Buenos Aires — The wind isn’t blowing off of Rio de Plata this morning. The streets are practically empty and the flags outside of Metropolitan Cathedral where Pope Francis used to work hang limp. It’s as if the capital is holding its breath, waiting to see what will happen now that Argentina President Cristina Kirchner has led the country down a rose-colored walk into the land of financial bankruptcy.
Kirchner told the country on national television last night that there is no way the South American country can come up with $1.5 billion. Argentina has been appealing to American courts for over a decade to get relief from hundreds of millions in dollars incurred when Argentina defaulted in 2001.
Speaking on national television, conveniently postponed until after the World Cup was over for the day, Kirchner said she was willing to negotiate. Surprise. Kirchner has not been willing to negotiate ever since she stepped into office. But now that she’s been backed into a corner, she’s ready to sit down and talk.
Calling the Supreme Court ruling “extortion,” Kirchner shook her finger into the television cameras and tried to put up a bold front for her countrymen. It was an attempt at bluster and bravado that fell on deaf ears. Kirchner’s approval ratings have steadily slid downhill since the last election. The latest figures show only about 26 percent of her constituents are happy with her performance.
Under the US court mandate, Argentine’s must fork over $900 million to the creditors in the suit or forfeit the chance to access the US financial tools to pay before the June 30 deadline.
Kirchner claims that Argentina owes one-and-a-half billion, with interest, and if she had to write a check today for it, another $15 billion in cash payments would be triggered. Because of corruption at the highest levels in Casa Rosada, $15 billion is over half of the reserves being held in Argentina’s Central Bank.
Never one to let morals get in the way, Kirchner is now trying to claim a moral responsibility to remit the court-mandated payments to NML Capital, whom she calls “vulture funds.” What was not answered in last nights monologue was the question: “Why hasn’t Kirchner felt morally obligated before now?”
Earlier on the 16th, the world’s financial markets responded in anticipation of the stupid move that Kirchner would make. Argentine stocks fell quicker than a skater through ice while even her own economists and analysis’s pleaded with her to adhere to the order.
The justices didn’t stop at tossing out Argentina’s appeal without discussion, they also decided that bondholders could mandate that Argentina reveal where its assets are held globally. Doing so could make it easier to get paid on debts that have been pushed away since Argentina’s economy collapsed like an old lady at the church revival.
Antonin Scalia, US Supreme Court Justice, noted that US federal law doesn’t offer a shield of protection to cover Argentina’s assets. Justice Ginsburg said that Argentina’s embassies and ships might be subject to appropriation if Kirchner doesn’t open her coin purse.
While Kirchner’s mean-old-lady stance may win her some accolades from the few supporters she has left, bigger problems remain. Paying the bill now due means that Kirchner will have to give up the subsidy and populist programs that enabled her to win re-election three years ago.
The ruling by the US Supreme Court marks the end of the line for Argentina’s dipping and dodging like a 15 year old learning to drive. Caving in to the US would force Kirchner to forget all about a mandate she and her late husband, and predecessor, Nestor have held on to for years: Argentina must maintain its economic independence at any cost.
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