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ARGENTINE DEFAULTS… BRICSA WAITING IN THE WINGS?

There's been a significant development in the financial world in Argentina(shared with us courtesy of Mr. T.M.), and it has some intriguing geopolitical implications:

ARGENTINA DEFAULTS

Consider the following statement from the article, as Argentina considers selective default on some bonds held by American hedge fund investors:

"First we're not going to sign any agreement that hurts Argentina's future," Kicillof said. "Second, we're going to defend the 92% of bondholders that did restructure ... In third place, we're going to take every measure ... we have to make sure this situation is not perpetuated. Argentina is ready to talk, to come to an agreement. Let's come to a just, fair ... ruling for 100% of our investors. But do not make us do anything illegal ... Do not make us do anything unjust ... Do not make us do anything that will make us put Argentina's economy at risk ... We won't allow it."

As the statement indicates, Argentina's real problem is not with payment, but with the refusal on the part of some to restructure. (One wonders, why, in the aftermath of the Argentine default in 2001, why any hedge fund CEO would invest anyway, but that's another story... but perhaps one might venture to say that such an "investment" might have motivations other than financial, but rather, geopolitical. But see also This Is How A Hedge Funder Brings An Entire Country To Its Knees).
As the immediately preceding linked article makes clear, Singer has refused to take any discount, or haircut, on his bonds, and is pursuing Argentine assets all over the world. In short, we have a speculator, whose track record is one of recovering more in courts than what he originally invested, and President de Kirchner is saying "no!"
While one can perhaps muster a bit of empathy for Mr. Singer, my problem here is the geopolitical fallout from such international predatory practices: in effect, we have one American hedge fund manager holding an entire country's feet to the fire. Granted, Argentina's prodigality have certainly contributed, and it bears some of the responsibility for this. But by the same token, one cannot expect a country to get its financial house in order when one adamantly refuses any renegotiation and restructuring.
The geopolitical consequences are what should disturb anyone, and we've just seen that President Putin and Argentina's de Kirchner have negotiated an energy deal during the recent Forteleza BRICSA summit in Brazil.
So herewith a bit of high octane speculation: such pressures are only going to increase the compulsion for Argentina to seek some sort of relief from the BRICSA bloc, and it is conceivable that if there is any restructuring, it may ultimately involve BRICSA intervention in the affair. One can easily imagine scenarios where, say, China buys Mr. Singer's bonds at par, and then renegotiates them with Argentina, in return for privileges and so on.
And that means you can say goodbye to another prominent South American country as it reorients more and more toward the BRICSA bloc. And it's a lesson in how private capitalism of this sort is always fraught with geopolitical consequences...
See you on the flip side...

16 thoughts on “ARGENTINE DEFAULTS… BRICSA WAITING IN THE WINGS?”

  1. In a way, I wish them luck with the BRICS project, a competition and a sort of balance wont be bad for world politics. But I dont see how they may have a big one or how to make a united block.

    Few people may know but in the 80’s it was an attempt to form a different block, kinda separate from the usual “communism” vs “capitalism” back then. The one with the proposal was Nicolae Ceausescu, the president of Romania at that time, and his first allies was Gadafi of Lybia and Saddam Hussein of Irak (eventually Iran was contacted too, in 1989).

    Romania is the country who build the first (or second, dont remember now) oil refinery in the world (we do have an important production in WW 2 as well) and we had back then in the 1980’s (and partially even now) some huge refineries and as well we started to build huge oil tankers (almost as big as an US super-carier).
    Lybia and Irak were one of the largest oil and gas producers in the world (we build them some refineries and factories too) and Iran as well.
    All these dictators, Ceausescu, Gadaffi and Sadam were quite friends (and especially after Irak-Iran war was over the contacts with Iran were strong as well, the last visit Ceausescu make was in Iran, right before his end). And they supposedly planed to form one of the largest (if not the largest) world oil cartel, with Romania providing mostly the technology (we were back then the third in the world as producers of oil technologies, after US and USSR) and transport and with Lybia and Irak (and eventually Iran) providing mostly the oil and gas.
    This would have allowed this cartel to control the biggest world share in this product (surpassing Saudi Arabia I think), from the extraction to refineries and to transport, and then to bring under its wings the so called “third world” of countries not alligned with neither capitalist west or commmunist east.

    There were discussion for productions of WMD (including nuclear arsenals) for this countries (to protect them just in case), apparently Gadaffi offered to pay for this as some dubious people say in some books (some biological weapons are mentioned here and there, some stories are like a movie scenario, as well about medium range balistic missiles). Interesting is that Romania (back then a communist country theoretically part of the Warsaw Pact but practically opposed to USSR) have an American nuclear reactor since 70’s and we buyed Canadian CANDU reactors in 80’s.

    However, fact is that before any of these plans to happen, this is what happened with the 3 heads of that supposed “new block”.

