Argentina Will Meet With Mediator, But Not Hedge Funds

Jul 7 2014 | 9:18am ET

Little more than three weeks from its second debt crisis in 13 years, Argentina will meet today with a court-appointed mediator—but not with the hedge-fund holdouts from its 2001 default.

Speaking Thursday at the Organization of American States in Washington, D.C., Argentine Economy Minister Axel Kicillof said a delegation of government officials would meet with Daniel Pollack in New York. But Kicillof said that it would not sit down with the holdouts, led by Elliott Management and Aurelius Capital Management, and implied that it wouldn’t do so unless the hedge funds agree to certain preconditions, chief among them a deal allowing Argentina to pay its restructured debt while negotiating with them.

Kicillof confirmed yesterday that he would lead the delegation.

“This will not be a meeting with the other side,” Kicillof said Thursday in Washington. “It will be a meeting with Mr. Pollack.” An Economy Ministry source told Pagina/12 that “we are going to listen to the mediator and we want to know if there is the possibility of a genuine negotiation or if the vultures expect the ruling to be carried out as it was dictated by” U.S. District Judge Thomas Griesa, who has barred Argentina from paying its restructured debt without also paying the holdouts $1.5 billion.

Argentina missed a $539 million debt payment last Monday. It has a 30-day grace period to make the payment before it formally defaults.

At the OAS, Kicillof insisted that “Argentina has the resources to pay its sovereign debts. But this ruling, with its absurd features, attempts to ensure that Argentina cannot pay.” He went on to blast the “lobbies of tiny interest groups” for his country’s predicament.

He said that a default would stand in the way of Argentina’s growth potential, which he estimated at 7% to 8% annually. “Argentina must continue to grow,” he said. “The dead don’t pay.”

“We will go to talk to Griesa’s negotiator, but we need fair and balanced conditions,” Kicillof continued. “Argentina wants to negotiate in good faith, but under conditions that contemplate the rights of all creditors.”

“We have only 28 days to avoid a default. Argentina has the resources to pay its debt but Griesa’s decision seeks to restrain us from paying.”

“We ask the international community to take action. We need them to implement urgent solutions and not only issue statements. We don’t want to be a case to be studied in the future on how a country suffered due to an absurd decision. We need the world to support our claim and help us.”

The speech before the OAS was Kicillof’s second in the U.S. since the Supreme Court declined to hear Argentina’s appeal. But he has refused to meet with the holdouts, a fact that they were quick to point out.

“This will be Mr. Kicillof’s second speech in the U.S. in two weeks, yet both times he has refused to meet with us,” Aurelius founder Mark Brodsky said. “Speeches won’t avoid another Argentine debt crisis on July 30.”

“Engagement with the court or creditors doesn’t have to wait another week,” Elliott’s Jay Newman said before Kicillof’s OAS appearance. “We’re ready to meet with Minister Kicillof during his visit to Washington, D.C., this week, and to negotiate without preconditions.”

Kicillof did not have harsh words only for their hedge fund nemeses and Griesa. The two attacked the U.S.—which, along with Canada, refused to sign an OAS declaration in support of Argentina.

“The United States had previously supported our stance in the case so it understands the gravity the case,” Kicillof said. “Nevertheless, their support hasn’t continued at the Supreme Court. I wonder why they changed their mind.”

The U.S. declined to ask the Supreme Court to hear Argentina’s appeal, as it had done in lower-court appeals.

“It’s surprising that the United States asks not to talk about this issue and doesn’t partake in the support for Argentina by numerous countries,” Argentine Foreign Minister Hector Timerman said. “Still, we have a good relationship with them and a permanent dialogue.”

“Hedge funds threaten the financial stability of Argentina and undermine debt restructuring mechanisms that allow countries to pay their debt and start growing again,” OAS Secretary José Miguel Insulza said.

“Both sides of this dispute have said at different times they would be willing to negotiate, which we believe offers the parties the best path to a resolution,” U.S. State Department official Roberta Jacobson said. “We are hopeful that Argentina will find a solution to this matter that resolves its issues with the bondholders and allows it to return to inclusive growth.”


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