Monday night, after the U.S. Supreme Court decided not to hear the case between Argentina and a group of hedge funds and effectively ordered the country to part with $US15 billion in one go, Cristina Fernandez de Kirchner gave a passionate, defiant, Oscar-worthy speech.
It was 30 minutes long, and it was all about bonds.
In any other country, people would immediately switch to “Dancing with the Stars,” but Argentina has an odd, fatalistic relationship with international markets — one that explains the Fernandez administration’s defiant stance on this case and its overall consumption of the Argentine imagination.
Fernandez was preparing her people for another tangle with its twin enemies — debt and inflation. “I think this merits a quick look at our history,” she said.
The president took the story back to the country’s dictatorship in 1976, the first time international debt turned to inflation and was, she said, “without a doubt the most powerful trap we’d been in keeping us from growth, the development of Argentina, it created poverty, backwardness, homelessness, a lack of infrastructural development, investment in education, in science …”
What she is describing is the defining moment of Argentine history — a moment many in power lived through themselves. Over and over again in the speech, as she discussed the country’s struggle with foreign debt, she repeated “and this wasn’t the end.”
Because in Argentina it’s never the end.
From there she went on to the latest default in 2001 and the IMF’s loan to the country, which she called a “fictitious operation” to ensure that money made in Argentina never stayed there to aid the country. Instead it went abroad, to feed the beast that was the international market.
She goes on, naming specific bankers, specific debt deals now familiar to her people as potential harbingers of disaster. This was a bedtime story — the kind of thing you’ve heard your whole life and will tell your own kids — not a news report.
Eventually she got to the case at hand, the country’s latest dance with default. She describes hedge fund manager Paul Singer and his group (NML) as vultures quite clearly. They bought Argentine bonds when they were “garbage,” “worth nothing.”
“Only people intending to speculate would buy these bonds,” she said.
If you think about it this way, these investors, eating the carrion of the international financial market, are vultures.
They want to make 1,608% off of the suffering of Argentines, from bringing the horror of the past into the present and future. “So fine, there are some that say: Why not pay the $US1.5 billion and end it,” she said.
“Because there is another more serious problem that the 1% of holdouts create. There’s another 7% that, if we pay NML their $US1.5 billion, Argentina has to pay them $US15 billion … That’s half of all the reserves in our Central Bank.” (She’s being generous, it’s more than half — they have got about $US28.5 billion.)
It’s not that she doesn’t want to pay, she insists, it’s that she needs a payment plan. In any case, because of this situation, she says that NML demanding payment in full at once is extortion — one that has wider implications for financial markets.
It’s why so many entities and countries stood with Argentina and against NML.
And she told those countries in her speech: “I have a confession to make to all of you: Our loss did not surprise me, I expected the loss. This morning when I talked to the president of our Central Bank, Juan Carlos Fabrega, he told me ‘president, you were the only one who believes this would happen.’
Yes, because this is not an economic problem, or a financial problem, it’s not a judicial or legal problem; it’s the result of a business model on a global scale that, if it continues, will produce unbelievable tragedies.” She should know, her country is obsessed with them.
The full transcript of the speech is here (in Spanish).