Debt swap Bill announcement. 26th August 2013.

Good evening, everyone. Last Friday the Court of Appeal of New York City ratified the sentence of Judge Griesa in favour of the Vulture Funds, which are very well konwn by the Argentine People because they were, precisely, the ones who impounded the fragrate "Libertad" last year in the Ghana Republic and for that reason we had to make use of International Law, and also we had to appeal to International Courts to have the Fragate back, without expenditure from the Treasury. In this way we recovered one of Argentina's symbols. There had been a few impoundments before, on Tango 01, on embassies, on other funds. But what we really want to talk about today, and to make it public, not only to the public opinion of the Republic of Argentina, but also to those bond holders that have trusted in Argentina -93% of bond holders-, we want to make public that this sentence of the Court of Appeal ignores this agreement that we have reached with the 93% of bond holders, or at least underestimates it. And also, in our humble opinion, it ignores the sovereign immunity that the debt restructuring has, restructuring that was achived first in 2005 and then in 2010; because as the National Constitution of Argentina commands, the negotiation of the external debt is the express power of the "Congreso de la Nación" and it can be carried out only under its authorisation. Anyway, it is advisable to make a little of history as regards the origin of all this because, well, even though it seems to have happened a long time ago, "31st December 2001" is not very long ago. And it was then when Argentina defaulted the exact amount of US$ 81,836,000,000. I say it again: 31st December 2001, the Republic of Argentina, our country, defaulted the bond debt for US$ 81,836,000,000 (eighty one billion eight hundred and thirty six million US Dollars). The origin of this was, some 49%, that is US$ 40,363,000,000. Argentina had incurred in this debt during the administration that spanned from 1989 to 1999. The remaining 51%, that is US$ 41,473,000,000
Which had been incurred by the Administration that spanned from 1999 until the time when the default was declared. It is imperative to know that when President Kirchner takes office in the year 2003
This problem of the debt is met. It was actually a problem that had its origin on 24th March 1976, when the country began to incur in heavier and heavier debt and to do carry trade; getting worse during the "convertibility", to ultimately implode on that 31st December 2001. President Kirchner had an idea which was in total opposition to that which had been supported until that time. Until then, within the "constant borrowing" the motto, so to speak, was "pay in order to grow". He claimed that it was the other way round, that it was necessary to "grow in order to pay". Well, it was not that he wanted to play the smart guy; he had simple noticed what had happened in Argentina during the last 30 or 40 years and it was crystal clear what had happened. It was impossible to pay unless there was growth; on the contrary, following the traditional recipe the debt was paid with more debt and the debt was ever heavier and it meant a severe restriction on the Argentine economy as regars education, culture, infrastructure, social welfare, health, production development, work; well, a country as we all know.
When Nestor (Kirchner) took office, it had an unemploment rate of 25%. Factories were closed. A situation that we all remember well. I remember him (N.Kirchner) in the UN Assembly, the first Assembly that he was to be part of, that was on September 2003, he decidedly faced this issue and claimed that it was necessary that the world understood that for Argentina to pay its debt it was essential for our economy to be able to grow. I will never forget what he stated: "It is imperative that you let us grow for us to be able to pay, because the dead, they do not pay the debt". And well, from that moment on, he changed the logic statement: "pay in order to grow" for "grow in order to pay". And precisely, from 2003 up to now, important payments were made based on two restructuring processes.
