Wed, May 20, 2015 - Page 7 News List

Argentina tagged as ‘vulture’ by Cuba, Paraguay

Bloomberg

Argentina’s leaders have spent a decade vilifying investors who refuse to take massive losses on defaulted government bonds. Yet they have been similarly unforgiving toward the debt an ally: Cuba.

One result is that Argentina might find it hard to get in on any boom in foreign investment in Cuba if the US proceeds with its push to restore diplomatic relations with Havana and lifts a half-century-old embargo.

The debt goes back decades, but the friction dates to 2006. By then, Cuba had long since been set adrift by what was the Soviet Union, its now dissolved protector, and was drowning financially. So it asked then-Argentine president Nestor Kirchner to slash the debt it had taken on to fund car shipments dating to 1973.

The original US$2.4 billion of debt had more than tripled.

Cuba pleaded for indulgence, according to then Cuban minister of foreign affairs Jorge Taiana.

Taiana, speaking publicly about the events for the first time, said Havana had asked for a 75 percent reduction and wanted “to pay us back with pills and other medicine.”

Taiana, who is today a Buenos Aires state legislator, was in favor, but added: “Unfortunately the offer was rejected.”

Little has changed in the intervening years and the debt has likely risen to more than US$11 billion, according to Orlando Ferreres, who runs Ferreres & Asociados, a consulting firm.

Argentina is also demanding its small northern neighbor Paraguay repay an US$18 billion debt stemming from funds it contributed to build a hydroelectric dam in 1983.

The whiff of hypocrisy grew a bit stronger in the Cuba case in July last year after Russian President Vladimir Putin agreed to write off 90 percent — almost US$32 billion — of the Caribbean island’s Soviet-era debt.

Argentine President Cristina Fernandez, Kirchner’s widow, went so far as to publicly praise the gesture as one “worth imitating.”

Fernandez did not stop there. She urged Argentina’s biggest investor, billionaire Paul Singer, to take the same forbearing position toward Argentina. Singer leads a group of investors who have refused Argentina’s offer to repay 25 percent of its US$95 billion of debt from a 2001 default.

Argentine government officials have not been hesitant to label Singer a “vulture.”

Taiana said he does not remember why Cuba’s request was rejected in 2006.

Former Cuban ministry of foreign affairs official Roberto Mori said it would have required congressional approval, which Kirchner was uncertain of obtaining.

Mori added that in recent years, the only debt pardoned by Argentina was Bolivia’s in 1989.

The debt with Cuba adding accrued interest is closer to US$8 billion today, he said.

Alfredo Scoccimarro, a spokesman for Fernandez, did not reply to an e-mail and telephone call seeking comment.

Phone messages and e-mails to Cuba’s embassy in Buenos Aires, the Cuban Interests section in Washington and its UN mission in New York were not returned.

Ferreres lamented that he was unable to get the figures from the central bank and that such secrecy harms Argentina as Cuba starts becoming a focus of investment.

Across the border in Paraguay, anger flashes periodically about the US$18 billion debt.

Local newspaper ABC uses a familiar term to describe the Argentine government: “Vulture.”

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