We all know that Argentina publishes dodgy economic statistics. This post is not about that.
Recently, Argentina agreed to pay dollar bonds with a face value $506 million to five companies that have successfully taken it before investment tribunal alleging expropriation. The reason Argentina wants to settle is simple. Argentina needs international credit, but unless the Obama administration relents in its determination to punish Argentina for expropriation, it will not get it. So Buenos Aires has arranged a settlement, paying five companies $506 million for claims worth $677 million.
The thing is, when I went to the data to find out how much Argentina owed the five companies involved in the settlement, it turned out that the judgments came to only $460 million. (Except for Vivendi, the source is Table 11.1 in The Empire Trap. The Vivendi data come from page 8 at this link.)
Which means one of three things:
- Argentina overpaid, and the $677 million number is wrong;
- More companies are involved than Bloomberg reported;
- The companies were collecting interest on their unpaid judgments ... at a maximum rate of 7.7%. (The actual rates are lower; the 7.7% assumes that interest started accruing in 2008, when in fact the claims started to accrue interest at dates ranging from 2005 to 2008.)
I vote for option (3).
In other words, Argentina managed to convince the companies to give up their interest claims, but paid the basic settlement. That is not a great outcome for them, but it is not terrible. And it gets Argentina back into the Obama administration’s good graces ... with the result that official credit again flows.
Still, I cannot help but think that the companies could have pushed for a harder bargain. It is true that Argentina did nothing that would have been illegal under domestic American law. But it is also true that Argentina did break its (stupid) treaty obligations. And it is true that the Obama administration had its companies’ backs.
So I am not sure why they did not hold out for interest. Thoughts?