Message of President Cristina Fernández de Kirchner on national network

cristina-fondos-buitres

Message of President Cristina Fernández de Kirchner on national network, in her Presidential office, at the Government House.Today, I speak to all the Argentines, in view of what is already  of public and common knowledge, which is the ruling of the Supreme Court of Justice of the United States, validating the ruling of judge Griesa, of first instance, contrary not only to the interests of our country, the Argentine Republic,  but also the 92 percent of creditors who believed in Argentina  and  restructured their debt, 92 percent of the creditors of the Argentine foreign debt and also – why not say it – about the system and the operation of the global economic and financial system. Why am I saying so? The reason is very simple, it was not for nothing that countries like France, Mexico, Brazil and more than 100 British MPs, among other personalities, supported the Argentine Republic before  the United States court as ‘amicus curie’, just because they understood this was not just a case for Argentina, but for the whole world.

But I think that this deserves a brief previous reflection, and that is what became in Argentina´s history ,  the foreign debt,  which began to grow exponentially, since the dictatorship of March , 1976, 24  – and turn with no doubts – into the most formidable trap that hindered the growth, the development of  Argentina and generated  poor, unemployment, backwardness, lack of investment in infrastructure, in education, in investigation, in science and technology, the history, in brief,  of the last decades of our country.

That debt not only grew during the dictatorship, it also grew under democracy, it grew during the ´80 and it also grew exponentially during the so-called convertibility regime, where the fiction that the dollar was pegged to the peso, led the country getting into debt in a terrible way at the international markets, to underpin that fiction that one dollar was pegged to one peso.
But that isn’t the end of the story, when the government that had set up the convertibility regimen changes and another government takes office, not only keeps upholding the convertibility, but also two incredible financial operations took place;   some people name it as the greatest financial fraud in the history: the so-called Global Bond Exchange (known as the “Megacanje”) and the so-called risk shield (known as the “Blindaje”).

The risk-shield – and I remember this quite well because I was national lawmaker- took place at the end of the year 2001, it was a fictitious operation, a sort of handrails of 40 thousand million dollars that the International Monetary Fund, lent to the then government ,  to take over the debt that the government had, and which was not able to pay and which was in fact a handrails or just a book entry,  because the money that got into the country,  immediately flew away to pay the debts of the capitals had entered  our country with super- high rates at international level.  This of course in exchange of a formidable adjustment that was addressed at the Congress: reduction of the PAMI, the ANSES, reduction of the State, the educational budgets, in brief what turn to be the adjustment that had a widely spreading and a widely discussion at the Argentine Parliament, of which, at that moment, as a parliamentarian, I was a main actor too.

But that isn’t the end of the story, as was to be expected, the risk-shield was neither successful, and then it came out what it became the last act of the great tragedy of the Argentine debt: the mega-swap (“megacanje” in Spanish). The mega-swap was an idea; its intellectual author was a former Treasury secretary, from the United States of America. David Mulford, by then,  the Credit Suisse CEO, the  Swiss Credit Bank,  that suggested to the then Economy Minister and to the then President, to swap 46  debt bonds existing at that moment for 5 debt bonds.

The operation, in which seven banks were involved and also the AFJP,  produced commissions, this means payment for the intermediation of exchanging bonds, of 150 million dollars, of which 20 million were for David Mulford and the rest for the banks and the AFJP that had been involved. What is interesting – besides the 150 million dollars of commission – is that the banks that had been involved in that operation and the AFJP put and I say they put with the quote marks,    27 thousand million dollars, but in fact they were only 7.000 because 20.000 were already in their portfolios. That means that they charged commissions themselves, which they already had. This caused a formidable criminal proceeding including litigation support, and it prescribed. What does it mean that it prescribed? It means that the time went by and due to the inactivity of judges, chamber members and district attorneys led to what happen this last June 6,    that David Mulford, who was neither interrogated nor investigated, neither I know if somebody requested him to come to the country or insisted too much for him to come to the country, was dismissed and also other people that took part in that operation. It is curious and I say so because it is curious the speed of some judges, some chamber members and some district attorneys that have the speed of the ‘Roadrunner’, that character of the Beep Beep, in some media and political cases. I cannot forget that summer of the reserves, when a judge prevented us, through a precautionary measure to pay with reserves of the Central Bank, the debt that the Argentines had incurred into, and I cannot do other but compare that speed and those different speeds with this inaction, during years, on part of fiscal, judges and chamber members that allowed that a cause that generated a damage of 55.000 million dollars to the country, prescribed.

It is remarkable also the difference of how a Justice acts – as it is that of the United States – in defense of hardly 1 percent of the accrediting vultures of  Argentina and I will explain why that of vultures and how the Justice acts, or at least some judges, some district attorneys and some Argentine chamber members. I say so because clarification is undoubtedly necessary and to call things by their right name too.