In 2005, March 2005, the debt is restructured during the presidency of Nestor Kirchner. I remember clearly that was a tough, long negotiation. At one time, the first bank that took part as negotiator and eventual fiduciary, the Wachovia Bank, drew back from the ongoing negotiation, causing a severe crisis. At that time, the Minister of Economy then in office offered his resignation to President Kirchner because it seemed that the attempt at resctructuring the debt had failed. And Kirchner said, "let's be confident, let's go on". And it was decided to include the Bank of New York as a negotiator and eventual fiduciary, which is commonly known as BoNY in the financial jargon. In the end, that first debt-swap, which was not very much trusted, but which Nestor had a lot of expectations for; 76% of the sovereign debt ended up being restructured, with the biggest debt relief that can be remembered in history. Debt relief, that in order to measure its effect in the later growth of Argentina, it can be quantified as over AR$ 79,000,000,000 and for you to have an idea of what it represents, it is the total of the AUH (Child Universal Assignation). It is the total of the over 2,000 schools that have been built during this ten years in the Republic of Argentin. And it is the total of the houses and their respective infrastructure, all the public housing which were built between 2003 and the present day. This shows the extent of its importance. Which was the argument for the debt relief? During the time when we were incurring in debt, Argentina actually paid exorbitant rates in dollar currency all around the world, rates were no more than 1% or 2%, here, we paid rates of two digits. The key argument for that debt relief was that those who knew that they were going to a place where an exorbitant rate was paid. They were fully aware of the risk they are undertaking when they place their funds. For that reason, we said that it should be joint venture, between a country that had bet on a "financial gambling". And also, those who knew that it was impossible that that money could be paid under such conditions. It was then when the "holdout" problem was raised; they were, let's say, those who did not take part in the first debt-swap. Even though all countries have a Bankruptcy Act , our country has one, which states that if 66% of the creditors are in agreement, the judge can approve of the bankruptcy. It is a similar amount in the USA.
In this first agreement we reached a 76% agreement among bond holders. But the problem with the "holdouts" continued, which was reasonable because there was a lot of people who were skeptical about Argentina, a country that had never paid its debts. We even took active participation creating, as a stronger proof of good faith, what came to be called "GDP-linked bond", meaning that if Argentina grew the creditors would receive more money, as a result of standing by and becoming a partner in the growth of Argentina. Then, during my presidency in the year 2010 we opened the debt swap negotiation again and we reached a record number in the acceptance of the debt restructuring, which is 93% of those bond holders which we owed to. There was more confidence by then; debt had already been paid, not only debt issued under foreign law but also under national law. Debt was paid in the Bank of New York and also here in our country so we reached a 93% acceptance rate, a remarkable achievement due to the effort of the Minister of Economy, who traveled around the world together with his team, the present Minister of Economy, Dr Lorezino to be precise, to include many Italian, Japanese bond holders, that were samaller bond holders and which were left out of the first swap. We reached, I say it again, this 93% of agreement among bond holders. I think the sentence of the New York Court of Appeal is a little unfair with Argentina. It picks up an argumentation published in the Financial Times and states that it condemns us because Argentina is a "recalcitrant debtor". Argentina has paid, between 2003 and 2012, the same Argentina that is labeled as "recalcitrant debtor", US$ 173,733,000,000. I say that again, from 2003 up to the present day we have paid US$ 173,733,000,000. US$ 41,044,000,000 were paid inside our own National Public Sector, between different agencies from the Public Sector that lend money in order to finance each other, infrastructure. To be brief, everything related to the State. US$ 81,487,000,000 is the amount of money we have paid to the foreign and domestic Private Sector, in dollars to bond holders. And to the Multilateral Credit Organizations, among them the IMF, when we cancelled the debt in the year 2006, to the Interamerican Bank of Development because of the loans we have been granted, to the World Bank, to the Corporación Argentina de Fomento: US$ 51,201,000,000. Net gross: US$ 173,733,000,000. Rather than "recalcitrant debtors", we are better difined as "Serial Payers". But in addition to that, we have an extra quality: we have done this with genuine resources, with reasources that we have obtained through Commerce Administration and by a better administration of the State resources without access to the Capital Market. In the same way that, I think, we are part of the Guiness Record because of the most important sovereign debt that has been defaulted. I also think that we should be in the Guiness as the country that has paid more debt and had more obligations fulfilled, in the last 10 years without access to the Capital Market. For that reason, I consider that it is important that all the Argentinians be aware of the effort that we have all made and it is also important that the world notice the effort made by the Argentinians. Today, the National Debt, that when Nestor (Kirchner) took office represented something like 150% of the GDP, has now come to represent in foreign currency, be it domestic private sector or foreign private sector, less than 10% of the GDP (Gross Domestic Product)
That is, from 150% of the GDP, we have come today to less than the 10% of the GDP and in a few days time, we are going to pay BONAR 7, we are going to pay US$ 2,000,000,000 "cash". On the 12th September, to be precise. Because the majority of them are foreign holders, and it is easy how they can receive the money with local subsidiaries of foreign banks, they pay to their other central administration where the internatonal creditors reside, and in that way the debt is cancelled out.
