FOR workers in Britain, Argentina may well appear to be a far off country in South America whose sovereign default on its debts to the international financiers this week is of little interest and even less consequence.
In truth, the unfolding crisis – involving the US legal system right from an obscure court in New York up to the Supreme Court, along with the activities of the vulture hedge funds who seek unlimited profit through speculation, and above all the drive by US capitalism to bankrupt its rivals – is of the greatest importance to workers throughout the world.
The story of Argentina’s default on its sovereign debt goes back to 2001 when the country, after 50 years of right-wing and military dictatorship, under which it ran up huge debts encouraged by the IMF and US banks (secure in the knowledge that the generals would find a way to make the Argentine people pay), faced financial ruin and was unable to pay its creditors.
In that year, the country entered the largest sovereign default in history, on debts in excess of $80 billion.
With the country unable to pay its creditors, there then commenced a lengthy round of negotiations between the Argentine government and the banks, pension funds, etc., who had bought their bonds.
These debt restructuring negotiations ended with 97% of those owed money by Argentina accepting a ‘haircut’ of about 70%.
This, however, was not good enough for one small group who now owned some of the debt. Two hedge funds, NML Capital and Aurelius, wanted full repayment with interest of the debt they now owned.
These ‘vulture’ hedge funds had not originally purchased any of the country’s debt; they make their vast profits by buying up debt from the original investors at a knock-down price and then using the full weight of the US and capitalist courts around the world to demand full repayment of the debt.
In order to screw their profit, these vulture funds headed to a New York court – under the terms of the original loans, the US insisted that this court had legal jurisdiction. The New York court, presided over by a right-wing republican judge Thomas Griesa, ruled that Argentina had to pay these hedge funds in full plus interest – an amount in excess of $1.5 billion.
Under the law surrounding this debt, if Argentina paid these two, then every other creditor – even though they had agreed a haircut – would be eligible for full repayment plus interest, a crippling blow to the Argentina economy.
This ruling by Griesa was upheld by the US Supreme Court who refused to even hear the case. Now these hedge fund operators are clamouring for an audit of Argentina’s foreign holdings in order to seize them.
Last year, NML Capital tried to legally seize an Argentinian ship docked in Africa, now the US courts have given these hedge funds a green light to grab whatever they can lay their hands, on either through the bourgeois courts or through military means.
The vultures intend to pick over the bones of Argentina and the Argentinian working class and poor until there is nothing left and the country is in ruins. With the economic crisis driving countries across the capitalist world into ever increasing and un-repayable sovereign debt, Argentina is not an isolated case.
Argentina represents the future for Britain, Europe and indeed the entire world. US imperialism is determined to survive the economic crisis by bankrupting all those countries like Argentina and the rest of the BRICS nations, including Russia and China, who believe they can challenge the power of US capitalism.
In its death agony, US imperialism has no ‘friends’ only enemies and competitors to be smashed economically and militarily in order to ensure the survival of bankrupt US capitalism. While debt repudiation is absolutely correct, it must be carried out as part of a revolutionary programme to completely destroy capitalism through the world socialist revolution.