Argentina called in the United States' top diplomat in
the country on Tuesday to express its "deep indignation"
over a local newspaper interview in which he made reference the South American
country's latest debt default. Argentina missed a coupon payment on its
restructured sovereign bonds in July after a U.S. judge ordered that $539
million deposited by Buenos Aires with an intermediary bank and intended for
bondholders not be paid out. Pointing to the fact that the government tried to
make the payment, Argentina denies being in default.
U.S. chargé d'affaires in Argentina Kevin Sullivan
nonetheless told local newspaper Clarin that "it is important that
Argentina get out of default" in an interview published on Monday. Outside
of government circles, the term default is commonly used in Argentina to
describe the missed July payment.
Sullivan was called into the office of Foreign Minister
Hector Timerman on Tuesday after Timerman issued a statement expressing
"deep indignation and energetic rejection" of Sullivan's comments to
Clarin. Sullivan is Washington's ranking diplomat in Buenos Aires, as no
replacement has been named since its ambassador to Argentina left last year.
The U.S. embassy had no comment on the spat with the Argentine government or
the Sullivan-Timerman meeting.
Debt is a touchy subject in Argentina after millions of
people in the middle class were thrown into poverty in 2002 when the government
defaulted on about $100 billion in bonds. More than 93 percent of the bad debt
was swapped in 2005 and 2010 for paper offering less than 30 cents on the
dollar.
A small group of hedge funds that rejected the two
restructurings sued Argentina for 100 cents on the dollar. They won a court
decision saying Argentina was prohibited from making payments on its restructured
bonds without paying them at the same time.
Some of Argentina's original bond contracts were written
under U.S. law. So the case ended up in the courtroom of District Judge Thomas
Griesa in lower Manhattan, who issued the controversial ruling.
In the Monday interview, Sullivan also rejected Argentina's
proposal to use the United Nations as a forum for coming up with a
new way to handle sovereign defaults. He said market-based mechanisms remain
the best way of handling debt crises.
At Argentina's prompting, the 193-member United Nations General
Assembly agreed this month to negotiate and adopt a multilateral framework for
sovereign debt restructurings. The non-binding resolution was adopted with 124
in favor and 11 against. The United States was among the 'no' votes, saying it
would create uncertainty in financial markets. There were 41 abstentions.
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