Although some Argentine holdout bond investors might be feigning shock at Argentina’s recent move to restructure debt in its own legal domain, thumbing its nose at the US legal authority, the truth is this was the highest probability path during the negotiations. So why is anyone surprised that when, as leaked legal documents revealed, Argentina did exactly as expected?
Argentina announces debt obligations swap
The government of Argentina made it official yesterday, as President Cristina Fernandez de Kirchner, riding a fanatic wave of domestic popularity, said her government will submit legislation to its Congress that allows overseas debt holders to swap their now worthless debt obligations into new bonds governed under local law.
By defying the powerful “world” economic community – really a power source of Anglos that reside in Western nations – Argentina could be testing its international “friendships” with Russia, China and other alternatives to the dominate control of the “world.”
Argentina is still locked out of international credit markets because the issue with the holdouts remains unresolved,” Will Nef, who helps oversee $3.2 billion of emerging-market debt at Union Bancaire Privee in Zurich, was quoted as saying in a Bloomberg report. Nef was reading from the establishment playbook – threatening that those who defy the Western-controlled financial system will be punished.
Russia challenging US dominance
Russia, a primary instigator with new found courage in challenging US dominance, is facing a test of potential Western backbone in Urkraine. As a result, don’t be surprised if the country becomes a higher priority military target in light of not just its aggressive actions in the Eastern European region, but more importantly, and likely little discussed, its recent challenge to what really matters: US world financial control.
This is a perspective seldom discussed in the mainstream, but fighting back tears, Kirchner recognized the issue. “When it comes to the sovereignty of our country and the conviction that we can no longer be extorted and that we can’t become burdened with debt again, we are emerging as Argentines,” she was quoted as saying.
Argentina’s Kirchner described fight against financial control using mafia terms
The fight against financial control, which Kirchner has described using “mafia” terms, is also being played out on a different battlefield: insurance payments.
The big banks and financial players who have sold generally lightly regulated derivatives – the same type of instrument that played a key role in the 2008 stock market crash – are considered responsible to deliver a payout on the SWAPs contracts insuring Argentine debt. But payouts have traditionally not come as easy as one might think. During various debt defaults in Cyprus, for instance, loopholes were suddenly discovered that resulted in the large financial interests being able to avoid payouts.
In other news, the International Swaps & Derivatives Association pushed back the auction date to settle Argentina’s credit default swaps from August 21 to September 2.
Stay tuned, but ignore the mainstream gloss because the real story is most interesting and significant to investors.