New York judge's ruling sparks nationalist surge in Argentina

The stakes couldn’t be higher for Argentine President Cristina Fernández de Kirchner as a legal tug-of-war with a $20 billion US hedge fund plays out in a New York case that has sent nationalist sentiment soaring in Argentina and raised concerns about the impact on future efforts to help debt-ridden countries recover.

NML Capital, part of American billionaire Paul Singer’s Elliott Management, is among a handful of creditors demanding full repayment of bonds that Argentina defaulted on in 2002, rather than the partial repayment to which most creditors agreed. They were buoyed by the Nov. 21 ruling of United States District Judge Thomas Griesa, who, arguing that Argentina must treat all its creditors equally, said the Southern Cone country must pay $1.33 billion to NML – as well as satisfy the demands of other creditors – by Dec. 15, or potentially face a second, “technical” default. 

A US court of appeals, however, issued a stay on Griesa’s order, sending it back to let the court figure out the mechanics by which it would force Argentina, a sovereign nation, to submit to local courts.

Legal experts are watching the NML case closely because of implications they say it could have elsewhere in a scantly regulated area of international finance. President Kirchner, whose approval ratings arein a slump as the commodities-heavy economy slows, has seized the moment to shore up national sentiment among a population that remains wary of foreign creditors after Argentina’s $100-billion sovereign debt crash, the largest in history. Kirchner has used the conflict to cast Argentina as the victim of predatory “vulture funds” seeking to impose “judicial colonialism.”

“One judge wants to frustrate Argentina’s greatest achievement,” Kirchner told crowds in Buenos Aires’s Plaza de Mayo Sunday, during an event to commemorate Argentina’s return to democracy in 1983. The crowd responded with hisses and boos.

In recent months, the government’s inability to settle with a handful of holdouts led by NML has resulted in one of its Navy tall ships being impounded in Ghana and an expensive court case in New York.

Young Argentines who grew up in the shadow of former President Carlos Menem’s free-trade indebtedness in the 1990s argue that refusal to pay is a way to avenge previous wrongs – and perhaps even make a statement to the world that Argentina is skeptical of globally managed economic action.***

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