    The communism fell in 1989 and Ceausescu was executed. Romania gradually lost her position in world oil industry and the ties with Saddam and Gadaffi were weakened and ended almost at all at some point. Now we are part of EU and the majority of our oil and gas industry is controled by foreign companies.
    Next in line was Saddam, executed as well after the second Irak war, and Irak is split now and controled by various outside forces. And then Gaddafi ended as well executed at the end of the civil Lybian war, and Lybia is as well split now in tribal areas with her resources mostly controled by outsiders.
    Iran, the last who had come to join that supposed cartel, is still in fog and in expectation and still possible to become next to pay.

    And Russia (USSR at some point) was helping or supporting (even if just by looking the other way or moaning some weak condemnations) at that point “the west” (or “the west” supported USSR) to get rid of this “cartel” and those who wanted to rule it.

    So, I agree BRICS is more powerful then that “cartel”, at least apparently. But in the same time is less united, with China, India and Russia having a love and hate relation, with China having more economic ties with USA and EU, not sure if India is not in the same position. Brasil is pushing forward but is not yet a big player in the world, we see the economic and social problems at World Cup. In the same time they are probably the only country in the world that can use if necessary only bio-fuels for their needs, and are not that dependend on oil and gas.
    Russia have the Ukrainian problem now, and frankly is an empire that come to end, as any empires come sooner or later in history.
    And China can switch against her with no regrets if the time and posibility come, and they will need that.
    India is sometime in conflicts with China as well (have even a war few decades ago) and have Pakistan near as a mean of control

    I really dont see them (BRICS) becoming soon a real contender, or even surviving long enough and becoming a real block. Which in a way, as I said, is unfortunate. Probably China, eventually, will form a new Asian block that will become the other power pole and “enemy” to drive the world politics, with the muslim world as a no man’s land that provide another option to fight (and as boogeyman) or make business or test new weapons and tactics.

    Argentina, unfortunately, will be hit until the “loan sharks” will be satisfied, and I dont see how they (Argentina) may comes out soon and not hurt by them

  2. Empathy for Paul Singer? You’ve got to be joking. He is a financial sociopath of the first order. And in any semi-just culture he would be a total pariah.

  3. This reminds me of the first time I read John Perkins “Confessions of an Economic Hit Man” Noooo we don’t do that, Do we?

  4. Paul Singer and Elliot Management are high class loan sharks. And should be treated as such their punishment must be dealt out underworld style a family rub out done publicly as a warning to other vulture capitalist to mend the ways. He is a billionaire already what does he intends to do with his billions out Golden House Nero. This behavior pattern goes back to Alexander the Great successors and help spark the Mithridates War in the eastern Meditterian during the last days of the

    1. Robert Barricklow

      Great idea marcos!
      And may the hits keep on coming!
      Maybe a hit parade, keeping track of the top 40 hits,
      as the competition gets more and more stiffs lining up!

  5. Enrique Massot

    Absolutely. For Argentina, it would be a welcome change to be able to negotiate with different blocks as opposed to have its eggs in the same basket.

    As the article points out, the vulture crisis can’t but encourage this strategic move.

    On the other hand, it has to be noted that the vultures did succeed to fleece quite a few countries (Peru, Zambia, Liberia, Congo)of badly needed cash.

    However, the Argentina case, with its larger dimensions and the country’s refusal to comply, is doing a service to the world’s financial health. The level of awareness this case has brought to the public opinion makes possible to reach international consensus to once for all outlaw these parasitical, predatory financial practices.

  6. I wonder what would happen if the gruesome details of Argentina’s debt restructuring would make it to the MSM? The way the AngloSphere has used financial weaponry against the rest of the world is a great untold story.. Blue pill addicts need not apply..

    1. Try to move beyond cliches. There are plenty of WASP bankers investing in this garbage behavior.

  7. Robert Barricklow

    Take Two.
    I reminded of Dr. Farrell and the many takes trying to get around the “accidental” technical roadblocks to posting his videos.

    This, of course, is a form of economic warfare. The Corporate State(think modern version of The East India Company) is attacking the nation states(what Clinton and Rubin referred to as “quaint notions”) and stripping them of their assets. They put the PIGS, or Iceland, or Argentina, on an international auction block and let the international vultures strip her sovereignty, treasures and peoples to the bone. The BRICSA launched a ship into these international financial seas to protect the Nation States and named her BRICSA, to fight on the side of political capital, versus Economic capital. I hope that vulture personified, Singer, is eaten-up, bit by bit, by his feathered friends.
    http://michael-hudson.com/2014/07/vulture-funds-trump-argentina-sovereignty/

    1. The point is Singer is picking and choosing US courts to get the rulings he wants. In this case that Argentina must pay the full value of Argentine bonds that Singer’s fund picked up really cheaply last time Argentina defaulted.

      Of course various investors just made a fortune having shorted current Argentina bonds with the knowledge that legal rulings in the US would force Argentina to default.

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