Liberty or Debt

The Liberty is being held hostage. At the request of N.M.L. Capital, a subsidiary of the investment firm Elliot Capital Management, a judge in Ghana has barred the Argentine Navy’s training frigate, A.R.A. Libertad, from leaving the eastern port of Tema since Oct. 2. The fund, run by the billionaire Paul Singer, seeks payment from Argentina’s record debt default a decade ago and is demanding $20 million to let the 100-meter-long vessel go, only a fraction of the more than $1.6 billion it is owed according to U.S. courts. (source: Daniel Politi – NYTimes – 18/10/2012)

What was supposed to be a brief stopover in Ghana during a 6-month journey to South American, European and African ports is turning into a stark example of the lingering specter of Argentina’s $95 billion default in late 2001. It also illustrates how President Cristina Fernández de Kirchner’s government seems unable to react quickly to unexpected crises and avoids taking the responsibility for its mistakes. The government waited more than one week after initial court ruling to send a diplomatic mission to Ghana. Amid growing controversy, it pushed out the Navy chief, Carlos Alberto Paz, on Monday shortly after removing two other senior Navy officials, one of whom had publicly said the ill-fated stop in Tema was an “interministerial decision.” Foreign Relations Secretary Eduardo Zuain seems to have warned the Defense Ministry that frigate could face trouble, particularly in European ports. But warning was ignored, even though such incidents aren’t unheard of: creditors tried to seize Argentine state assets, including planes and the Libertad itself in 2002. So now the government is eager to pin the blame on Navy officials, even if it’s unlikely the stopover could have happened without approval from Foreign Ministry. It’s unclear why the decision was made. Perhaps it was ill-conceived extension of government’s recent attempts at making inroads in Africa. (Kirchner went to Angola in May on a trade mission). Or perhaps it was born of hubris. Kirchner frequently boasts Argentina has flourished by shunning international markets and has successfully renegotiated its debt. This is only partly true. The government managed to restructure about 93% of outstanding bonds in debt exchanges offered some 30 cents on the dollar in 2005 and 2010. But it has done little to deal with outstanding creditors and the remaining $4.5 billion they hold.

And it has turned alienating powerful allies almost into a sport. It has nationalized country’s largest energy company, boosted protectionism and ignored I.M.F.’s admonishments over unreliable inflation figures. Small surprise that no country has publicly come to Argentina’s defense over Libertad saga. The embarrassing crisis has put country’s isolation on display. Despite estimated $50,000 per day it is being charged in mooring fees, government insists it won’t give any money to what it has long called a vulture fund: N.M.L. Capital was among several investors that bought Argentina’s defaulted debt at fire-sale prices in the hope of later recouping its full value through courts. Negotiations have begun, but Argentina says it will take issue to an international tribunal if necessary: frigate, it argues, should have never been seized because it enjoys immunity as a military vessel. Even if Argentina wins such a suit, though, the media attention will have reminded the world of the country’s scofflaw ways, giving investors a reason to look elsewhere. A decade after defaulting, Argentina still needs to watch its back. European debtor nations might see in this story a cautionary tale: the painful consequences last for a long, long time. 


Acerca de ignaciocovelo
Consultor Internacional

One Response to Liberty or Debt

  1. Professor Uziel Nogueira says: The government of Cristina Kirchner is caught in a catch 22 type of international situation. At this point, it is irrelevant to discuss whether the Ghanaian judge did act correctly, or not, in detaining the frigate Liberdad at the port of Tema. The question for the government of Argentina is how to solve the problem as soon as possible. If the government of Ghana continues to uphold the judge’s action, there are two courses of action to be followed by Buenos Aires. First, pay the $ 20 million to the investment fund N.M.L Capital to release the vessel. This opens a dangerous precedent for similar actions in the future, unacceptable as a viable solution; Second, Argentina can take the government of Ghana to the International Tribunal of Hague. However, any decision by that international tribunal takes years to be delivered. Even a favorable resolution for Argentina has a downside. The decision is no binding i.e., it lacks enforcement power. How long and how does the crisis ends is anybody’s guessing. However the Chilean government is not too optimistic about a rapid solution. Recently, Palacio de la Moneda did send an official mission to Ghana in order to repatriate Chilean sailors travelling aboard the frigate Liberdad.


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