The vulture capitalists willing to destroy a nation for a good return //t.co/4AkAUt8Q

  9. Anonymous

    No blame at all for the politicians that took the money, promised to pay, spent it, and then said, nah nah, yah boo sucks, we’re not paying it back.

    If you borrow money you should pay it back.

    If you borrow money with no intention of paying it back, you are a fraudster.

    If you borrow money, and don’t pay it back, then the lenders have a right to your assets.

    If a government borrows money and doesn’t tell the population, then the government are criminals.

    It’s the same in the UK.

    Is the UK government going to pay off its debts? If the answer is yes, tell us how the 7,000 bn is going to be paid, and who pays how much. If the answer is that it won’t pay its debts, tell us who the criminals are.

    Tell us where the state pension appears in the government accounts. If it doesn’t, then the governments are crooks because they have taken money up front for the state pension. It doesn’t appear, politicians like you are crooks.

  10. Thomas Goodwin, G.G.

    #UK : Revealed: The vulture capitalists willing to destroy a nation for a good return //t.co/4AkAUt8Q

  11. JubileeDebtCampaign

    Revealed: The vulture capitalists willing to destroy a nation for a good return: //t.co/jb4Gl9wg by @dropthedebt's Nick Dearden

  12. Nadia Idle

    Revealed: The vulture capitalists willing to destroy a nation for a good return: //t.co/jb4Gl9wg by @dropthedebt's Nick Dearden

  13. Nick dearden

    Revealed: The vulture capitalists willing to destroy a nation for a good return: //t.co/jb4Gl9wg by @dropthedebt's Nick Dearden

  14. javier alvarez cobb

    #UK : Revealed: The vulture capitalists willing to destroy a nation for a good return //t.co/4AkAUt8Q

  15. Selohesra

    Spend recklessly and then default – is that where Gordon got his master plan?

  16. Selohesra

    Would this be the same Argentina that is G20 country and has> $50Bn in reserves?

  17. Blarg1987

    We as the electorate did shoot ourselves in the foot in all honesty, we had two parties, one saying low taxes the other saying better services and low taxes, if they said better services and higher taxes they would not have got in as we are too greedy.

    Bear in mind at the time our infastucture NHS Schools etc needed massive amounts of investment now people are naturally selfish so we would have cut of our nose to spite our face.

    Is it wrong to mislead people yes, do people need to change their atitudes and listen to facts instead of politicians who will tell them hat they want to hear of all parties, yes they do, this needs all goverments to be open about spending plans and have credible policies.

  18. PAIRSonnalites | ES

    Back in 2001, Argentina was in a situation much like that of Greece today. Its debts were completely unpayable, … //t.co/Ki3E5Uur

  19. PAIRSonnalites | ES

    //t.co/pHtXURBI: Back in 2001, Argentina was in a situation much like that of Greece today. Its debts were… //t.co/lfrRkVaH

  20. Eldiablo

    The mixture of morality and economics here really doesn’t work…in fact, it isn’t really clear what the core argument is apart from a general disgust with money. The point is if they didn’t want the trouble that they got, they should not have issued it under international law. It is also strange to criticize “vulture funds” (whatever they are) when Argentina is jailing economists who don’t agree with their manipulation of inflation figures. Also you seem to have confused the actions of distressed debt investors with the actions of BAML who bought trade claims of US companies in Argentina. Again, Argentina signed the agreement to settle claims with ISCID. Morality doesn’t come into it as that is uncertain what is certain is that Argentina entered into these contracts so they should stick to them.

  21. Anonymous

    So back to the article for a moment.

    Who should pay?

    1. Argentinians
    2. Pensioners who lent them money

    Lets take a third world country.

    Who should pay?

    1. The citizens
    2. Pensioners who loaned them money.

    all goverments to be open about spending plans and have credible policies

    And lie about the debts?

    And lie about who pays for the spending?

    You have to have all three on the table, and spending its part of it.

    1. The cost – taxes
    2. Who pays the taxes.
    3. What you get for the cost.

  22. Nick

    I find it interesting how many people here are supportive of Greece but so few of Argentina. After all, Argentina was in a position very like Greece – in fact it had been so for a longer time (Greece will probably get there soon enough). Really the government didn’t ever say ‘default’ – the people overthrew the government and said default. It wasn’t a conspiracy by a reckless government but people power.

