Business World

Wednesday 1 October 2014

Argentina brands bondholders an 'international mafia'

Published 15/08/2014 | 02:30

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Argentina's President Cristina Fernandez de Kirchner gestures after arriving at the Silvio Pettirossi airport in Luque, near Asuncion August 12, 2014. Kirchner is on a two-day visit to the country to meet with Paraguay's President Horacio Cartes. REUTERS/Jorge Adorno (PARAGUAY - Tags: POLITICS)
Argentina's President Cristina Fernandez de Kirchner gestures after arriving at the Silvio Pettirossi airport in Luque, near Asuncion August 12, 2014. Kirchner is on a two-day visit to the country to meet with Paraguay's President Horacio Cartes. REUTERS/Jorge Adorno (PARAGUAY - Tags: POLITICS)

HEDGE funds suing Argentina over its 2002 debt default are an "international mafia" out to wreck the country's finances, the government said yesterday, pumping up the rhetoric in a battle that is squeezing the struggling Argentine economy.

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With its peso currency at record lows, foreign reserves down more than 5pc over the last year and vast shale oil and gas resources laying undeveloped in its southern Patagonia region, Argentina is desperate to tap foreign financing.

But the debt case, which stems from Argentina's default on nearly $100bn (€75bn) in sovereign bonds 12 years ago, is blocking its access to the international bond market.

"Today we are in the hands of an international financial power comprised of small, voracious interests that form a real international mafia," Jorge Capitanich, the Cabinet chief and government spokesman, told reporters in Buenos Aires.

Many Argentines side with their government against a group of hedge funds that rejected the country's 2005 and 2010 debt restructurings in which holders received less than 30 cents on the dollar.

Holdout funds led by Elliott Management Corp and Aurelius Capital Management bought Argentine bonds at a discount before and after the 2002 default and have pressed their demand for payment of 100 cents on the dollar in the US courts.

In 2012, a federal judge in New York awarded them $1.33bn plus interest and barred Argentina from repaying holders of exchanged debt without paying the holdouts too.

The case pushed the country into default again last month, effectively slamming the door on Argentina's hopes of tapping global bond markets. (Reuters)

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