Happy hour is now in full swing at The Temple Bar, a busy British-style pub in the upscale Palermo Soho district of Buenos Aires.
Over a pint of artisan pale ale, a young economist, Martin Trombetta, admits it is hard to tell from where we are sitting that his country is now in default again. For many observers it is difficult to be sure whether this is even the case.
Argentina's president, Cristina Fernández de Kirchner, continues to insist that the country has not recently defaulted on its sovereign debt for the second time in 13 years, while her chief finance minister, Axel Kicillof, accuses all those who think otherwise of dealing in "atomic nonsense".
"We're in default all right," says Trombetta, a researcher in labour econometrics at the National University of General Sarmiento.
"Leaving all the legal minutiae aside, our access to credit is null today. The markets have corroborated it."
If the after-work crowd filling the pub don't seem particularly panicked by this, it may be because they have seen and heard it all before. "I'm sure that a lot of people are worried and confused," says Trombetta.
"But they're already living in a country with the second-highest rate of inflation in the world [after Venezuela], and I think they're pretty used to Argentina's economic cycles by now." It may also be, understandably, that they don't fully understand all the legal minutiae.
After almost 10 years of wrangling, the Kirchner government's US court battle against a small but powerful group of foreign creditors has become so internecine that even the presiding judge stands accused of misreading or ignoring certain terms of the swapped bonds in question.
According to the judge, Thomas Griesa, of the New York district court, the clause of pari passu stipulates that all holders be treated as equal.
While a majority of Argentina's creditors accepted a vastly reduced payout, or "haircut", on their bonds when the external debt was restructured in 2005 and again in 2010, a minority of "holdouts" made no such agreement.
So, in Griesa's view, those investors – who own about 7% of the debt – have as much right to a return on the full value of their bonds as the 93% who settled for less. In June this year Griesa ordered a block on the transfer of $539m (£324m) in interest payments from Argentina to the "haircuts", ruling that the "holdouts" would have to be satisfied first.
The Argentinian side (as Argentina has been referred to throughout the proceedings) argued in turn that Griesa was neglecting the "rights upon future offers" (Rufo) clause, which effectively inverts pari passu by prohibiting the full repayment of any one bond-holder without paying all the others the same at once.
If Rufo were activated, the $15bn liability could clear out half the nation's already depleted foreign exchange reserves.
So Argentina refused, the 30 July deadline for a settlement passed, and various ratings agencies downgraded the country to a status of "partial", "technical", "restricted" or "selective" default, all terms rejected by Kirchner and Kicillof.
"They will have to invent a new name," said the president. A name was duly invented by those who tended to blame the judge for this mess, and the hashtag #GrieFault has been trending on Twitter.
On Tuesday, Kirchner used a national television address to announce plans to circumvent Griesa's ruling by making payments on its bonds via an Argentinian bank – a move that stunned the bond market. As the dispute has ground on the holdouts have become better known as vultures.
The hedge funds involved, and especially Paul Singer, of Elliott Management, the figurehead of the lawsuit, are now characterised as enemies of the state in government-endorsed graffiti and official hoardings all over Buenos Aires which invite the population to pick a side: "Patria o buitres" (motherland or vultures).
For most residents, this is no choice at all. As a card-carrying member of Partido Obrero, the Argentinian Trotskyist workers' party, Trombetta has no more sympathy for the "vultures" than anyone else.
"They knew what they were doing when they bought those bonds for pennies on the dollar, hoping to score big off a struggling country.
They're like gamblers who try to sue the casino when they put a little money on black 31 but it came up red 32." Trombetta believes that, in political terms, the concept of sovereign debt is "a mechanism of capitalist oppression".
Like many Latin American leftists he considers the borrowing of US dollar treasury bonds by the military juntas of the 1970s to be the "original sin" at the root of the region's economic problems.
This view is relatively common in Argentina, where the outstanding national debt is contaminated by still-painful memories of the unelected dictatorship that first ran it up, and the later neoliberal governments whose failure to control it led to the domestic deficit crisis of 2001 and the biggest default in history.
As an economist, though, Trombetta cannot bring himself to side with the president or her late husband and predecessor, Nestor Kirchner, who effectively legitimised the debt when he restructured it in 2005 and swapped the bonds for more favourable interest rates under New York law.
"To make this an ideological fight against the vultures seems entirely false to me," he says. " And Griesa is not the enemy either. He gave the Kirchners nine years to solve this problem with the holdouts, and instead they spent all that time and money on bad economic policies leading nowhere."
Others in the capital still cannot get their heads around the idea of Griesa having jurisdiction over their country. "I'm an ordinary man, the man in the street," says Rogelio Dolavaraz, who owns the Don Pollo grocery shop in the middle-class neighbourhood of Nuñez.
