EspañolArgentina’s long history of problems associated with default, its bondholders, and the justice system has now been further complicated by a recent development in the United States. Together, on Wednesday, 21 states filed a previously unpublished letter before the US Supreme Court, and it calls on the government of Argentina to meet the nation’s debt obligations in full.

According to Argentinean newspaper La Nación, the letter seeks to protect US citizens and urges the court to rule against the debtor nation’s bond exchange plan. It has the signatures of attorneys general from: South Carolina, Alabama, Alaska, Arizona, Connecticut, Georgia, Hawaii, Iowa, Michigan, Mississippi, Missouri, Montana, Nebraska, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, Texas, and Vermont.

Argentina and Its Defense

The government of Argentina has appealed to the Supreme Court of the United States on the basis of foreign sovereign immunity, when confronted by a group of “vulture funds” (those that buy in or near bankruptcy). Paul Clement, Argentina’s high profile attorney in this case, contends that the court should reverse an earlier decision that forces the South American nation to pay both the vulture funds and bondholders.

According to Clement, it is an affront to the sovereignty of Argentina.

“[The Supreme Court] crosses the border into Argentina,” he says, “forcing it to violate its own policies of sovereign debt and demanding that billions of dollars worth of sovereign assets, the Argentinean reserves, be paid to vulture funds NML Capital Ltd and other holdouts.”

The hedge funds NML Capital and Aurelius, along with 13 other minority investors, are seeking to collect the full value of the bonds they owned prior to the default in Argentina during the crisis of December 2001 and the brief presidency of Adolfo Rodríguez Saá. They argue that they did not accept the terms of the bond exchange plan, proposed by former President Néstor Kircher.

The government of Argentina has appealed the 2012 ruling from US District Judge Thomas Griesa, whose decision called for payment to be made in full. The appeal was unsuccessful, rejected by the New York Court of Appeals in October of that year.

Meanwhile, the Barack Obama administration has expressed a very different view than that of the state government signatories. On March 3, the US president’s legal team told the Supreme Court he was “substantially interested in the proper administration and enforcement” of the law of sovereign immunity (FSIA) that the case is based in.

While Argentina’s government took this statement as a show of “strong support,” Secretary of State John Kerry later contradicted this view on March 13 when said the US government would not side with Argentina in court.

“I can answer that very quickly. No, the answer is no. We are not going to,” he stated.

Amicus briefs filed in support of Argentina were due in court on March 24, and the US government did not lend its assistance. Others, however, did speak in favor of Argentina, including the governments of Mexico, Brazil, and France, as well as the NGO Jubilee, Gramercy and Puente banks, and Nobel prize winner Joseph Stiglitz.

What’s in Store for Argentina’s Debt?

Currently, the decision by the US Supreme Court to either accept or reject the government of Argentina’s request is still pending. According to Clement, if the court does not rule in its favor, Argentina could default on the US$24 billion owed.

Iván Cachanosky, an economic analyst for the Freedom and Progress Foundation in Buenos Aires, believes that Argentina is trying to delay the court’s final decision for as long as possible.

“The amount in question is only about US$4 billion, but the problem is that if they are required to pay that, it could activate a clause for the rest of the firms to also seek 100 percent, and the amount owed would increase,” explained the Argentinean economist.