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Argentina’s President Macri Urges Congress to End 15-Year Feud with ‘Vulture Funds’

The deal, announced on Monday, looks set to end one of the most brutal debt battles ever seen between a country and a creditor though some in Argentina see it as a betrayal
Imagen por David Fernández/EPA

Argentina's President Mauricio Macri has urged the country's congress to approve a deal reached with the so-called "vulture funds" that foresees an end to one of the most brutal debt battles ever seen between a country and a creditor.

"I am counting on this Congress to end this conflict, which has lasted 15 years," Macri said in a speech to both houses on the first day of the new legislative session on Tuesday. "I am sure you will meet this responsibility."


Although parts of his speech were greeted by heckling from the opposition, Macri appears likely to obtain the votes required to implement the deal before the April 14 deadline set by a US court. Congress must also revoke two laws that would block the debt-payment. Some observers say he may have to negotiate concessions on other parts of government policy to get these measures through.

The deal, announced on Monday, outlines the payment of $4.65 billion dollars to several different funds that had refused to join negotiations that restructured most of Argentina's debts after the country defaulted in 2001.

Their demand to be paid the full amount was met by an equally stubborn response from the previous Argentine government headed by Cristina Fernández de Kirchner who called them "vulture funds."

Related: Talons Out: Argentina Desperately Fighting "Vulture Funds" Over Debt

The deal means that the funds — led by Paul Singer's Elliott Management — are now willing to accept a 25 percent cut off their original claim. Singer is one of the top donors to the presidential campaign of Marco Rubio.

President Macri took office last December promising to find a way out of the impasse over the debt that was cutting Argentina out of international capital markets and discouraging foreign investors.

Government ministers immediately hailed the new agreement as the curtain raiser to a sunnier future for the Argentine economy that has been struggling with low growth, high inflation, and a devaluing peso.


Finance Minister Alfonso Prat-Gay said that bank loans totaling $15 billion dollars, which will enable the country to make payments to all its creditors, have already been secured.

"This is a done deal with various banks that promised to actively participate in investing in Argentina," he told reporters on Monday.

Prat-Gay also made the most of the government's charge that Argentina's current economic troubles have much to do with the refusal of the previous government to negotiate with the holdouts.

"Growth is impossible without support," he told daily La Nación, claiming that the delay over reaching an agreement had lost the country two million jobs.

Former Economy Minister Axel Kicillof hit back in a Tweet on Monday in which he called the agreement "a catastrophe." The following day he announced that "Now the extortion has been put before Congress."

Tuesday also brought a protest against the deal outside the presidential palace in the Plaza de Mayo square. "They are taking the country backwards, once again binding us to enormous debt. It is a crap deal," said Pablo Dilo, a 34-year-old teacher.

Others in the streets of Buenos Aires welcomed the news. "We need the change," said 59-year-old janitor Óscar Reyes, cursing the previous government that he blames for the current economic situation.

The seemingly imminent end of the debt conflict was also welcomed by many economists who have long said the Argentine economy cannot rebound until this happens.


Economy professor Sebastián Auguste said he expects that, once the debt settlement has been finalized, President Macri will seek to bring private investors into infrastructure projects. He also said he thinks the president will look for new loans from multilateral organizations such as Inter-American Development Bank and the World Bank.

"It will make the economy grow again after a four-year stagnation," Auguste said.

The problem stems from 2001 when Argentina defaulted on its debts, the equivalent of a bankruptcy, after the country could not make its payments to creditors.

Related: Argentina Moves to the Right as Mauricio Macri Wins Presidential Runoff

This led to a restructuring of most of the debt in 2005 and 2010, but some creditors — known as holdouts — refused and decided to wait for repayment of the entire debt.

When Argentina started paying back some of its debt to creditors who had accepted the restructuring deal the holdouts, lead by Paul Singer's Elliott Management, sued the country under New York law, and won.

In 2012 Manhattan District Judge Thomas Griesa ruled in favor of the holdouts. With the US Supreme Court refusing to hear the case, the ruling stands.

The funds' aggressive strategy provided former President Fernández with strong public support in her non-negotiable stance with the funds, but Argentina's economy paid a costly price — solitude.

While other Latin American countries could borrow money at five percent interest, Argentina was forced to look to China and Russia for loan deals with interest rates as high as 10 percent. The conflict also discouraged foreign investors.


Since then, the two parties have fought a tough battle, negotiated by appointed mediator Daniel Póllock, who was the one to break the news of the new deal on Monday.

"It gives me great pleasure to announce that the 15-year battle between Argentina and Paul Singer's Elliott Management is on its way to being resolved," Póllock said in a statement.

Back at the protest outside the national palace on Tuesday, Natalia Boquet was not convinced.

"We had the support of the UN and then just said ok, let's pay this. And now we're getting more debt in order to do so," she said, referring to a resolution from the United Nations last year that supported the right of countries to renegotiate their debts without the interference of foreign courts. "We accepted awful conditions without negotiations."

Related: Argentina's New President Mauricio Macri Promises a 'New Era'

Follow Peter Lykke Lind on Twitter: @PeterLind2