"I'm not familiar with all the details. But I don't agree that a judge from another country should be able to put us in checkmate like this. And his judgment will have repercussions because money has no borders. Money has no friends.
When money is involved, the truth is silenced." Dolavaraz wants to know why Barack Obama is allowing this to happen. And he is not the only one to ask. Yet another legal clause, in the US constitution, could supposedly solve the entire problem.
"Under the principle of 'comity'," the investigative journalist Greg Palast wrote in the Guardian in August, "Obama only need inform Griesa that Singer's suit interferes with the president's sole authority to conduct foreign policy. Case dismissed."
While Kirchner and Kicillof have seized on this, other commentators say there is no such mechanism in the US for executive override of a court decision.
And three weeks into the default, the repercussions remain to be seen. Internationally, it is nothing new for Argentina to be labelled an economic disaster, and there was no stock market rout in Buenos Aires.
The Buenos Aires index has been stable in response to Kirchner's hard line, and the world keeps turning as she said it would – though the bond market reacted negatively to her gambit on Wednesday.
And if Kirchner prints more money to stay afloat through this crisis and maintain her public-spending programme, the country's already astronomical inflation rate is likely to rise yet higher and faster. The effects, as ever, will fall hardest on the poorest.
On the outer edge of the capital in Villa 11-14 – among the biggest and most notorious of the surrounding shantytowns – Susana Arino, a volunteer drug rehab worker, says she does not doubt that the default "will eventually affect the people around here".
She adds: "You don't hear much talk about it because they've got bigger day-to-day problems, but it's not going to make their lives any easier."
It is often claimed by Kirchner supporters that her party's social programmes have helped integrate the shanty dwellers, and by her opponents that she has simply bought the vote of Argentina's underclass.
As a resident of the neighbouring Barrio Juan XXII, Arino says she has not seen much evidence of improvement since the catastrophic year of 2001, or the subsequent debt restructures of 2005 and 2010 that supposedly allowed the Kirchners to get poverty and unemployment under control.
"It seems to me things are getting worse again," Arino says, citing factory closures and layoffs as proof of a new recession now happening. She believes, she says, the country should just pay its debts. Even if it clears out the reserves? Arino shrugs. "No one in this neighbourhood would ever see that money anyway."
theguardian.com
Over a pint of artisan pale ale, a young economist, Martin Trombetta, admits it is hard to tell from where we are sitting that his country is now in default again. For many observers it is difficult to be sure whether this is even the case.
Argentina's president, Cristina Fernández de Kirchner, continues to insist that the country has not recently defaulted on its sovereign debt for the second time in 13 years, while her chief finance minister, Axel Kicillof, accuses all those who think otherwise of dealing in "atomic nonsense".
"We're in default all right," says Trombetta, a researcher in labour econometrics at the National University of General Sarmiento.
"Leaving all the legal minutiae aside, our access to credit is null today. The markets have corroborated it."
If the after-work crowd filling the pub don't seem particularly panicked by this, it may be because they have seen and heard it all before. "I'm sure that a lot of people are worried and confused," says Trombetta.
"But they're already living in a country with the second-highest rate of inflation in the world [after Venezuela], and I think they're pretty used to Argentina's economic cycles by now." It may also be, understandably, that they don't fully understand all the legal minutiae.
After almost 10 years of wrangling, the Kirchner government's US court battle against a small but powerful group of foreign creditors has become so internecine that even the presiding judge stands accused of misreading or ignoring certain terms of the swapped bonds in question.
According to the judge, Thomas Griesa, of the New York district court, the clause of pari passu stipulates that all holders be treated as equal.
While a majority of Argentina's creditors accepted a vastly reduced payout, or "haircut", on their bonds when the external debt was restructured in 2005 and again in 2010, a minority of "holdouts" made no such agreement.
So, in Griesa's view, those investors – who own about 7% of the debt – have as much right to a return on the full value of their bonds as the 93% who settled for less. In June this year Griesa ordered a block on the transfer of $539m (£324m) in interest payments from Argentina to the "haircuts", ruling that the "holdouts" would have to be satisfied first.
The Argentinian side (as Argentina has been referred to throughout the proceedings) argued in turn that Griesa was neglecting the "rights upon future offers" (Rufo) clause, which effectively inverts pari passu by prohibiting the full repayment of any one bond-holder without paying all the others the same at once.
If Rufo were activated, the $15bn liability could clear out half the nation's already depleted foreign exchange reserves.
