Argentina’s Refusal to Pay U.S. Creditors Leads to Embarrassing Loss
The BBC News today reported the ruling of Ghana’s court that the Argentine military training vessel, the ARA Libertad, could be seized by creditors because of billions of dollars of unpaid U.S. debts. The ship has been berthed at Tema’s port since October 1, unable to leave until the Argentine government posts bond to creditors who are seeking enforcement in Ghana of judgments against Argentina.
Ghana’s court ruling in favor of U.S. creditors is a victory for U.S. taxpayers and for the people of Ghana – signaling its respect for international norms both within its borders and when dealing with foreign jurisdictions. Without a doubt, this is a historic moment: Ghana is tutoring Argentina, a G20 nation, on rule of law.
Argentina still owes $3.5 billion to U.S. creditors. President Kirchner’s strategy of repudiating its debts, defying U.S. court judgments demanding payment to creditors, and failing to pay arbitral awards to U.S. companies has cost the U.S. Treasury Department millions of dollars in forgone tax revenue. This litigation has also proven costly for Argentina by unnecessarily increasing the cost of its debt, some 500 points above neighboring countries.
Indicators of a worsening economic climate in Argentina include double-digit inflation, capital flight, and a skittish international investment community, still reeling from President Kirchner’s recent nationalization of oil company YPF. Currency fears and “pesification” risks have also caused Argentine bond prices to plunge this week. Along with the IMF, World Bank, the Paris Club, Spain, the UK, and other governments, the Obama Administration has intensified pressure on Argentina to honor its obligations to U.S. investors. U.S. Trade Representative Ron Kirk suspended Argentina’s preferential trade status in March (according to the World Bank, Argentina is “the most protectionist country in the world”) and began to vote ‘no’ against multilateral development bank loans to Argentina, alongside several other countries which include Canada, Germany and Spain.
As Latin America’s third largest economy, Argentina has more than $45 billion in reserves and could meet its obligations to U.S. citizens, yet it chooses not to, at the expense of the American taxpayer. Ghana has done the right thing in supporting a measure that will push Argentina to behave as a responsible nation rather than a renegade. As a member of American Task Force Argentina (ATFA), we are committed to helping to ensure that U.S. taxpayers are remitted financial settlements owed to them by the Argentine government following its historic 2001 sovereign debt default.