From that moment on, that is, from 12th September onwards, Argentina will come to owe, in foreign currency -Euro or Dollar- 8,3% of its GDP. It is important to highlight that this is one of the lowest debt ratio of the developed countries, not to mention that it is one of the lowest debt in our region. It is worth keeping in mind that our administration is a "Serial Payer", not a "Serial debtor, debt taker", because the debt was taken during other administrations and also it was "defaulted" during other administrations
and this has allowed us, the Argentinians, this administration, to grow and to be able to pay the debt. Well now, earlier today I was hearing some comments on this sentence, that I dare label them a little short-lived, because the sentence, well they say that it will have effect, it will be appealed, the Supreme Court of USA will have to make a decision in 2014 or 2015. It does not seem very serious, and it is not good governance to believe that 2014, 2015, in a short-term, it is a solution to the problems. We believe that the problems should be solved not only in the short term but also in the long term. Because of that, we have taken some steps regarding this since, as a country, we cannot have "a sword of Damocles" hanging over our neck when at any moment somebody is going to make a decision and the 2005 and 2010 swap would become null, we won't be able to pay our creditors and the country will go back to 2001. This is the only thing we will not allow to happen, at least as long as I am the President. For that reason, the first decision we have made is to ask God to enlighten the Supreme Court of USA, because we would be at the doorsteps of an event that not only will nullify one of the most important debt restructuring that can be remembered of, but it also will leave invalid other debt restructuring attempts.
Because you have to consider that these "vulture funds" represent only the 0.45%. To make things clear, 93% of Argentina Creditors accepted the debt swap. A 7% of them did not accept it
But only 0.45% of the bond hoders are suing Argentina in NYC, and were benefited with this sentence last Friaday. Bonds that were purchased in 2008, when they had already been defaulted, they had a very low price; and if they are granted what they expect, their profit in dollars would be over 1,300%
This is a complete nonsense and lacks common sense. I think it is not necessary to be an expert on law or economy to realize that in this way not only Argentina is driven to bankruptcy but also everybody in this country. Moreover, in times when a good number of developed countries, countries from the First World are restructuring their sovereign debt. For that reason, the decision that be made by the Supreme Court of USA would affect not only Argentina but also all the financial system worldwide. Not in vain a lot of "amicus curiare" made themselves present at court who are not precisely friends of Argentina, it suffices to remember the ex-IMF chairwoman Ann Krugger. A good number of Administration Funds that have also vested intrests and have made themselves present, also the Government of France, a country we are grateful to because of their being present at the US Supreme Court. But as I was saying, since we cannot afford having a sword of Damocles hanging over our heads, we have taken two more steps, apart from this spiritual, and not at all terrenal one which is to commit ourselves to God. Firstly, tomorrow we are going to send a new Bill to the Argentinian Congress, that as the Constitution commands (art. 75), it is the only competent institution to decide over the Foreign Argentine Debt. The Executive always acts as a negotiator, as a delegate, but ultimately the contracts must be scrutinized by Congress in order to be passed or not. And this Bill is about the opening of the swap for the third time for that 7% that did not participate in previous negotiations. We want to show, once more, our strong commitment to fulfill our obligations undertaken by the Argentine Republic. Today, we cannot do so because we would be trespassing our own law that states only the 93% and the second swap was closed in 2010. Nonetheless, we are going to send, I repeat, a Bill to Congress so that the remaining 7% of bond-holders be able to be part of the debt-swap
and be paid in the same terms as the rest of the creditors. But we have also taken the step to protect the interests of those who have trusted in our country, the 93% of bond holders. Some have been being paid since 2005, others since 2010. And it consists in replacing the bonds preserving the same currency, the same terms, modifying only the place where the bonds are to be paid in order to avoid future impoundments on the funds, as we have already been subjected to impoundments before. To be clear, those who own Argentine Bonds, that is, 93% of the bond holders. Those bonds are going to be replaced for similar bonds, in foreign currency, with the same terms the only modification is that the place for the payment is going to be here, in Argentina, in the Central Securities Depository. We have already paid bond holders in our contry, so that you can get a picture of the legal certainty. "Boden 12", that are the bonds that Argentina issued in order to pay all those whose savings had been trapped in the "corralito". Maybe you can recall the time when you were not allowed to take out your deposits from the banks. The Argentine government, as regards bonds issued under Argentine law and to be paid here in the Central Securities Depository, it has