Argentina’s lower house of Congress voted Wednesday to approve a settlement package for vulture funds, reportedly worth $4.65bn, after a marathon debate amid massive protests against the agreement, which now needs to pass through the Senate for final approval.
Lawmakers in the lower house voted 165 to 86 in favor of the deal after an extended 20-hour debate on how to handle the country’s over decade-long battle with predatory creditors.
President Mauricio Macri campaigned on promises to reopen negotiations with vulture funds in the name of attracting international investment to kickstart the economy.
In 2014, negotiations in New York between Argentina and the “holdout” creditors fell through, putting the country into a “partial default” despite showing the will and capacity to pay 90 percent of its creditors on a month by month basis.
The break down in talks have prevented Argentina from accessing international credit markets, forcing it to issue domestic bonds to generate funds and to obtain loans from countries such as China.
Former President Cristina Fernandez frequently emphasized the importance of securing alternative sources of external finance capital, as a strategy to promote autonomous development and economic growth, arguing that the negotiations were an issue of national sovereignty.
Former Economy Minister Axel Kicillof criticised the government's proposal to finance the settlement accords with a planned US$11.68 billion bond issuance saying "It's easy to settle by giving the vulture funds everything they want."
Predatory hedge fund lenders, or vulture funds, have threatened to ruin the country’s already struggling economy as they attempt to profiteer from the debt crisis.
The decision comes in the midst of several controversial austerity measures, such as currency depreciation, a plan to partially remove energy subsidies, and trade liberalization policies, along with mass layoffs, which critics argue will decrease the purchasing power for Argentine consumers.
“The Macri government and its allies in Congress have done this in a context of largescale layoffs and repression of labour and indigenous movements – demonstrating clearly that it is serving the interests of the corporations and capital over those of the general population,” Dr Daniel Ozarow, an academic at Middlesex University, London and Chair of Jubilee Debt Campaign UK's Academic Advisory Network told teleSUR English.
Leading up to the legislative approval, several civil society organizations called on the U.S. creditors to drop Argentina’s debt, urging the international financial community to respect the balance between sovereign domestic development priorities and external financial debt restructuring.
“Indebted countries across the world are now left in a weaker position as vulture funds have been empowered to block necessary debt reductions. We urgently need anti-vulture fund laws and bankruptcy procedures to stop this disgraceful profiting out of crisis,” Tim Jones, economist at the Jubilee Debt Campaign told teleSUR english.
The holdout creditors rejected the debt restructuring that followed Argentina’s US$100 billion debt default in 2002.