    If anything Argentina has far more reason to default even then Greece, on the basis that countries like ours lent their brutal dictatorship a lot of money – should that be paid back too, the fact our part of the world helped prop up a regime who we then decided we didn’t like at all?

    Pension funds actually play a large role in destabilising developing economies. Should we continue to make people in those countries suffer for our retirement or stand up ourselves and say we don’t want our pension invested in stocks and shares any more?

    And finally the way of thinking that says ‘always pay your debts’ and ‘morality doesn’t come into it’ is the same way of thinking that, as David Graeber says in his new book on debt, believes “the loss of ten thousand human lives is really justified in order to ensure that Citibank wouldn’t have to cut its losses on one irresponsible loan that wasn’t particularly important to its balance sheet anyway.” Sick I would say.

  23. Tim Martin

    Revealed: The vulture capitalists willing to destroy a nation for a good return: //t.co/jb4Gl9wg by @dropthedebt's Nick Dearden

  24. abi ramanan

    RT @leftfootfwd: Revealed: This is exactly why #Greece needs to leave the Eurozone NOW. //t.co/MfB4yA2e

  25. H. O.

    RT @leftfootfwd: Revealed: The vulture capitalists willing to destroy a nation for a good return //t.co/pNaCxVWt

  26. Little Metamorphic O

    Revealed: The vulture capitalists willing to destroy a nation for a good return: //t.co/jb4Gl9wg by @dropthedebt's Nick Dearden

  27. Richard Fountain

    Good piece RT @PatronPress: #UK : Revealed: The vulture capitalists willing to destroy a nation for a good return //t.co/PqcR77ut

  28. No ID

    Revealed: The vulture capitalists willing to destroy a nation for a good return //t.co/8qIJ50YG

  29. Notar incanadumb

    Revealed: The vulture capitalists willing to destroy a nation for a good return //t.co/8qIJ50YG

  30. mz chief

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  32. liane gomersall

    RT @leftfootfwd: Revealed: The vulture capitalists willing to destroy a nation for a good return //t.co/8I1fGrwq

  33. Anonymous

    What, so Argentina takes the money knowing that it cant afford to pay it back and that’s ok? any chance of putting both sides of the argument or does that not suit your agenda. The Argentine government is a set of chancers. You only have to do some basic research on the internet too see that their economy is crumbling, their infrastructure decayed and they are now trying to almost steal other country’s companies in the hope of staving their internal woes for another month. they will no doubt run out of money very soon, but not before they have bled absolutely every last ounce of any sort of resource bone dry. Its time that the Argentine people demanded a capable Government instead of the political pygmies it stumbles along with era after era. A shameful country.

  34. Anonymous

    Not for long: //gulfnews.com/business/economy/argentina-plans-to-tap-more-central-bank-reserves-1.989190

    They will then use the money to buy this company for a song having bad mouthed it and seen its share price plummet: //www.bloomberg.com/news/2012-02-08/argentina-could-tap-central-bank-reserves-for-ypf-takeover-barclays-says.html

    Absolutely disgraceful behaviour.

  35. The World Outside Westminster – Romney marches on towards Super Tuesday reckoning | Left Foot Forward

    […] Revealed: The vulture capitalists willing to destroy a nation for a good return – Nick Dearden, Jubilee Debt […]

  36. Newsbot9

    “Despite the claims of Soderberg, default was undoubtedly the right thing to do.”

    No. They’ve only recently managed to get back where they were before they defaulted.

    Moreover, Argentina is engaging in hostile acts. We should be endorsing the debts in full, unless or until they back down over British sovereignty.

  37. Newsbot9

    You. You and your 1% are the criminals. You have done immense damage by sucking away societies money from wages to capital. You are responsible, and should pay. You’re the crook, the enemy of anyone who works for a living.

  38. HaywoodsLocalVoice

    RT @leftfootfwd: Revealed: The vulture capitalists willing to destroy a nation for a good return //t.co/4scU4Anv

  39. John COYB Syme

    RT @leftfootfwd: Revealed: The vulture capitalists willing to destroy a nation for a good return //t.co/4scU4Anv

  40. Edward English

    Revealed: The vulture capitalists willing to destroy a nation for a good return //t.co/rjHXI5hS #money

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