So Argentina refused, the 30 July deadline for a settlement passed, and various ratings agencies downgraded the country to a status of "partial", "technical", "restricted" or "selective" default, all terms rejected by Kirchner and Kicillof.
"They will have to invent a new name," said the president. A name was duly invented by those who tended to blame the judge for this mess, and the hashtag #GrieFault has been trending on Twitter.
On Tuesday, Kirchner used a national television address to announce plans to circumvent Griesa's ruling by making payments on its bonds via an Argentinian bank – a move that stunned the bond market. As the dispute has ground on the holdouts have become better known as vultures.
The hedge funds involved, and especially Paul Singer, of Elliott Management, the figurehead of the lawsuit, are now characterised as enemies of the state in government-endorsed graffiti and official hoardings all over Buenos Aires which invite the population to pick a side: "Patria o buitres" (motherland or vultures).
For most residents, this is no choice at all. As a card-carrying member of Partido Obrero, the Argentinian Trotskyist workers' party, Trombetta has no more sympathy for the "vultures" than anyone else.
"They knew what they were doing when they bought those bonds for pennies on the dollar, hoping to score big off a struggling country.
They're like gamblers who try to sue the casino when they put a little money on black 31 but it came up red 32." Trombetta believes that, in political terms, the concept of sovereign debt is "a mechanism of capitalist oppression".
Like many Latin American leftists he considers the borrowing of US dollar treasury bonds by the military juntas of the 1970s to be the "original sin" at the root of the region's economic problems.
This view is relatively common in Argentina, where the outstanding national debt is contaminated by still-painful memories of the unelected dictatorship that first ran it up, and the later neoliberal governments whose failure to control it led to the domestic deficit crisis of 2001 and the biggest default in history.
As an economist, though, Trombetta cannot bring himself to side with the president or her late husband and predecessor, Nestor Kirchner, who effectively legitimised the debt when he restructured it in 2005 and swapped the bonds for more favourable interest rates under New York law.
"To make this an ideological fight against the vultures seems entirely false to me," he says. " And Griesa is not the enemy either. He gave the Kirchners nine years to solve this problem with the holdouts, and instead they spent all that time and money on bad economic policies leading nowhere."
Others in the capital still cannot get their heads around the idea of Griesa having jurisdiction over their country. "I'm an ordinary man, the man in the street," says Rogelio Dolavaraz, who owns the Don Pollo grocery shop in the middle-class neighbourhood of Nuñez.
"I'm not familiar with all the details. But I don't agree that a judge from another country should be able to put us in checkmate like this. And his judgment will have repercussions because money has no borders. Money has no friends.
When money is involved, the truth is silenced." Dolavaraz wants to know why Barack Obama is allowing this to happen. And he is not the only one to ask. Yet another legal clause, in the US constitution, could supposedly solve the entire problem.
"Under the principle of 'comity'," the investigative journalist Greg Palast wrote in the Guardian in August, "Obama only need inform Griesa that Singer's suit interferes with the president's sole authority to conduct foreign policy. Case dismissed."
While Kirchner and Kicillof have seized on this, other commentators say there is no such mechanism in the US for executive override of a court decision.
And three weeks into the default, the repercussions remain to be seen. Internationally, it is nothing new for Argentina to be labelled an economic disaster, and there was no stock market rout in Buenos Aires.
The Buenos Aires index has been stable in response to Kirchner's hard line, and the world keeps turning as she said it would – though the bond market reacted negatively to her gambit on Wednesday.
And if Kirchner prints more money to stay afloat through this crisis and maintain her public-spending programme, the country's already astronomical inflation rate is likely to rise yet higher and faster. The effects, as ever, will fall hardest on the poorest.
On the outer edge of the capital in Villa 11-14 – among the biggest and most notorious of the surrounding shantytowns – Susana Arino, a volunteer drug rehab worker, says she does not doubt that the default "will eventually affect the people around here".
She adds: "You don't hear much talk about it because they've got bigger day-to-day problems, but it's not going to make their lives any easier."
It is often claimed by Kirchner supporters that her party's social programmes have helped integrate the shanty dwellers, and by her opponents that she has simply bought the vote of Argentina's underclass.
As a resident of the neighbouring Barrio Juan XXII, Arino says she has not seen much evidence of improvement since the catastrophic year of 2001, or the subsequent debt restructures of 2005 and 2010 that supposedly allowed the Kirchners to get poverty and unemployment under control.
"It seems to me things are getting worse again," Arino says, citing factory closures and layoffs as proof of a new recession now happening. She believes, she says, the country should just pay its debts. Even if it clears out the reserves? Arino shrugs. "No one in this neighbourhood would ever see that money anyway."
theguardian.com
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