The truth is that this mega-swap financial operation wound up and the Argentine foreign debt was close to 160 percent of the Gross Domestic Product, and had turn impossible to cancel. Unemployment reached a two-digit figure, nearly 25 percent, poverty reached 54 percent, indigence 30 percent and  of course, the default. It was the default that broke out in 2001 and was the highest sovereign debt default  on record . A default that accumulated debts taken during the military dictatorship and during democracy, plus convertibility, risk-shield and mega-swap.

On May 24, 2003, President Nestor Carlos Kirchner was sworn-in as President of all the Argentines, with only 22 percent of the votes. He set himself to the task of renegotiating the debt of the Argentines, because we knew that it was an  insurmountable trap, Then a negotiation started,  an arduous renegotiation that finally wound up, in its first part, in 2005, with the approval of almost 76 percent  of the creditors and with a very important reduction, confirming what Kirchner had said: “Let us grow to be able to pay, because dead people don´t pay”.  And Argentina, without access to the capital  markets, for the first time started to eliminate the financial bicycling phenomenon and began to pay its debt with genuine resources, with its own resources, with resources that were a product of its growth and economic development.

Parallel to the payment of that debt, millions of jobs were created, pensioners were incorporated to the social security system, pensions began increasing, collective wage negotiations were back, factories opened along with industrial parks. It was a cancellation of debt with growth and social inclusion.

Then it was my turn to be inaugurated as President of all Argentines, and in the year 2010 we had the second bonds swap, with an acceptance of 92 percent  of the creditors. We must bear in mind something, that in the majority of countries, ours included, when the default  takes place, if 66 percent of the creditors agree with what the debtor proposes to pay, the bankruptcy can be lifted and the debtor can begin paying. That is the percentage required everywhere else, also in the United States. But  in the international field we lack  a global regulation that sets conditions in cases of countries on default or countries in bankruptcy. Also during President Kirchner´s term the debt with the International Monetary Fund (IMF) was paid and cancelled with our own resources. For the first time in history, since Argentina joined the IMF in 1957, the International Monetary Fund ceased to conduct the destinies of our economy and that of the Argentines. On the basis of all these elements  we can also explain many of the things that have happened in our country in the recent years.

Part of those who had bonds, or we should better say, part of those who purchased bonds after Argentina went into default,  are people who specialize in buying bonds in countries already on default. They are bonds that are almost worthless and are known as crap bonds. Why? Because they are worth nothing in the market, bonds that from a nominal value of 100 US$ can be bought for US$ 30 or 40 cents. They are crap bonds. Because who can be interested in bonds of a country that has defaulted on its debt and is not honoring it? Well, only those who plan to speculate and speculate, and that have  all the time in  the world to wait until a country recovers, to take over it. -This is the case that we are now dealing with, and is the case that the U.S. Supreme Court has rejected but that Judge Griesa did accept and validated, it is the NML Fund. It is important to remember that it is the Fund that purchased in 2008 for US$ 48.7 million. Please bear in mind that we had defaulted on our debt in 2001.

The aggregated return to the year 2014 of those US$ 48 million invested was of 1.608 percent, in dollars. I  don´t think that  even in the organized crime there is a return rate of 1.608 percent in such a short time. All this is over in 2014 when the U.S. judiciary recognized to the NML Fund US$832 million. It is worth remembering that 70 percent of those bonds were issued by the mega -swap through the operation I just  mentioned, in which U.S. businessman David Mulford was acquitted  and that took place in 2001. The remaining 30 percent  are bonds issued during the convertibility.

Well, what are the vulture funds claiming for now? The NML  represent 52 percent of the original capital and  what Judge Griesa order to pay cash, amounts to US$ 1.500 billion.

Let us remember this. They bought bonds for US$ 48.7 million and now Judge Griesa ordered to pay them US 1,500 billion, all complete, without installments. All this before the 92 percent of other creditors that are also bondholders, who accepted reductions, terms and delays  and to whom we have been paying dutifully.

Some are now saying: Why don´t we pay them these US$1.500 billion  and finish with all this now? Because there is considerably more serious problem represented by 1 percent of those who did not get  into default. There is another 7 percent that,  in case this payment of US$ 1.500 billion to NML is accepted, they would be in conditions of demanding to Argentina a payment of US$ 15 billion. This represents more than half of the Central Bank´s total reserves.

As you can see, it is not only something absurd, but it is impossible that a country allocates more than 50 percent of its Central Bank’s total reserves to a single payment to creditors. But also, with the possibility that the other 92 percent, that is the majority of creditors, finds another judge who says “ok, but if you accepted reductions, terms and it turns out that someone was benefitted having 1 percent and obtained the total payment at once, you are also entitled to the same thing as a matter of equity and equality.” Who finds a judge Griesa, can find another judge who also agrees with them, with a very high possibility that the total Argentine debt and the restructuring operated in the years 2005 and 2010 was demanded, fell as a castle of cards and with it, obviously, the Argentine Republic.

