IMF Backs Off Argentina Debt Support

It’s a touch ironic that Argentina had spent so much energy hoping that the IMF would step to its defense with holdout bond holders, including Elliott Management, given that Argentina blames the IMF for its economic collapse. But then Argentina blames everyone but themselves when it suits them as I’ve written here before. Beyond this blame game that love to lash out at their creditors especially if they’re Elliott Management as we’ve also covered.

IMF Backs Off Argentina Debt Support

In a surprise twist yesterday, Christine Lagarde, IMF managing director, wrote that the IMF has pulled its plans to support Argentina’s push for a US Supreme Court review in a court battle with its creditors.

She had planned to file an amicus curiae brief on behalf of Argentina but decided against it when the United States strongly opposed the move.

Last year a U.S. court ordered Argentina to pay $1.3 billion to creditors, including Elliott Management, that refused to accept Argentina’s debt restructuring. Anticipating a ruling by a New York appeals court that could move Argentina into technical default Argentina appealed to the United States Supreme Court to hear the case.

The IMF’s Plans To Step In To Assist Argentina Surprised

The IMF was believed to be interested in stepping to Argentina’s defense given future sovereign restructurings and the potential precedents the case could set. However, it seems the IMF has deemed the Argentina case to unique to threaten blow-back. The IMF’s plans to step in to assist Argentina surprised many given the censure on Argentina earlier this year for its faulty, or dishonest, statistics.

Despite withdrawing its support the IMF still has concerns.

“The fund remains deeply concerned about the broad systemic implications that the lower court decision could have for the debt restructuring process in general.”

U.S. Treasury On-board With The IMF’s Planned Defense

The U.S. Treasury seemed to be on-board with the IMF’s planned defense, but gave no word as to what made them change its mind so quickly and dramatically this week.

“It is a bit awkward, but it is consistent with the consensus-based nature of IMF’s decision making,” said Domenico Lombardi, the director of the Global Economy program at the Centre for International Governance Innovation in Waterloo, Canada. “Certainly, this is a case in point showing the political reality under which international organizations operate and how such constraints limit their institutional effectiveness.”

In a letter seen by the Financial Times, Michael Spencer, an attorney with Milberg, which is representing several hundred individual investors from Argentina, Italy and 17 other countries, appealed to Ms Lagarde “not to take this unprecedented and gratuitous step”.