By
Matthew
Russell Lee
UNITED
NATIONS, October 6
-- With the dispute between Argentina and hedge or vulture funds more and more discussed, the International
Monetary Fund on October 6 released a paper and held an embargoed press
call on the topic of "Strengthening the Contractual Framework to
Address Collective Action Problems in Sovereign Debt Restructuring."
Inner City Press asked the IMF's Sean Hagan, General Counsel and Director of the IMF's Legal Department, how his "market based" approach relates to the vote take last month in the UN General Assembly and to respond to the critique that the lack of quota reform at the IMF undermines the legitimacy of its approach.
Hagan said the UNGA's approach is "treaty based," and that "there
was insufficient support in our members to support that approach,
there has been in no change in the attitude of our members when we
discussed this last year.”
But in essence the membership of the IMF is the same as the UN General Assembly -- it's just that in the IMF votes are weighed to wealth, measured in the past. The UN is controlled by five permanently veto-wielding Security Council members. At the IMF for now there is one veto: the US.
Hagan made much of Kazakhstan including some of the IMF supported language in its most recent bond issuance. He mentioned copycat litigation, already pending in Grenada. He said it seems the issue will be discussed at the upcoming IMF and World Bank Annual Meetings in a session involving "civil society organizations." We'll have more on this.
For
now, the IMF on October 6 said "Directors acknowledged that the recent
New York court decisions with respect to Argentina may exacerbate
collective action problems, although most felt that the extent of their
impact on the restructuring process is still unclear. Directors welcomed
the recent modification of pari passu clauses in certain sovereign bond
issuances to explicitly exclude the obligation to effect ratable
payments."
So beyond the cited Kakastan, how prevalent is this?
The
IMF also on October 6 discussed "the inclusion of an enhanced
collective action clause (CAC) that includes a more robust 'aggregation' feature to address collective action problems more effectively."
Back on September 11, two days
after 124
nations in the
UN General
Assembly voted
to start
a process on
sovereign debt
restructuring,
Inner City
Press asked
the International
Monetary Fund,
"What is the
IMF's comment
on the
“sovereign
debt
restructuring”
resolution
adopted by the
UN General
Assembly on
September 9?
The resolution
cites the
IMF's work on
the issues, in
2003."
At the IMF's
embargoed
briefing that day,
IMF
spokesperson
William Murray
provided a
long answer,
including that
the IMF is
working on a
"market based"
solution,
particularly
on debt
contractual
terms to
prevent "hold
out" problems.
He mentioned,
as he had to,
Argentina,
which has had
it own
contentious
relation with
the IMF.
Clearly,
Argentina --
and Bolivia as
chair of the
Group of 77 --
were aware of
these IMF
efforts when
they pursued
the issue in
the UN General
Assembly. But it's a power game.
When
Argentina's
foreign
minister
Héctor
Timerman held
a press
conference at
the UN at 5:30
pm on September
9, he was
flanked not
only by
Argentina's ambassador
to the UN
Maria Cristina
Perceval but
also the chair
of the Group
of 77, Sacha
Llorenti of
Bolivia.
They spoke of
11 countries
opposing their
resolution
on sovereign
debt and vultures
funds, or
sovereign debt
restructuring,
including the
United States.
Timerman took
the high road,
saying that
Argentina
would present
a project with
the G77 and
speak with all
opponents.
He asked how
the UN General
Assembly,
which he
called the
most
democratic
forum, could
be involved in
so many fields
but not this
one. Why
indeed.
Back
in June, Inner
City Press
thanked
Timerman and
his finance
minister Axel
Kicillof on
behalf of the
Free
UN Coalition
for Access,
then asked if
Elliott
Management and
Aurelius
Capital hold
stakes in
other G77
members, and
if the case
shows the need
for reform,
that countries
should have at
least the same
debt
restructuring
rights as
corporations.
Kicillof
added,
states and the
people (pueblos)
they
represented.
He said that
in the G77
meeting, Peru
had spoken. An
attentive
Inner City
Press reader
chimed in with
a question
about Ecuador,
which sold
bonds just
this week.
But in
that case, new
language tried
to avoid the
Argentina
decision of
the US Supreme
Court, just as
Belize and
Armenia have
also done on
their debt. Watch
this site.
