Daily Headlines – November 27, 2012
|Written by Jake Johnston|
|Tuesday, 27 November 2012 12:45|
Yesterday Argentina appealed a ruling by a New York court that could force Argentina to pay holdout bondholders known as vulture funds, reports the Associated Press. Judge Thomas Griesa ruled last week that Argentina must put $1.3 billion into an escrow account by December 15. If Argentina refuses to do so, the court ruling would force Bank of New York Mellon, which distributes payments to those bondholders who did accept a restructuring following the 2001 default, to stop those payments. The ruling is based on the parri passu clause, which the court interpreted as requiring equal treatment to both the bondholders who accepted a restructuring and those that held out. If, as President Kirchner has indicated, Argentina refuses to pay the vulture funds and the appeal is unsuccessful, it could lead Argentina into a technical default. Siding with Argentina in the court case is the US Federal Reserve, commercial banks and holders of restructured bonds. Also, as the AP points out, even critics of Kirchner in Argentina have criticized the judge’s ruling in recent days, as it threatens the successful economic growth that resulted after the default in 2001. For more on the case, click here and here.
Meanwhile, writing in The Guardian, Cambridge economics professor Ha-Joon Chang highlights the need for a sovereign bankruptcy law, similar to what countries offer debt-laden companies. Once a company declares bankruptcy, “the debtor company and its creditors are forced to work together to reorganise the company's affairs, under clear rules.” Unfortunately, as Chang notes, “no mechanism like this exists for countries, which is what has made sovereign debt crises so difficult to manage.” Chang uses the examples of Greece and Argentina, arguing that the effects of their debt problems go far beyond their borders, noting that “In the Argentinian case, we are risking not just an end to Argentina's recovery but a fresh round of turmoil in the global financial market because of one questionable US court ruling.”
A new report from the Economic Commission on Latin America and the Caribbean reports on the reduction of poverty in the region over the last few decades, reports the AP. Overall, despite recording the lowest poverty level in three decades, some 167 million people still remain mired in poverty in the region. This is one million fewer than in 2010 and represents some 29 percent of the population. The report, “Social Panorama of Latin America 2012”, released today, also reports on trends in inequality. The report notes that “on average, the richest 10% of the Latin American population receives 32% of total income, while the poorest 40% receive just 15% of income.” Since 2002, the countries that have shown the largest decrease in inequality are Argentina, Bolivia, Nicaragua and Venezuela. In all of these countries the Gini coefficient fell at an annual rate of more than two percent. To read the entire report, which “examines paid employment in care activities, as well as household spending on care services, and proposes a series of policy recommendations,” click here. For more on the reduction of inequality in Latin America, see here and here.
Mexican president-elect Enrique Peña Nieto is in Washington today to meet with President Obama, reports CNN. In an op-ed printed by the Washington Post last week, Peña Nieto lays out his agenda for the meeting with Obama, noting that “It is a mistake to limit our bilateral relationship to drugs and security concerns. Our mutual interests are too vast and complex to be restricted in this short-sighted way.” As CNN notes, Peña Nieto will focus on economic issues as well as security in his visit. Meanwhile, writing in Huffington Post, John Ackerman a professor at UNAM-Mexico City writes that Obama is losing credibility by cozying up to Peña Nieto. Ackerman notes that the recent election in Mexico was “a far cry from normal democratic politics” and warns that Peña Nieto represents a return to the old guard, which “represents the worst of Mexico's authoritarian past.” Ackerman concludes that by cozying up to Mexico’s new president “Obama sends a clear message that his Latin America policy will be equally as shortsighted in his second term as it was during his first.”