The Twenty-Eighth Meeting of Consultation of Ministers of Foreign Affairs of the Organization of American States, convened at the request of Argentina, today adopted a Declaration expressing “its support to the Argentine Republic so that it can continue to meet its obligations, pay its debt, honor its financial commitments and through dialogue arrive at a fair, equitable and legal arrangement with 100% of its creditors.”
In the Declaration, the representatives highlight “that it is essential for the stability and predictability of the international financial architecture to ensure that agreements reached between debtors and creditors in the context of sovereign debt-restructuring processes are respected by allowing that payment flows are distributed to cooperative creditors in accordance with the agreement reached with them in the process of consensual readjusting of the debt.”
Finally, through the document, the Ministers declare their “full support to achieving a solution that seeks to facilitate the broad Argentina sovereign debt process.”
The Secretary General of the OAS, José Miguel Insulza, referred to the theme of the meeting as one which “not only threatens the financial stability of that sister country. It also wreaks havoc with the sovereign debt restructuring mechanisms that have been developed over time, with the acquiescence of international lending agencies, to enable numerous countries to overcome their debt crises and embark once again on a path to growth.”
The situation represents “a triple paradox” continued the Secretary General. The first aspect, he explained, is that while in national economies there exists “the limited liability system, whereby an enterprise or corporation that files bankruptcy proceedings is liable only to the extent of its capital. Under no circumstances does the collection of its debts affect the wealth of its shareholders.” Meanwhile, in the global economy, “no such limited liability exists.” Therefore, said the Secretary General, “the only possibility open to sovereign states for restructuring their debt is to reach collective agreements with their creditors, with the support of the international system.”
The second aspect of this paradox, explained the OAS leader, “is that efforts to establish a sovereign debt restructuring system that protects the legitimate interests of bondholders while at the same time ensuring that countries are not prevented by the overwhelming weight of their debt from growing and attending to the most pressing needs of their citizens, have now been undermined by a decision that declares that a creditor who accepts a renegotiation and a creditor who does not accept one must be repaid at the same time.”
“But the worst facet of the paradox is that, even though the governments of all our countries and the international organizations we have founded agree that an unjust aberration is being perpetrated, so far there are no signs of the tools needed to correct it,” said Secretary General Insulza, who welcomed that the Meeting of Consultation of the OAS once again served as the forum in which a key issue for the region was debated. The complete address of the Secretary General is available here.
For his part, the Minister of Foreign Relations of Argentina, Héctor Timerman, explained that, following the default of 2001, Argentina arrived at agreements with its creditors first in 2005, and then in 2010, reaching agreement with 92.4% of the creditors. “But we didn’t count on a small detail – the vulture funds – those who want to dominate the system.” “Their success - the success of the vulture funds,” said the Argentine Foreign Minister, “is the ruin of our countries. The more we are ruined, the more they earn.”
Minister Timerman said the central theme of the meeting is “a political issue.” “Because what we are talking about is a group of people we call vulture funds who, using political means – political influence, media, lobbying, and various financial means, want to try to control the international financial system and adapt it to their needs,” he said.
“We are talking about sovereignty,” continued Foreign Minister Timerman, “and thus we can see that this issue is much more than a simple economic calculation.” “The problem of debt affects the people. Argentina has already been through a default,” said the Argentine Minister, and explained the negative effects of the default in creating poverty and unemployment, as well as problems in the educational and health systems, among others. “It is not a theoretical problem, it is a practical problem, and it is a problem that we must take on and resolve,” said Timerman.
The Minister of the Economy of Argentina, Axel Kicillof, said before the Heads of Delegation of the member states that his country wants to negotiate the restructuring of its debt in good faith. “Argentina is committed to dialogue and wants to negotiate as it always has, we are going to do so, but we need equality of conditions, we cannot do it under conditions of extortion,” said Minister Kicillof, who added that “we ask the world, we ask the OAS, that it take part in the matter, that it accompany the fair demands of Argentina, that it helps us to avoid that a judge, due to an interpretation of a clause that did not exist previously, puts at risk what Argentina has done to raise itself up after having been struck by the crisis of 2001; so that its children can eat, and be educated, so the country can grow once again, this cannot be put at risk because a group of speculators put at risk the international financial system.”
In another aspect of his address, Minister Kicillof thanked the OAS for addressing the restructuring of the sovereign debt of his country at its headquarters. “We welcome greatly that a body of the importance that has the OAS, probably as Secretary General Insulza said the most visible stage in the Hemisphere, echoes a problem that the Republic of Argentina is suffering,” he said.
Moreover, the Minister of the Economy highlighted that Argentina has had the backing of the international community and – among others – mentioned countries like Brazil, France, Mexico, the United States, Uruguay, Bolivia, Venezuela, Ecuador, Cuba, Chile, the G-77 plus China, parliamentarians in the United Kingdom, organizations including the IMF, ALBA, Mercosur, UNASUR, CEPAL, and various experts.
At the same time, he warned of the seriousness of the situation not only for his country, but for any country that finds itself in a similar situation. “It is a problem not just of Argentina, but the whole world, and it is a problem that demonstrates a fault in the financing system of the countries, as it makes probably impossible the processes of restructuring of sovereign debt.” Minister Kicillof added that his country came to the OAS to explain its situation and also “to urge the international system, the multilateral system, and the organizations that we as countries have created, to act. This cannot be allowed to happen, because it puts at risk the possibility of restructuring.”
During the meeting, the representatives of Venezuela, Colombia, Guyana, El Salvador, Honduras, Paraguay, Antigua and Barbuda, Brazil, Bolivia, Uruguay, Peru, Mexico, Nicaragua, Ecuador, Guatemala, Grenada, the United States, Dominica, Chile, Panama, Canada, the Dominican Republic and Saint Lucia all took the floor.
A gallery of photos of the event is available here.