cancelled out debt that totaled US$ 19,600,000,000 entirely. Argentina paid the total amount of the confiscated savings, belonging to Argentinians and non-Argentinians, that is, from this nation and foreigners the sum of US$ 19,600,000,000 in Bonds issued under local legislation and paid here in the Argentine Republic in the terms and currency stipulated. And in a few days-time, on 12th September to be precise, we are going to pay another type of Bond issued, BONAR 7, for the sum of US$ 2,000,000,000; also under local legislation and to be paid here in the Central Securities Depository. So, we have paid thousands of millions of dollars in bonds issued under local legislation which were paid here in Argentina. So, in that respect, the legal certainty is not only the result of our strong conviction in facing our obligations, which Argentina as a state had committed itself, even though it was not under our Administration, but also the result of objective facts that we have already been part of, paying Bonds issued here in Argentina. And our fundamental duty is not only to show an intention of payment, I know that there are social sectors that refuse to pay anything, an absolute minority, because it would be a scandal not to do so. We must remember that Argentina has a population of 40 million people that demand responsibility on the Government Authorities and to guarantee the growth of our country within the frame of legal certainty and to fulfill our obligations. For that reason, today I wanted to address not only the 40 million people of Argentina but also to all those who have trusted in our country, national or foreign private, companies -
they are part of that 93% of bond holders that accepted the negotiation with the "GDP-linked bond" which has already been paid- I also want to address the rest of the international financial world, and specifically to the US authorities, in particular to its Court, I want to say that a severe damage could be done onto the legal certainty, onto the "trust", to the trust that must be part of debt restructuring in a very difficult time all around the world as regards financial matters. We really think that a 0.45% of bond holders with "trash-bonds", acquired at a very low price, today, they pretend to undo what we have achieved as far as debt restructuring, growth, payment, contribution to the world is concerned; because in the end it is a contribution from Argentina to the legal certainty of the world and to the trust of those who believed in us. I think it is important that we could say these things. Finally, for those who say that we are fond of talking about the past and who think that the past has already "passed", I think that this "last" Friday, on Friday last week, it has been proved that the past, in economy above all, is always just around the corner. That all it takes is somebody making a mistake, or for somebody to have other interests other than representing the interests of the 40 million people of Argentina in order to undo the things we have work so hard to achieve in the past few years. These things we sometimes recall from the past is not in the mood of supervising or pointing our finger at sombody, or highlighting what we do; on the contrary, we do this so that we try and not make the same mistakes, the Argentinians, myself included, even though I haven't been part of any "Debt Taker " Administraton, even though I am part of the Argentina and I feel as responsible as the 40 million people from this country. Maybe a little more responsible because I have been elected to lead this country's future.

In closing, I wanted to communicate these important decisions we have made, the re-opening of a third debt swap, a third swap bill. I hope, as the saying goes around, that it be third time lucky; and we could finally make the remaining 7% of the bond holders part of the debt restructuring. Also, I want to make a call for reasonable decisions and common sense. It cannot be possible that a 0.45% of bond holders, that acquired the bonds at so low a price, put the remaining 93% of our creditors at risk, bearing in mind the amount of money we have paid, and the money we still have to pay, and particularly the possiblility to continue to grow in Argentina, to create new jobs, to provide health care, education and at the same time to fulfill our obligations. For this reason, I wanted to address all the Argentinian people, as well as all those who have believed in Argentina, who have trusted; please go on trusting. Because we are in command of this ship and we are leading it to a safe port. And we also believe that, we have faith that, common sense should prevail over lobbying where 0.45% of the bond holders is on the verge of imposing its will over that of the remaining 93%. At the same time, I am a lawyer, and I know that this definitely affects equality between the parties, I know that this affects the legal certainty,
I know that this affects the certainty that economic and financial relations must have, and for that reason we petition the authorities that be confident of the responsibility with which we have conducted ourselves. We also ask responsibility to those who are to make the decisions. Be as it may, I also want to say that Argentina is not going to violate its own laws and the Congress of Argentina is going to be part of this so important an issue, just like in 2005 and 2010. This restructuring has enabled Argentina to grow and to fulfill its obligations. Thank you for your attention. And good night, everybody.


Translation: Cristhian Bourlot