I believe that Argentina’s will to negotiate is highly proved. We have negotiated in 2005; we have negotiated in 2010; a few days ago the agreement with Repsol was closed. We had been sued before the ICSID because of the expropriation of the main Argentine oil company, and we were able to negotiate, to reach an agreement between the parties, to close a deal and to start fulfilling it, at the extent that Repsol withdrew the charges before the ICSID.

But not only that, a few days ago also, we have closed definitely and for the first time the negotiations on the debt with the Paris Club. A debt that has its origin in the year 1956 and that eight governments previous to ours had tried to negotiate, and they could not do it.
When the country started incurring in that debt, I was 3 years old. The first loan of US$ 700 million dollars was requested in 1956. Economy Minister Axel Kicillof, who negotiated in Paris with all the Economy ministers from the whole European Union and Japan, was not even born. This means that Argentina has proved its will to negotiate which is more than evident.

But I believe that it is necessary to differentiate negotiation from extortion. I think they are two absolutely different concepts. Every ruler, every country, every leader in politics and economics should be willing to negotiate. But what a president of a sovereign nation cannot do is to bring its country and its people under such extortion.

I want today address not only the millions of Argentines that are surely listening to us, but also mainly to that 92 percent of creditors who believed in Argentina. I want to tell that Argentina will fulfill its obligations. Argentina is not going to default  on its restructured debt. We are also willing that, as we have always been and that is why we have opened the swap,  that the 100 percent of Argentina’s creditors enters to that swap, out of that 7 percent that has not entered yet. Because Argentina wants to pay, we have proved it, we have been the only government that didn’t take advantage of the financial bicycle to continue falling into debt; the only government that met all its payments without acceding to the capital market; the only government that was finally able to close negotiations with the Paris Club.

I must also say that we had tried in 2008, when I announced the payment to the Paris Club, but at that time the fall of Lehman Brothers and the global financial crisis triggered from Wall Street towards the whole world, made it impossible for us to fulfill it.
But what is certain is that Argentina has made evident its will to negotiate. But Argentina doesn’t have, let us say it clearly,  to be submitted to such extortion.

I believe that our country neither deserve it, nor the bondholders whom we want to pay by the end of the month, and there is an attempt to seize the funs of those bondholders; on June 30, when we have expirations for 900 million dollars and we will pay them.

I’ve instructed the Economy Ministry and all the technical organisms of the National State to provide all the instruments and the necessary strategies for those who have trusted in Argentina, in order that they
can receive their money, the dollars we have committed to pay. But we
want to do it with seriousness and responsibility.

This is not a cause that implicates only Argentina; it implicates, as I said yesterday during the G77+ China meeting in Santa Cruz de la Sierra, Bolivia, the whole global financial system. That’s why so much people supported us before the court.

And I want to say or confess you something: the ruling did not surprise me, I expected this ruling.

This morning, when I talked with the head of the Central Bank, Juan Carlos Fábrega, he told me, “President, you were the only one who believed that this was going to happen.” Definitely, because this is not an economic problem, it is not a financial problem, it is neither a juridical nor legal problem. It is the ratification of a business model at global scale that if it keeps pronouncing itself, is going to produce unimaginable tragedies.

As I said yesterday in Santa Cruz de la Sierra, in Bolivia:  Why if somebody only placing 1 dollar from its desk in a junk bond, receive a return and a rate of 1.608 percent from the year 2008 to 2014?  Why somebody who has that incredible profitability, will decide to invest in a factory or in commerce or to buy part of the stock of a company or to make any financial business? It is clear that a worldwide financial domination of by-products way,  is being validating in order to make people kneel down, and where it´s not even necessary to exploit nobody, but only with exclusion is enough. It’s enough that there are governments willing to make mega swaps, governments willing to carry out risk-shield, governments willing to negotiate commissions in order that this business model keeps on prospering with the blood, the hunger or the exclusion of million young people all over the world who lack work and education.

We want to fulfill and pay our debts and we are going to make it. But we do not want to be accomplices of this way to do business, by not qualifying it in the other way, that some people want to install it in the world.

That’s why; I wanted to address all my fellow citizens, with the tranquility that I knew what it was going to happen. I am not even angry, I am very worried. Very worried because life does not begin when one comes to Government or when one leaves it; the life of my children, of my grandchildren, the life of the planet, of the different towns, it becomes worse and yesterday we commented it with many officials of this group that brought us together in Bolivia. And that’s why I believe that it is a duty of all we have government responsibilities, taking charge of our obligations and between our obligations, is, among other things, to pay our creditors, but there is also the duty of not allowing being extorted by those who have speculated and obtained benefits from extreme poverty and even want to harm 92 percent of creditors that trusted in Argentina.

I hope that all may reflect and we can, not only honoring, as we are going to do it with the 92 percent, but with the 100 percent.

Thank you very much and good nights to all the Argentines.